History of Real Estate Crowdfunding Part II – The JOBS Act
If you haven’t read The History of Crowdfunding Part I, it is the early history of Crowdfunding.
Pabst Blue Ribbon, believe it or not, was instrumental in paving the way for Crowdfunding to be legalized. Ironic that a bunch of beer drinkers helped the American Public to invest but hasn’t beer always helped the American People? Pabst Blue Ribbon brewing Corp was for sale and two marketing executives, Patrick and Brian, heard about Crowdfunding, and as a joke started a website called BuyABeerCompany.com and they collected $282M in pledges before the SEC shut them down.
U.S. Representative Patrick McHenry heard about this and realized that there was a new and different way to invest, or for business to raise money. He thought this needed to be brought to the forefront of the Economy. However, there were strict FINRA and SEC rules that made it impossible. Patrick McHenry the introduced the Crowdfunding The Entrepreneur Access to Capital Act(H.R. 2930) which passed in November 2011. That created the JOBS(Jumpstart Our Businesses StartUp) Act which included a number of other bills. This important piece of legislation repealed laws that had been in place, and hindering the American Economy for 80 years. Well those laws actually only hindered the average investor. Not the rich guy, the rich guy is never hindered, except for paying taxes.
The first 6 sections of the JOBS act were Titles.
- TITLE I - REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES
- TITLE II - ACCESS TO CAPITAL FOR JOB CREATORS
- TITLE III - CROWDFUNDING
- TITLE IV - SMALL COMPANY CAPITAL FORMATION
- TITLE V - PRIVATE COMPANY FLEXIBILITY AND GROWTH
- TITLE VI - CAPITAL EXPANSION
- TITLE VII - OUTREACH ON CHANGES TO THE LAW OR COMMISSION
Titles I, V, and VI became effective immediately. Title II is the ability to advertise stock in your private company. Title IV was raising capital, Title IV Reg A+ Crowdfunded Mini IPO. The last was Title III that allows the average American to invest in a start up, and that went into effect May 16th, 2016.
I’ll be writing about each one of these later. If you’re wondering how this affects the Real Estate Industry, it does and it’s going to change how investors invest in real estate. You see almost any purchase of Real Estate for anything other than your primary residence is a start up venture. Now, there is another way for builders to get money to build their houses, developers to finance their projects, and flippers to finance their rehabs. I guess that’s really lending. Their bumming, and they don’t even know it yet.
As for a Real Estate Broker working with buyers and sellers, the “end user,” you probably wont feel that much of an impact. However, for any agents dealing with ANY sort of commercial or investment property you are going to be out of business if you don’t adapt to this new Asset Class
One other note. Take this from one of those Real Estate guys that went broke in 2008, I mean I lost everything! When you fail like I did, you change. All the ultra successful people, Warren Buffet, Michael Jordan, say you learn more from success than failure. I thought that was hogwash Seminar Speak, until after I went broke. I know it wasn’t me that failed it was the market, but when I tossed and turned in my bed every night wondering if I was going to be able to feed my family or if we would go homeless, I analyzed everything I had done in the last 10 years in Real Estate. Every breath, what I could have done different, wrong or right. That’s what you do when you fail. When you succeed, as I did in Real Estate from 1998-2008, all you do is say to yourself “Whoo Hooo! I just made a boat load of money. Time to celebrate, and do it again tomorrow.”
The Market is great right now and WE DESERVE THIS! However, don’t get complacent. Don’t stop analyzing. Don’t celebrate too much, because Real Estate Crowdfunding is coming for you, and it’s at least going to steal some of your commission.