- Real estate agents will be able to invest in tech startups sometime next year thanks to new rules approved by the SEC.
- The new rules means real estate agents could theoretically mobilize behind industry-friendly startups.
- They also might boost real estate crowdfunding's benefit to developers and home flippers.
Quigler, a startup designing a communication platform for real estate agents and consumers, envisions receiving small investments from thousands of real estate agents.
The agents would “become apostles for Quigler to the public and within the business,” Quigler CEO David Michonski wrote in a recent email. “After all, these ARE salespeople who are in the business of selling every day.”
Michonski wants to capitalize on newly approved rules that will let everyday consumers invest small amounts in startups. In the real estate industry, the regulation could potentially empower legions of the country’s more than 1 million real estate agents to fuel industry-friendly startups while also providing a boost to real estate crowdfunding.
The new rules, which were recently approved by the Securities and Exchange Commission (SEC), “level the playing field that was once reserved for accredited investors, VC funds, and other institutions,” said Eric Eckardt, CEO of dwellxchange, a real estate crowdfunder that may stand to benefit from the new rules.
The rules let a private company raise up to $1 million during a 12-month period in “crowdfunding offerings.” Individual investors with an annual income or net worth less than $100,000 may invest up to 1) $2,000 or 2) 5 percent of the lesser of their annual income or net worth — whichever of the two is greater.
Meanwhile, investors who have both an annual income and a net worth over $100,000 may invest up to 10 percent of the lesser of the two.
The new rules will go into effect 180 days after they publish in the Federal Register, meaning the first crowdfunding offerings will debut in mid-2016, according to Crowdfund Insider.
All transactions that rely on the new rules must take place through an intermediary registered with the SEC, either a broker dealer or a funding portal. The forms enabling funding portals to register with the SEC will go into effect on Jan. 29, 2016.
The new rules could provide startups with access to billions of investment dollars that were once out of reach. Previously, regulation typically made it cost-prohibitive for a startup to raise funds from anyone but accredited investors — people who make at least $200,000 a year or are worth more than $1 million, not including the value of their primary residence.
Seen through a real estate lens, the regulation could potentially be a boon to startups that seek to empower real estate agents, enabling a vast army of professionals to open up their wallets to companies that have their best interests at heart.
Some real estate crowdfunders, which let investors pool money to buy stakes in property or fund loans used to buy property, have already found success raising money from accredited investors.
The new rules may spur these companies, or a new wave of real estate crowdfunders, to raise funds from everyday consumers, potentially boosting the benefit of real estate crowdfunding to developers and home flippers.
“My expectation is that you’ll see new marketplace entrants and established platforms, expanding their product offering to facilitate these type (non-accredited) of crowdfunding raises,” Eckardt said.