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Crowding commercial property now available to all investors

People in Maryland who would like to invest in commercial real estate may now be able to do so for very little money. On June 19, the U.S. Securities and Exchange Commission is expected to issue new rules about crowdfunding investments that will open up these investment opportunities to people without a lot of capital.

With the popularity of crowdfunding platforms, an increasing number of commercial real estate developers are using this tool to fund their projects. Crowdfunding platforms like CityFunders and Fundrise have allowed small time investors to back projects such as 3 World Trade Center and a rental tower on Long Island. Crowdfunding commercial property shares usually require a minimum investment of between $5,000 and $25,000.

In the past, only accredited investors, defined to be those who earned more than $200,000 per year or who had a net worth of more than $1 million were allowed to invest in crowdfunding equities. After the 2012 Jumpstart Our Business Startups Act was passed, the SEC indicated that it would be issuing rules that would open up these investments to others. After investing in a commercial property, some crowdfunding investors may receive returns on their investment through annual distributions. Other investors will hold onto their share and then sell it if it has appreciated in value.

Crowdfunding properties could be lucrative, but there are considerable risks associated with this form of commercial real estate investment that people should be aware of. While some developers estimate high returns for investors, these estimates are not calculated by external credit rating agencies. Before investing in a crowdfunding property or another real estate opportunity, people may want to consult an attorney about the risks involved.

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