Development - Summer 2015

Inside Investment + Finance

Crowdfunding for Accredited and Non-accredited Investors
What’s the difference, and why does it matter?

investors, and how does raising funds from accredited investors differ from raising money from unaccredited ones?

It’s always easier to raise money from accredited investors. That’s not only because accredited investors have more money, but also because the law assumes that accredited investors — individuals with an annual income of at least $200,000 ($300,000 with a spouse) or a net worth of at least $1 million (excluding primary residence)

— are smart and sophisticated enough to protect themselves, while

Mark Roderick

CROWDFUNDING IS giving commercial real estate developers access to trillions of dollars of capital that was previously unavailable, while allowing individual investors to participate in institutional-quality transactions for the first time. It’s a very big deal for the real estate industry.

The term “crowdfunding” can mean several different things. The most useful definition is also the broad-est: raising money via the Internet.

How can a real estate developer or
crowdfunding platform raise money
from accredited and non-accredited
non-accredited investors need the
paternalistic arm of the government.

With non-accredited investors come additional legal rules and requirements.

There are three kinds of crowdfunding
offerings today:
• Offerings under Securities and
Exchange Commission (SEC) Rule

506(b).

• Offerings under SEC Rule 506(c).

• Offerings under SEC Regulation A.

Rule 506(b) Offerings

Rule 506(b) offerings are simply old-fashioned private placements. This is how developers have been raising money for the last 30 years. But now you can conduct a Rule 506(b) offering online.

Using Rule 506(b), a developer can raise an unlimited amount of money from an unlimited number of accredited investors and up to 35 non-accredited investors. If an offering includes only accredited investors, the issuer is not required to provide any particular information, although issuers typically provide at least basic information, including a list of the risks of investing, to avoid being sued for fraud. If even a single non-accredited investor participates, the issuer must provide a great deal of information, including financial statements and an opinion of counsel.

For class descriptions, course
instructors and registration,
call 800-666-6780 or visit
naiop.org/thecenter.

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