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New financing vehicle for real estate

On Behalf of | Mar 25, 2016 | Uncategorized

The strength of the market for commercial real estate is dependent upon the ability of developers in Missouri and around the country to obtain funding for their projects. Changes in federal securities law may now allow real estate developers to attract financing through the use of crowdfunding platforms, and crowdfunding is also allowing more investors to participate as well.

Commercial real estate offers investors more stability than stocks. It can also provide tax benefits because the interest on loans taken out for the purchase or refinancing commercial real estate may be tax deductible along with depreciation. The downside of investing in commercial real estate is that most opportunities used to require the investment of large sums of money. Crowdfunding provides small investors with the chance to acquire an ownership interest in real estate with a much smaller buy-in.

Traditionally, real estate closings depended upon the ability of developers to acquire financing through commercial mortgages from banks or private venture capital arrangements. Crowdfunding offers buyers or owners of commercial real estate to appeal to a much larger group of potential investors willing to contribute money to the purchase or to the development of a particular piece of land. Increasing the available pool of investors can create a broader range of financing options.

From contract negotiations through to the real estate closings associated with commercial real estate transactions, developers and investors alike can often benefit from the guidance of an attorney experienced in commercial real estate and commercial development. The addition of crowdfunding presents new issues, and real estate developers and investors may find it advisable to have legal counsel review all of the documents in advance of signing.