Regulation A+ opens the Floodgates of Real Estate Investing
by David Drake
Regulation A+, which is also known as Direct Public Offering, will significantly bring down the cost of raising capital for businesses. Such incidences like paying $250,000 legal fees when you raise $5,000,000 will no longer exist. Regulation A+ is expected to greatly influence direct public funding and give people an opportunity to raise capital more affordably.
Many people have been unable to start businesses in the States due to the strict regulations that have been in existence especially as far as raising capital is concerned. People have been paying thousands of dollars as legal fees on every capital they raise. This has always been the biggest discouragement especially for startup businesses. Business experts have argued that this has been a big obstacle especially to people who wanted to do business but did not have access to sufficient capital on their own.As a result, operating business in the States has been left to the few lucky ones who can easily raise money and pay the legal fees.
With the new laws contained in Regulation A+, startups will be able to raise up to $50 million in capital per year. Unlike the previous years, startups can now sell securities to the public and raise capital even from more non-accredited financiers. Basically, this is aimed at giving equal opportunities to those interested in doing business, regardless of their capability to raise capital. As a matter of fact, more people will now be able to raise capital, start businesses and generate additional jobs.
One of the sectors that will benefit greatly from Regulation A+ is the real estate industry. The demand for real estate properties has always been strong in the States. Many people have showed interest in investing in this industry. With the Regulation A+ in place, startups will now be able to raise sufficient capital and develop real estate properties hassle free.
Experts have been making comparisons between Regulation A+ and Regulation D. Definitely, both Regulations have their advantages and disadvantages. But the fact that Regulation A+ enables businesses to raise capital from non-accredited investors makes it far better than Regulation D. In addition, the scrapped off legal fees and reduced compliance costs in Regulation A+ also make it affordable for startup businesses to raise capital and start operations immediately.
In general, the Jumpstart Our Business Startups Act, or JOBS Act, brings a different business climate in the States. From the time JOBS Act was signed into law by President Barack Obama in April 2012, there are great steps that have been made already. Currently, a lot of capital is being raised by startups through crowdfunding.
Regulation A+ is more advantageous than Regulation D, because with Regulation A+ startups can raise money from non-accredited investors.
There is high anticipation that Regulation A+ will be approved. This is because it is believed that the law will enable more people to participate in building wealth in the country. Before Regulation A+, only the rich investors have been dominating the real estate industry and giving no room for startups to get established.
But with Regulation A+, the many startups that have not been able to operationalize their business ideas for lack of funds can now do so. The business platform will be made neutral as every business will easily access the funds it requires. This means that there will be more competition, especially in the real estate sector, and this will lead to high quality products and services. Many people are also expected to shift from leasing to owning properties because nearly everybody will now be able to invest.
Regulation A+ gives the public an opportunity to participate in active business and thus, in building wealth. Previously, this was left to privately owned companies and individuals who were able to pay for the high costs of operating business in the States. Regulation A+ will connect the public directly with investors and their investments. Most importantly, transaction costs and fees will be sliced making it affordable for startups to get established and operate efficiently.
If you have been thinking and reflecting on making an investment, especially in the real estate sector, this is the best opportunity for you to explore. Regulation A+ provides a conducive environment to crowdfund capital from non-accredited investors and fund your startups, and for investors to gain wealth as well. Businesses are expected to be more competitive and manageable even by startups. Just make sure that you understand comprehensively Regulation A+ and then make the necessary steps to start your business.
David Drake is an early-stage equity expert and the founder and chairman of LDJ Capital, a New York City private equity advisory firm, and The Soho Loft – The Voice of Capital Formation – a global financial media company with divisions in Corporate Communications, Publishing and Expos. You can reach him directly atDavid@LDJCapital.com.