God Bless America

Crowdfunding Meets House Flipping in San Francisco

Have the stomach to evict-and-flip in the Bay Area but not the money? Well then San Francisco-based Tycoon Real Estate has a deal for you!

Thanks to 2011’s JOBS Act, restrictions on foreign investment in American real estate and minimum limits on investment buy-ins were eased, effectively allowing a new class of “crowdfunded” capital campaigns for Real Estate Investment Trusts (REITs). Previously, if you wanted to buy in to private equity investments like REITs, you had to be an accredited investor with the SEC which meant having $1 million net worth or $200,000 in income over the previous two years.  Not anymore!  Not only can REITs now leverage investment from more investors (up to a maximum of 2,000, up from 500), restrictions on advertising these investments to the public have also been eased.

Long story short? Now small-time investors can buy in to residential and commercial property deals for the first time. Not since online brokerages opened up the day-trading market have bankers had an opportunity to milk a public with less access to information and legal protection once things inevitably go belly-up. Except unlike the day traders (a number of whom committed suicide when the dot-bomb hit), since REITs are private equity investments they aren’t subject to the myriad financial disclosure rules that public companies are, meaning small investors have even less information on which to estimate risk.

So with $1,000 you can’t actually buy in to much actual housing for yourself in San Francisco, but you can buy in to a “Tech incubator, accelerator, shared working/living space.” Certainly this will end well! Or, as Business Insider laments:

Tycoon Real Estate is still pretty small, with just a few dozen deals available on it right now.

If it gets big and starts funneling even more capital into the San Francisco real estate market, all those people throwing rocks at Google buses and whining about rents are certainly going to come after the startup, accusing it of fueling an already dangerous bubble.

Yes. Quite.

[h/t @SFBayAreaEcon]

Comments (8)

Instead of just sneering and complaining, perhaps you might take the constructive route this time and consider how it could be useful as a vehicle for groups of people to buy up SF housing stock for nonprofit purposes. Nonprofit REITs exist too, you know.

They do! Though that’s not what’s being marketed here.

Too bad they aren’t using this money to “flip” houses into condo/apartment complexes.

I am literally shaking right now.

I know, right? How dare they let the non-rich get in on this action? Real estate investment is for *my* people, not just anyone off the street.

And like the right to execute people too, right? Why should that just belong to the state? I’m thinking the guillotine… Why should the right to be executed just go to poor people?

Sleezy fucks.

Who’s “throwing rocks?”