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Los Angeles company uses crowdfunding for real estate investment

There are definitely risks attached to real estate investment in Los Angeles. Maybe a broker fails to properly investigate the property, or a seller fails to disclose defects or other problems. Maybe one party doesn't carry out the purchase agreement or in some other way breaches a real estate contract. Without solid legal support, buyers and sellers alike could face significant damages.

Still, it's undeniable that the possible gains of investing in commercial or residential real estate make the prospect extremely attractive, especially now that the market has shown signs of a turnaround.

One Los Angeles company has taken a relatively new approach to real estate investment: crowdfunding. Realty Mogul, a company based in Mid-City, is looking forward to looser investment regulations by the Securities and Exchange Commission. Right now accredited investors can use Realty Mogul's website for free. That means people whose net worth is a minimum of $1 million or who have an annual income of $200,000 can invest in real estate, but expected changes by the SEC will soon lower the requirements for potential investors.

The minimum investment is $5,000, and the moneys are pooled and put toward a property listed on the company's site. Realty Mogul teams up with real estate companies that want their properties listed.

Other companies have taken a similar crowdfunding approach, but the investments have generally been higher than many of the ones accepted by Realty Mogul.

California residents considering the pros and cons associated with the purchase or sale of a particular property should also be aware of the possible legal pitfalls. Careful preparation of contracts and other property-related documents can smooth out the transaction and protect against the cost of future litigation.

Source: Los Angeles Business Journal, "Startup Takes Crowdfunding to Real Estate," Natalie Jarvey, March 20, 2013

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