What can we do about that vacant corner store? Until now the choices were speculate among neighbors or online (I’ve had many conversations with neighbors that go like this: “that would be a great place for an independent coffee shop, but I don’t want a chain”), call your city councilmember (“can’t you find a nice coffeeshop for that space?”) or just hope (“I hope someone opens a coffeeshop”). Even though that corner building is small and inexpensive by commercial real estate standards, it is too expensive to purchase myself, and risky nonetheless, since I don’t know how to be a landlord anyway…yet….
Well, the answer may be coming in to focus and it bringing the localism movement to real estate investment. We eat local and buy local, why not invest local? My neighbors and I have discussed how we could pool resources to purchase a building, and it is being pursued in northeast Minneapolis. A recent New York Times article looked at crowdfunding for small startup companies, so why not crowdfund local real estate investments, as explored by this excellent and in-depth Atlantic Cities article .
The thing is, we believed in more than that. We saw that there was a newly vacant storefront in our neighborhood, and we believed that the new owner of the building was sincere about his intent to improve the ground floor commercial space and its upstairs apartments. The building owner and prospective brewpub owner presented residents with what appeared to be a sound business plan and we believed in these young entrepreneurs could make a go of a business we were sure to patronize.
Why not buy a building, as our neighbors in northeast Minneapolis and in Washington D.C. are doing? The evidence from the Northbound is compelling. One investor took a hit to his stock market portfolio and bailed on the deal, leaving the future of the Northbound in jeopardy. Within three weeks of putting the offer out there, Northbound owners had raised $200,000 from thirsty neighbors eager to see this local investment. Our neighbors in northeast Minneapolis have raised enough money to purchase a building themselves, so the fundraising part seems pretty sound. What other small-scale opportunities are we passing up by not being able to do this on a larger scale?
We set aside a portion of our paychecks to our 401k before taxes in hopes that a fund manager can increase that value over time through buying and selling shares of huge corporations and portfolios overseas. There is no sense of what is actually creating value, much less any sense of ownership. In this scenario you can point to the physical building, touch it, look after it, dream about renovations and future tenants and whether a profit can be turned. Why not invest locally, tax free or not? As the New York Times article indicates, we are waiting for the SEC to establish guidelines to allow this, based on President Obama’s JOBS Act, signed last April. The SEC is wary of fraud. I understand this, but why is it that only rich investors can commit fraud? Joking aside, it strikes me that a crowdfunding opportunity is less likely to have fraud occur with more people paying attention and having the corner store at stake.
Keep your eye on these stories in Minneapolis and Washington and we’ll see when the SEC acts.
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