Rule 506b vs. Rule 506c: What Real Estate Investors Should Know
For folks investing in real estate, it's essential to understand the difference between Rule 506b and Rule 506c. Let's break it down simply and see why it matters for you as an investor.
Background
Way back, if a company wanted money to grow, they had to ask around to friends and family. This was called private fundraising, and it didn't involve complicated paperwork with the Securities & Exchange Commission (SEC). But there was a catch—it was against the rules to ask the public for money.
Then in 2013, things changed. The Jumpstart Our Business Startups Act (JOBS Act) came into play, splitting the old way into Rule 506b and introducing the new Rule 506c
Key Differences
While 506b offerings are available to sophisticated & accredited investors, 506c can only be offered to accredited investors. Learn the difference between accredited and sophisticated investors in this article.
Why It Matters for Real Estate Investors
But why does this matter to you, the real estate investor?
Well, Rule 506c was made to help the economy. It lets companies reach out to more investors, which means you get access to cool private deals that were hard to find before. The only tricky part is figuring out if the deal is for regular folks, rich folks, or smart investors, which might limit your chances of joining in on the best projects.
For real estate managers or sponsors, it means more money for bigger projects. They can get money from their friends and family (thanks to Rule 506b) or even from the general public (with Rule 506c), helping them tackle larger ventures.
As a passive investor, it means you can get in on better deals like apartment buildings or fancy office spaces. But to join, you need to be either a smart investor (for Rule 506b) or a rich investor (for Rule 506c). So, it's a good idea to learn more, make connections, and save up to make the most of real estate investments.
