To date, most crowdfunded investment opportunities have been limited to wealthy investors who meet the current definition of “accredited investor.” This has left an absolutely HUGE market of potential investor capital, represented by those individuals who currently do not qualify as accredited investors, virtually untapped. However, with the increasing number of viable intrastate crowdfunding regulations (*cough*… Illinois), as well as significant broadening changes potentially being made to the current definition of accredited investor in the near future, more investor capital than ever before is set to enter the private placement market. Of the classes of crowdfunding investments that will gain from this potential influx of new investor capital, real estate crowdfunding is certainly at the top of the list.
Just How Big Is This Untapped Pool?
Let’s do some quick math just to get a sense of what we are talking about here in terms of the potential influx of new capital represented by this untapped pool (remember when your mom said math would come in handy one day, yeah that’s now). According to the SEC’s recent Staff report, roughly 10% of the U.S. population (or roughly 12.5 million households) qualify as accredited investors under the current standards. If you extrapolate that out, roughly 112,500,000 households (i.e. the other 90%) do NOT currently qualify. Now let’s assume that, conservatively, a third of these households are willing to make an investment in something like a stock or other security (it’s actually more like 50% according to a recent GALLUP poll). That would leave roughly 37,500,000 potential investing households. Finally, let’s assume these households are willing to make a meager $500 investment per household per year. That would result in a potential untapped capital pool of … drumroll please … roughly $18,750,000,000 dollars. Yeah math, thanks mom!