Housing In America Is Broken And Make The Rich Richer And The Poor Poorer

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Housing in America feeds financial inequality, and as someone who has spent two years immersed in commercial real estate, I have seen this firsthand. The current system necessitates wealthy investors to pool funds to purchase apartment buildings or single-family rental communities. Lower-income people then pay rent to live in these properties. A portion of the rent paid by less well-off renters goes to wealthier investors as distributions. This system perpetuates the wealth gap and leaves the poor further behind.

A Solution From An Unlikely Source: Adam Neumann

Fortunately, there is a solution that has come from an unlikely place. Adam Neumann, the former CEO and founder of WeWork, has launched a new company called Flow. Although he has yet to explain the regulatory framework he intends to use, Neumann wants to return value to renters who create value in the properties by living there — a noble idea, despite the perhaps ignoble source.

Grant Cardone Offered A Solution First

Another famous player in this space, Grant Cardone, has implemented this idea and used a Reg A offering to allow his tenants to purchase equity in the properties they rent and receive regular distributions. Cardone thereby gave his tenants a sense of ownership and pride in the property while raising money from investor-tenants who know the property and neighborhood best.

Ignoble, Perhaps But Helpful, Certainly

Some might argue that Cardone and Neumann see tenants as a source of much cheaper equity checks, and this is simply another way for the wealthy to take advantage of the less well-off. Be that as it may, it still offers a way for tenants to gain an equity position in real estate in a manner that would not be open to them otherwise and is something that many other sponsors refuse to do at all.

All Sponsors Can Do It

The truth is that all sponsors have the legal ability to offer tenants an equity stake in their properties. Regulation Crowdfunding (Reg CF), which came into law in 2016, enables anyone to raise money from the investing public, including non-accredited investors, up to $5 million in 12 months. Using Reg CF, real estate owners can offer tenants the opportunity to invest in their properties. So one need not be Adam Neumann or Grant Cardone to provide tenants with equity; the law also allows companies to raise capital directly from the public on a smaller scale.

Be Part Of The Solution Rather Than Part Of The Problem

Embrace the change, become a part of the solution rather than the problem. In the evolving real estate landscape, opportunities are emerging for property sponsors and owners to introduce unique offerings. One of these possibilities is selling property equity to tenants and the general public. By facilitating such investments, tenants get the chance to hold a share in the properties they inhabit. This strategy introduces a more equitable housing market, instilling in everyday individuals a newfound sense of proprietorship and satisfaction in their rented homes.

A Future Where Renters Become Owners Of Other Properties

Envision a future where tenants evolve into property owners. The practice of investing in real estate deals is steadily democratizing, becoming accessible not only to the affluent but also to the average person. As this trend progresses, an increasing number of sponsors will provide tenants with the chance to turn into limited partner owners of the premises they occupy. A future is emerging where individuals opt to lease their dwellings while investing as limited partners in other properties. This innovative approach allows people to possess a varied collection of limited partnership stakes in real estate across the country. Indeed, this transformation is fostering a dynamic solution to the affordable housing challenge.

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Posted In: OpinionReal EstateAdam NeumanncontributorsGrant Cardone
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