To crowdfund a real estate project, you raise capital from online investors under one of three SEC exemptions — Regulation Crowdfunding, Regulation D, or Regulation A — then file the required disclosures, run the offering through a registered platform or broker-dealer, and keep reporting to investors for years after closing. The exemption you pick controls how much you can raise, who is allowed to invest, what you have to disclose, and how you can market the deal. Get that choice right and the rest of the process is a checklist. Get it wrong and you either pay for compliance you didn’t need or lock yourself out of the investor pool you were counting on.
Pick Your SEC Exemption First
Every other decision follows from this one. The three main frameworks for real estate raises look very different in practice.
Regulation Crowdfunding (Reg CF)
Reg CF lets you raise up to $5 million in a rolling 12-month period, and it is open to both accredited and non-accredited investors.1eCFR. 17 CFR 227.100 – Crowdfunding Exemption and Requirements Every transaction must go through a registered funding portal or broker-dealer, so you cannot take investor money directly.2U.S. Securities and Exchange Commission. Registration of Funding Portals This is the most accessible path for smaller raises with a broad investor base. The $5 million ceiling rules it out for most large acquisitions or ground-up developments.
Regulation D, Rule 506(b) and Rule 506(c)
Reg D has no dollar cap, which is why most larger real estate syndications use it. Rule 506(b) bans general advertising but allows up to 35 non-accredited investors alongside unlimited accredited ones. Rule 506(c) lets you advertise publicly, but every investor has to be a verified accredited investor.3U.S. Securities and Exchange Commission. Private Placements – Rule 506(b) Either way, you file Form D with the SEC within 15 days of your first sale.4U.S. Securities and Exchange Commission. Filing a Form D Notice
Regulation A (Reg A+)
Reg A+ functions like a mini-IPO. Tier 1 allows up to $20 million in a 12-month period; Tier 2 goes up to $75 million.5U.S. Securities and Exchange Commission. Building Blocks – Regulation A Tier 2 requires audited financials plus annual, semiannual, and current reports to the SEC. Legal and accounting costs commonly run $50,000 to $100,000 or more before the first dollar comes in, so this path generally only makes sense for larger institutional-quality deals.
Matching the Exemption to the Deal
A sponsor raising $2 million for a small multifamily rehab usually goes with Reg CF for the broad investor access and lower compliance burden. A syndicator putting together $15 million for a commercial property from a known network typically picks Rule 506(b), which avoids advertising restrictions while keeping non-accredited slots open. A developer targeting $40 million who wants to market publicly needs Rule 506(c) or Reg A+, depending on whether non-accredited investors are part of the plan.
Who Can Invest and How Much
Accredited investor status matters for every path except the non-accredited slice of Reg CF and Rule 506(b). An individual qualifies as accredited with net worth over $1 million (excluding primary residence), alone or with a spouse or partner. They also qualify with income over $200,000 individually, or $300,000 jointly, in each of the prior two years with a reasonable expectation of the same this year. Licensed investment professionals holding a Series 7, 65, or 82 qualify regardless of income or net worth.6U.S. Securities and Exchange Commission. Accredited Investors These thresholds have not been indexed for inflation, so the accredited pool has grown over time.
Non-accredited investors have investment caps under Reg CF. If either annual income or net worth is below $124,000, they can invest the greater of $2,500 or 5 percent of the larger of their annual income or net worth, across all Reg CF offerings in any 12-month period. If both income and net worth are at least $124,000, the cap rises to 10 percent of the greater of the two, with a hard ceiling of $124,000 across all Reg CF offerings in a 12-month window.7U.S. Securities and Exchange Commission. Regulation Crowdfunding – Guidance for Issuers Accredited investors have no such limit.
Disclosure Documents You’ll Prepare
The paperwork differs by exemption, but every path requires enough disclosure that investors can size up the deal and the risks.
Form C for a Reg CF Offering
Before launch, you file Form C with the SEC. It lists names and three-year business histories of every director, officer, and anyone acting in a similar role. It also requires a specific use-of-proceeds breakdown.8eCFR. 17 CFR 227.201 – Disclosure Requirements For a real estate project, that means separating acquisition costs, renovation budgets, financing fees, and reserves rather than lumping them together.
Financial statement requirements scale with raise size. Offerings at or below $124,000 (across the prior 12 months) can use financials certified by the principal executive officer. From $124,000 to $618,000, an independent accountant must review them. Above $618,000, they must be audited. First-time Reg CF issuers raising between $618,000 and $1,235,000 can substitute reviewed financials for audited ones, but only once.8eCFR. 17 CFR 227.201 – Disclosure Requirements
Private Placement Memorandum for Reg D
Reg D deals typically use a Private Placement Memorandum instead of Form C. The PPM lays out the investment terms, the sponsor’s background, and the deal-specific risk factors. For real estate, that usually means environmental contamination, construction delays, interest rate swings, and tenant vacancy. The PPM also describes the entity structure (LLC operating agreement, REIT, or otherwise) and how profits and losses flow to investors. A business plan with appraisals and financial projections normally rides alongside it.
Bad Actor Checks Before You File
Both Reg CF and Reg D bar offerings when certain people connected to the deal have disqualifying convictions or regulatory history. Under Reg CF, the exemption disappears if the issuer, any director or officer, any 20-percent-or-greater equity holder, or any paid solicitor has been convicted of a securities-related felony or misdemeanor within the past ten years (five years for the issuer itself and its affiliates). Securities-fraud injunctions from the past five years and certain final orders from state regulators or federal banking agencies from the past ten years also disqualify.9eCFR. 17 CFR 227.503 – Disqualification Provisions The same framework applies to Rule 506 offerings.10U.S. Securities and Exchange Commission. Disqualification of Felons and Other Bad Actors from Rule 506 Offerings and Related Disclosure Requirements
Run background checks on every covered person before filing. Finding a disqualifying event after launch can unwind the whole offering.
State Notice Filings
Federal exemption is not a free pass at the state level. Rule 506(b) and 506(c) offerings are federally preempted, so states cannot require registration, but they can require a notice filing and a fee. Most states want the notice within 15 days of the first sale in that state, and fees vary. Rule 504 offerings do not get federal preemption, so they must be registered or exempt in every state where they are conducted. Reg CF sponsors get some help here because the platform handles most of the state compliance. Reg D sponsors have to track every state where an investor participates and file accordingly.
Running the Campaign
Once your documents are ready, you list on an SEC-registered crowdfunding platform or work with a broker-dealer. Platform fees typically run 3 to 8 percent of capital raised, and some also charge investors a small exit fee. Build that into the pro forma from the start.
Advertising Limits Under Reg CF
Reg CF sharply restricts marketing outside the intermediary’s platform. You can put out a narrow notice pointing investors to the platform (issuer name, location, brief business description, offering terms, platform link), but that’s essentially it.11eCFR. 17 CFR Part 227 – Regulation Crowdfunding, General Rules and Regulations Inside the platform’s communication channels you can discuss the offering, but you must identify yourself as the issuer in every post. Most of the social media and email marketing sponsors are used to running is off-limits.
Escrow and Fund Release
Investor money does not flow directly to you. When the intermediary is a funding portal, funds go to a qualified third party (a registered broker-dealer, bank, or credit union) holding them in escrow. The portal can only release funds after three things: the target raise is met, the investor cancellation period has passed, and at least 21 days have elapsed since the offering information first went public on the platform.11eCFR. 17 CFR Part 227 – Regulation Crowdfunding, General Rules and Regulations If the target isn’t met by the deadline, the money goes back.
Investor Cancellation Rights
This one surprises sponsors. Any Reg CF investor can cancel for any reason up to 48 hours before the offering deadline. Inside that final 48-hour window, cancellations are restricted unless something material changes in the offering terms or issuer disclosures.12eCFR. 17 CFR 227.304 – Completion of Offerings, Cancellations and Reconfirmations If a material change hits, the intermediary must notify every committed investor, and those commitments are automatically cancelled unless the investor reconfirms within five business days. A material change inside the last five days pushes the deadline out. Your total is not locked in until the last hours of the raise.
After the Money Closes
Closing is the start of a long administrative tail, not the end of one. Reg CF issuers file an annual report on Form C-AR with the SEC no later than 120 days after fiscal year-end. It includes updated financials and a discussion of financial condition.13eCFR. 17 CFR 227.203 – Filing Requirements and Form Reg A+ Tier 2 issuers carry a heavier load: annual, semiannual, and current event reports.5U.S. Securities and Exchange Commission. Building Blocks – Regulation A
Beyond the SEC filings, you’ll be running periodic distributions to investors on the schedule set by your operating agreement. Most platforms have tools for processing payments and posting updates. Investors expect current information on occupancy, construction milestones, lease-up, and problems as they surface. Late annual reports can bring administrative penalties or cost you the exemption for future raises, and going quiet on investors is the fastest route to complaints and regulator interest.
Ending Reg CF Reporting
Annual reporting is not permanent. You can terminate it by filing Form C-TR if any of the following is true: you have filed at least one annual report and have fewer than 300 holders of record; you have filed annual reports for at least the three most recent fiscal years and have total assets of $10 million or less; all Reg CF securities have been repurchased; or the company has dissolved.11eCFR. 17 CFR Part 227 – Regulation Crowdfunding, General Rules and Regulations Form C-TR is due within five business days of becoming eligible. Until then, the annual report obligation continues even if the property has been sold or refinanced.
Liquidity Investors Should Expect
Reg CF securities cannot be freely resold for one year after issuance. During that lockup, transfers are allowed only to the issuer, to an accredited investor, in a registered offering, or to a family member, a trust controlled by the purchaser, or in connection with death or divorce.14eCFR. 17 CFR 227.501 – Restrictions on Resales Even past the 12 months, there is no guaranteed secondary market. Most real estate crowdfunding investments stay illiquid for the life of the project, which can be five to ten years depending on the business plan.
Reg D securities carry similar practical constraints. Rule 144 offers an eventual resale path, but holding periods and volume limits make quick exits rare. Say so plainly in your offering documents. Mismatched expectations about when investors can get their capital back drive most of the disputes in crowdfunded real estate deals.