No, you cannot invest in a property with $100 or $66

In the previous post we discussed small scale offerings and the 20 12 rule under which upto 2 million can be raised from a maximum of 20 retail investors (and unlimited sophisticated investors) in one year under Australian law

However if a small business makes such an offer not many people are going to be aware of it given the strict restrictions on promoting such an offer. ASIC has created a work around for this difficulty.

Class Order ASIC [CO 02/273] “Business introduction or matching services”.

You can get introduced to potential investors via someone who runs a business introduction or matching service. The introducer cannot be party to the transaction and his role ends at the introduction stage. It is upto the introduced parties to hammer together a deal if it makes sense to them. There are again strict restrictions on the activities of an introducer and what can be done in the course of a public meeting, however there is an exemption where if you go via an introduction service then the amount of money you can raise is now increased to 5 Million from the previous maximum of 2 million.

The restrictions of 20 retail investors only and only one raise per issuer in one year still apply. A few crowdfunding sites are positioning themselves as introduction service providers,, but lets do some some simple math to see how this stacks up.

Lets say you are trying to raise 500K for an apartment via crowdfunding. And your crowdfunding site claims a $100 or $66 minimum. Well technically you can say $1 minimum but the fact is you are allowed only 20 retail investors as of now. So the minimum each investor has to invest is $25K. If the issuer takes your offer of $100 or $66 he is essentially wasting a seat out of the 20 on you and he will have to compensate for it from the remainder.

So sure you can make an offer to buy a "brick" for $66 but chances are your offer wont be accepted. Crowdfunding sites that are making such offers are resorting to what can be politely termed as "Switch and bait".

The only way a small investor of this size can be accommodated is under a full retail PDS where there are no restrictions on the number of retail investors can participate. At www.estatebaron.com we use a full PDS for every offering and even after that our minimum is $2000, just to ensure that the cost of servicing a small client is justified.

We just think in the long run it is better to be transparent with our customers rather than make misleading promises.