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Crowdfunding used for financing Southern California hotel

The U.S. hotel industry has now entered into what is called real estate crowdfunding. This method of using large numbers of small contributions by investors to finance these business ventures is being tried by one Southern California hotel in Palm Springs.

Rather than only provide a stake in the hotel, what is also being offered to the small contributing investors are perks. Those investing in the 163-room resort will receive benefits such as room discounts, free use of the poolside cabana, improved bookings, etc. The company that brings these property owners and investors together is also planning on using a similar strategy for raising funds for hotels in the San Francisco Bay area as well.

Millions of dollars have already been spent on the Palm Springs hotel concerning conversions and upgrades. Many of the investors are also described as "fans of the hotel." These individuals invest a minimum of $10,000 and then bring their families to visit the establishment.

Crowdfunding is being used more extensively in commercial real estate ventures. The advantage for hotels are that investors understand and even use what they are investing in. "Besides raising capital, you're building an audience," stated one executive.

Crowdfunding has gained momentum since the federal Jumpstart Our Business Startups Act went into effect in 2012. According to research, total crowdfunding was said to have increased 81 percent in 2012 from the prior year.

While financing is just one of many aspects involving real estate matters, it is very important to get this right. Real estate attorneys are available to assist concerning these matters. Though options may be available, it's often difficult for real estate owners and developers to know which would be right for their particular venture.

Source: Dallas News, "Real estate crowdfunding spreads to hotel industry as Hard Rock offers investors stakes," Nadja Brandt, April 17, 2014

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