Real Property Law

Cal. Real. Prop. Journal VOL. 40, NO. 2, 2022


Written by William Schumann*


As former United States Supreme Court Justice Louis D. Brandeis wrote in his book Other People’s Money, "Sunlight is said to be the best of disinfectants."1 By that he meant when it comes to investing, company disclosures act as the "sunlight" which "disinfects" the investments of fraud.2 In this paper, I apply Brandeis’s philosophy to the securitization of real estate investing. I will argue that this securitization is democratizing real estate investing, which overall is a positive development. Although there are significant financial risks involved with this democratization, substantial disclosure obligations will mitigate these concerns.

In Section II, I explain how past speculative real estate investing has led to dire economic consequences. In Section III, I will explain the intricacies and attributes of the traditional form of securitized real estate investing, Real Estate Investment Trusts ("REITS"). In Section IV, I will explain how the Jumpstart Our Business Startups ("JOBS") Act has facilitated the democratization of real estate investing. I will focus on crowdfunding and Special Purpose Acquisition Companies ("SPACS") within the real estate investment sphere. I will conclude by noting that although the JOBS Act has set the stage for a proliferation of securitized real estate investing, such a phenomenon does not endanger investors.

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