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Accredited vs. Non-Accredited Investors

If you are looking to invest in a real-estate syndication, then this will be a great topic to understand. Before jumping into this game, you must know that investors are categorized as either an Accredited or Non-Accredited Investor. It is crucial to know these terms and which one you fit into because it will determine which real-estate offerings you can place your capital into. Below I will break down what qualifies you as either an Accredited Investor or a Non-Accredited Investor. Accredited: 1. Your annual income level must be at least $200,000 as an individual ($300,000 joint annual income with a spouse). This level of income must have been consistent over the past two years and is expected to remain in the current year. 2. Your net worth (as a single person or with a spouse) is at least $1M which excludes your primary residence. 3. You may also invest as an entity such as an LLC or Corporation if it has assets in excess of $5,000,000 or if all the owners of the entity are accredited individually. New Changes: The SEC has recently amended the definition of an Accredited Investor. They did this because they realized that there are plenty of “sophisticated investors” who do not make $200,000 ($300,000 jointly) or do not have a 1M net worth. The new amendments to the definition of an Accredited Investor are listed below: · Individuals who have obtained their Series 7, Series 65, or Series 82 licenses · Individuals who are “knowledgeable employees” of a private fund · SEC- and state-registered investment advisors, exempt reporting advisors, and rural business investment companies (RBICs) · Any entities, including Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries, that own “investments” in excess of $5M o This entity also must not have been formed for the specific purpose of investing in the securities offered · Family offices with at least $5M in assets under management · The term “spousal equivalent” has now been added which says that if one spouse of a married couple qualifies as an accredited investor then they can pool their finances making them both accredited investors Non-Accredited: A Non-Accredited Investor is an investor who does not meet the qualifications of an Accredited Investor. Those qualifications are listed above. Please note, just because you do not qualify as an Accredited Investor does not mean that you can’t invest in real estate. The only deals that you cannot invest in would be 506c offerings which only allows accredited investors. There are plenty of 506b offerings out there which do allow non-accredited investors to place capital into. Conclusion: Now you know which camp you are in. Are you an Accredited Investor? Are you a Non-Accredited Investor? Whichever one you are you can now take that information and start looking for deals! Remember if you see a 506b offering then both Non-Accredited and Accredited Investors can invest in the deal. If you see a 506c offering, then this will only allow for Accredited Investors. It is now time to go find operators you trust, review their offerings, and begin passively investing in real estate. Jackson Wietecha




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