Part of investing is understanding all the different terminology and ways that you can invest. Two of those terms you will run across as a passive investor are accredited and non-accredited investors. What some people don’t realize as they start investing is that certain investments cannot be made by people who are not accredited.
In the guide below, we’ll cover accredited investors, non-accredited investors, and how to find the right investments depending on which category you’re in.
What is an Accredited Investor?
“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined...” - Andrew Carnegie, billionaire industrialist
An accredited investor is someone who has met specific net worth and/or income requirements to be permitted to make certain investments.
Accredited investors must:
Earn more than $200,000 annually and have done so for the past two years
Earn $300,000 annually when combined with their spouse
Have a net worth of more than $1,000,000 (Yes, a million dollars) without including their residence in the assets
Invest on behalf of an investment company or business with more than $5 million in assets
Being an accredited investor gives you access to higher-risk investments and more unique investing opportunities, so it’s worth trying to get there if you’re close.
What is a Non-Accredited Investor?
A non-accredited investor is someone who doesn’t meet the criteria above. They may be a first-time investor or a small-time investor, but they don’t have the income or net worth qualifications to become accredited. Their access to investment opportunities will be slightly different than their accredited counterparts.
Why Does It Matter.... Rule 506b vs 506c for Raising Capital
“If you’re not going to put money in real estate, where else?” - Tamir Sapir, business mogul
When it comes to raising capital for investments, some rules apply to accredited and non-accredited investors. The two primary guidelines are rules 506b and 506c.
With rule 506b, general partners (GPs) may raise unlimited funds as long as they aren’t publicly soliciting investments or advertising their efforts. This includes unlimited accredited investors and up to 35 non-accredited investors, which must be established as sophisticated and given additional documents regarding investment disclosures, etc.
What Does This Mean For You?
If you are an accredited investor you may see advertised deals that you would be able to access, regardless of who the real estate team is. As a non-accredited investor you will need to have an established relationship with whomever is offering you the investment opportunity.
For these two reasons I started the Whole Wealth Investing Group. By joining an investment group you can build a relationship with me and my team, allowing you to gain access to both types of deals (regardless if you are accredited or not) or off-market, non-advertised deals you would never gain access to. You would also be connected to your investment and the team running the deal. This is one of the most important aspects to doing well in real estate. Who you know makes all of the difference.
We don't advertise our real estate deals so we are able to work with investors where they are, accredited or not. As long as we have an established relationship and you qualify for our investment club (we do have investment minimums and there needs to be the right fit) you can gain access to multiple investment opportunities a year.
Next Steps
If you are ready to start passively investing in real estate, watch our Master Class 'Profits To Wealth' and join our Whole Wealth Investing Group so we can help you determine what your investment goals are and how we might help you.
Resources
https://www.moneyunder30.com/accredited-vs-non-accredited-investors
https://carta.com/blog/506b-vs-506c/
