What is an Accredited Investor?
One of the frequent terms you will run across when diving into the real estate investing world is “Accredited Investor”. Let’s explore this further by reviewing some common questions:
1. What is an “Accredited Investor”?
At its most basic level, an accredited investor is a person who the Security and Exchange Commission (SEC) deems financially sophisticated enough to participate in non-registered security transactions such as hedge funds, venture capital funds and for our purpose, certain multi-family real estate syndications.
An accredited investor must meet one of two criteria:
Earn an income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same or higher for the current year
Have a net worth of $1,000,000, excluding the equity in your personal residence
2. Why does being an Accredited Investor” matter?
The main benefit of being an accredited investor is having the ability to invest in more types of multi-family real estate, as certain syndications only allow accredited investors. If you don’t meet the criteria above, there are still plenty of real estate opportunities available, but they are more difficult to find as SEC regulations do not allow investments for non-accredited investors to be advertised to the general public. What this means in practice is you will need someone to find and send you these real estate investment opportunities (which is where we can help!). Connect with Us
3. Is there a shortcut to becoming an Accredited Investor?
Yes! The way to accomplish this is to pass the Series 65 license test. Once you have passed, boom, you are now an accredited investor regardless of your income or your net worth. Here are some additional details on the Series 65:
Estimated study time is 60 hours
Exam is 3 hours long and you need a 72% to pass (94 out of 130 correct)
Online study materials cost around $150-$200 (click here for examples)
Exam can be taken online or at an exam facility for $187 (you can register here for the exam)
While having to study and take an exam is not an enjoyable experience, the Series 65 does allow you to access more real estate investments, which is well worth the time and effort.
NOTE: In addition to the Series 65 license, those who hold a Series 7 or Series 82 license are also considered accredited investors. These are more difficult to obtain, as they require sponsorship by a security firm, which is not a prerequisite of the Series 65 license.