How Does The New SEC Definition For An Accredited Investor Affect You? 

Back in 3rd grade, Jamie didn’t invite me to her roller skate party. What I didn’t know couldn’t hurt me, right?

Oh but it did! When I found out afterward that there had been a super-cool roller skate party and that I didn’t even get invited, I was heartbroken! Who knows if I could have gone anyway, but it was the feeling that I’d been robbed of the chance to attend THE party of the year that stung so badly (everything’s dramatic when you’re 8 years old).

You’ve been there too, maybe in a different scenario. That feeling of finding out about an event you weren’t invited to leaves you grappling with the wish you had been invited, even if you wouldn’t have gone anyway. It’s just nice to know that opportunities exist and to have the chance to choose whether or not to take advantage.

Real estate syndications can be the same way. Most people haven’t heard about them because you have to qualify to be told about the opportunities. It can seem like this exclusive party you wish you’d heard about earlier in life. 

Luckily, the SEC just issued an amended definition of an accredited investor in August of 2020, expanding the pool of people who can qualify to participate in the exclusive “party” of real estate syndication investors. 

Since most real estate syndication deals are only available to accredited investors, and even fewer deals are available to sophisticated investors, you want to know immediately which bucket you’re in (sophisticated or accredited) and how to leverage your assets to gain access to the investment opportunities you deserve. In other words, you at least want a chance to be invited to the party! 

So, you might be wondering – Am I an accredited investor, and do the new rules help me?

The Old Definition Of An Accredited Investor

You must qualify as an accredited investor by meeting at least one of the monetary requirements, which, according to the SEC, deems you financially stable enough to invest in private deals like real estate investment syndications. 

To put it simply, you are required to have an individual income of over $200K per year or a joint income of over $300K per year. If you meet that income requirement, you’re in! If not, you can qualify as an accredited investor if you have + $1M in assets outside of your primary residence. 

Remember, you don’t have to meet both requirements. If you do, great, but only one is required. 

If you don’t meet either of these requirements, don’t give up yet! The amended definition of an accredited investor might help you, or you might fall into the non-accredited, sophisticated bucket of investors – Keep reading 🙂

The New/Expanded Definition Of Accredited Investor

The good news is the August 2020 update expanded the exclusivity to extend beyond just an income or net worth requirement. Highlights of the updated definition include spousal equivalents and qualifications based on licensure, knowledge, and professional investment experience. 

As of the recent amendment, the joint income requirements not only qualify legally married couples but also include “spousal equivalents,” allowing non-traditional couples to pool their income and assets to meet the income or net worth requirements from the original definition. This breaks down barriers for non-traditional couples and allows them to qualify as accredited investors just as any traditional partners would. Yay for progress!

The recent update also provides that professionals with certifications, experience, or knowledge of investment securities and the risks associated, such as those licensed with a Series 7, 65, or 82, or who are knowledgeable employees of a private fund may qualify as an accredited investor. This means that even if you don’t meet the income or net worth requirements, but you’re knowledgeable of or experienced in these types of investments, that you may have a foot in the door. 

The amended definition of accredited investor provides access to those who previously couldn’t qualify simply because of their lifestyle and for those who are knowledgeable and experienced with these types of investments, regardless of their income or net worth. If you are in either of these buckets, we can’t wait to celebrate with you! 

How Non-Accredited Investors Can Still Participate

It’s no secret that real estate syndication investments are exclusive, and even though you don’t quite meet the accredited criteria, you’re a high-net-worth individual determined to build wealth! So, how can you get in?

You might be what’s referred to as a sophisticated investor. The SEC provides a broad definition of a sophisticated investor as someone with sufficient capital or net worth and experience to weigh the risks and merits. Industry-wide best practices classify a sophisticated investor as someone with +$100K individual income (+$200K joint) or +$350K in assets outside the primary residence in combination with sufficient experience. 

The key here is “sufficient experience,” which is why we want to have a conversation with you! Even if you meet the income or net worth requirements, we can’t share deals with you (or even mention certain deals) without establishing a relationship first. 

Even if the thought of talking finances on a call makes you nauseous (we aren’t scary, I promise!), it’s never too early to begin a working relationship if it means you gain access to otherwise-exclusive investment opportunities.  Plus, since very few deals are available to a limited number of sophisticated investors, you want to make sure you get notified about those opportunities.

How The Updated Accredited Investor Definition Affects You

The amended definition of an accredited investor expands the criteria to include non-traditional couples, experienced investors, and licensed investment professionals who, according to the original guidelines, would have been excluded before August of 2020. If that’s you, this is your invitation to the party! We’re so excited to welcome you and those you know who are newly-qualified (according to this amendment), high-net-worth individuals to the exclusive world of wealth-building real estate syndication investments. 

Whether you’re unsure, sophisticated, or accredited, the important takeaway is that we create a relationship beginning with a call in which we discuss your experience and your investing goals so that we can share deals with you. 

You deserve to know about opportunities for which you qualify. It’s time to reach out and seize the chance to Join the Club and build the life and the passive income you deserve.

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