An accredited investor is an investor with a special status under the financial regulation laws. Accredited investors include high net worth individuals, banks, and other financial institutions and corporations who have access to complex and higher-risk investments such as venture capital, hedge funds and angel investments.
The United States security and exchange commission considered a change to the definition of “accredited investor ” to open a new class of potential investors: “accredited natural persons”. The proposed changes stipulate that an accredited natural person must be both “accredited investor ” under the existing standards and also own not less than $2.5 million in investments
In the United States, to be considered an accredited investor, one must have a net worth of at least $1,000,000, excluding the value of one’s primary residence or have income of at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.
However, it’s important to note one specific rule about the last point. You must meet those income requirements based on the sane method for all the three years: single or joint.
To get accredited investor status, you must meet the certain income or net worth requirements (already discussed) laid out by the Security and Exchange Commission (SEC). You must also prove to investment firms that you can qualify to invest in certain products.
Being an accredited investor is advantageous. You will be able to access some benefits which include:
Accredited investors are a special class of investors who are able to gain access to investments that regular investors are not. Because they meet SEC criteria for wealth, accredited investors get the green light to invest in private placement for small businesses like yours.
In addition to allowing you to bypass registration with sec, accredited investors ultimately are your intended audience when you conduct private stock offerings. Private stock offerings allow you to finance your small business by soliciting accredited investors to buy shares of stock in your company. As part of your private stock offering, you will provide potential investors an accredited investor Questionnaire Form, which will verify whether the investor is truly accredited.
You have a wide variety of accredited investors to choose from in soliciting investments. Aside from individual persons with net worth of $1,000,000 or income of $200,000 in each of the two most recent years with reasonable expectation that they will attain the same cash flow in the current year, or businesses whose equity owners are all accredited investors.
Accredited investors as have been explained above are a different class of investors who have gained access to investments that have higher rewards but also come with higher risks. Investing in opportunities with higher risks means the rewards for the investment are higher but it could also mean that if the investment fails, the investor stands to lose a lot of money. That’s why real estate syndication is one of the best investments for an accredited investor. The risks of failure in real estate are very minimal but the rewards are high and they also increase with time.
It is also easier to navigate the real estate industry as an accredited investor already has a huge wealth of resources and experience, this will make the management of the investment portfolios easier and more profitable with time.
If you would like to know about real estate syndication and other investments for an accredited investor, Please feel free to contact us