{"id":114458,"date":"2019-08-13T17:00:16","date_gmt":"2019-08-13T23:00:16","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=114458"},"modified":"2021-03-16T14:55:25","modified_gmt":"2021-03-16T20:55:25","slug":"real-estate-accredited-investors-definition","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/real-estate-accredited-investors-definition","title":{"rendered":"What’s an Accredited Investor? (And Why You Should Want to Be One)"},"content":{"rendered":"

Being an accredited investor can mean a lot of different things both in the legal sense and in the financial opportunities available to you. Before diving fully into what legally defines an accredited investor, let\u2019s begin quickly with a tangible, real world example of the superpowers an accredited investor has.<\/span><\/p>\n

What Accredited Investors Can Do That Non-Accredited Investors Cannot<\/h2>\n

Let’s say a real estate investor like myself wanted to raise money from a bunch of people for a real estate deal (something I’m actually doing right now), they are what\u2019s called a “syndicator\u201d and the deal is called a \u201csyndication.” But when you start raising money, at least here in the U.S., the government gets pretty involved. They don’t want you losing poor Grandma’s savings\u2014so the government requires syndicators to follow certain rules when raising money.\u00a0<\/span><\/p>\n

Now, there are a couple options for syndicators, and the specific way you set up your syndication or fund will determine what kinds of investors you can bring in. For example, I just opened up what’s called a “506(c) fund,\u201d which means I can talk publicly about my real estate fund like I’m doing right now. However, I literally cannot accept any<\/em> money from non-accredited investors\u2014not even from my own mom.\u00a0<\/span><\/p>\n

See what I mean by “superpowers”? As an accredited investor, you can get into some pretty awesome deals that the rest of the population can’t.\u00a0<\/span><\/p>\n

Now, if you’re not accredited, don’t fret. There are other ways for syndicators to raise money, like a 506(b), which allows for up to 35 non-accredited investors to join the syndication\u2014as long as they are “sophisticated” and they have some kind of personal relationship with the syndicator.\u00a0\u00a0<\/span><\/p>\n

What does “sophisticated” mean? Well, an investor is basically considered sophisticated if they know their way around a real estate deal. [1] But it’s realistically something that is kind of subjective. And because it’s the government, there are other avenues, as well. But for now, I hope this provides a clear example of the perks that accredited investors are entitled to.<\/span><\/p>\n