Not yet accredited, any actionable RE investment strategies?

Question

Hi,

I set up a Solo 401k last year to start funding my investments in real estate. I would like to start in syndication or short term rental deals. I believe there are limited options as a non-accredited investor. By next year, I should be accredited due to my income being over 200k for 2 consecutive years.

I have about $30k that I want to start somewhere with passive investment. Not looking for anything homerun. Is there any actionable investment opportunities I could look into?

Thanks

Evan Polaski · Answer

@Andrew Hogan, again, I respect I may be talking apples and oranges here, but the value of 506(c) is primarily to GROW a database of potential investors.  The groups I can think of have 30 yr track records, which started well before the world of social media and podcasting.  One group that comes to mind raised $140mm from, if I recall correctly, about 150 investors.  So, as you can calculate, the average check size is about $1mm.  This is a group with 17 yrs of experience as a company, but the founders worked in the industry for over 20 years prior to that.

Another I am an investor in, with a check far closer to OP's sizing, 506(b) with average check size around $300k.  Company formed in 2020/2021, but founding partners have decades of experience EACH, prior to launching company.

But to your point, while a 506(b) is limited in number of non-accredited investors, the whole point of 506(c) is to market.  So groups that have more capital available than they can place has no need to move to 506(c).  So, yes, each new offering is an opportunity to move to 506(c), but for these established groups with established networks that are limited by good deal flow versus capital availability there is no need to change the process and compliance requirements needed with a 506(c) offering, since the entirety of their marketing and raise will be limited to existing investors and/or referrals.

Again, for OPs purpose, it doesn't make finding them easier, admittedly, but to imply that 506(c) equates to better operators is not true in my experience.

Jonathan Greene · Answer

You are opening yourself up to get pitched at every turn with a post like this. You need to do a lot more due diligence about what you want to do with your money. Being accredited or not isn't that big of a deal, it's more about why and where you want to invest.

I am concerned that you wrote "I would like to start in syndication" because that does not fit anything else you said. How would you start a syndication and get other people's money at this stage in your investing cycle?

Dan M. · Answer

Treasury bills are paying 5% and if you stagger their maturity you could have the money ready to go if you find a better opportunity. I've heard of high yield savings accounts paying close to 5% now too.

Jordan Connett · Answer

I think private investment is your only way to start on syndication. I'd be looking for meetup groups of investors and start handing out business cards that say you are an investor looking for private deals to contribute to. sometimes its just 3-5 investors on a small house/STR

Brett Synicky · Answer

@Martin Kim many of our clients invest in private funds that loan to fix and flippers as an example.  You can get well over 5% doing this.  $30k is enough to get started.

Dan M. · Answer

You buy directly from treasurydirect.gov , I suppose you could buy from another institution but then it would likely be less of a return. As far as being able to use your Roth you should be able to, or at least buy into a fund, but contact your plan administrator to find out for sure.

Todd Dexheimer · Answer

STR and syndication are completely different worlds. If you're wanting to invest in STR's, then you likely cannot use your solo401k. STR's are very labor intensive and need your consistent attention. Profits can be great with good management and the right location. They can be very poor with a bad location and/or poor management.

A syndication is a great product for a solo401k and is a completely passive investment. $30k is a bit light on the dollar amount to invest in a syndication. Certainly there are groups out there that allow for that check size, but $50k is more common. My group and many others on BP offer syndication investments, but being accredited with at least $50k certainly gives you more access to opportunities.

Jerell Edmonds · Answer

How do I find these I've heard about them I have about 60k liquid

Chris Seveney · Answer

@Evan Polaski

I agree there is no most likely zero correlation to operator experience and 506b vs c

There is another post right now about an operator who did a 506c and was foreclosed on and didn’t tell their LP’s…. How is that for experience?

I would probably say 506b operators are more experienced as 506c operators can advertise and that’s the guru / marketing route of operators with no experience - let me just whip of some videos and market this thing and figure it out.

506b needs the relationships as they cannot advertise

Now as a GP I prefer 506c over b all day long, but as I mentioned above- I agree that no correlation

Not yet accredited, any actionable RE investment strategies?

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