Becoming an Accredited Investor

9 Replies

Good morning BP,
Hope your week is going well. I'm wondering if you can help clarify something for me. I am working with my CPA on having him sign me off as an accredited investor, but am falling a bit short of the $300K income mark for a married couple, which is preventing him from signing off on it. I am looking at the qualification of having a net worth of $1M. Just for point of reference here is the verbage in the Qualification form:

"I am a natural person whose individual net worth or joint net worth with my spouse, at the time of the purchase of the Securities, exceeds One Million Dollars ($1,000,000), excluding consideration of equity in my primary residence and after having deducted any negative equity in my primary residence or any indebtedness that I have incurred on my primary residence within the sixty (60) days prior to subscribing to this Offering;"

Not including my Primary Residence my net worth falls right at the $1M mark, but this does not include the mortgage debt on my real estate investments. So my total assets not including my primary or my liabilities is $1M.  Does this satisfy the requirement?  Any help or further insight from someone well versed in this would be greatly appreciated!  Thank you!

@Lucas W. Emhof   The accredited investor status is such a frustrating rule in my opinion.  Not because it doesn't have merit but because it's been the same number since 1980 and $1M was worth a lot more back then than it is now.  Anyway, side bar on that rant, as far as I know it needs to be your 'net' worth which not include any debt you have on those properties.  It must be your actual equity on the properties and not their total value. 

All that being said, I participated in several investments by asking for a pass-thru on the accredited status by deeming myself a 'sophisticated' investor status.  Sometimes the funds will make these concessions for you in an accredited only investment.  Also some accredited only investments make room for a small percentage of allowable non-accredited investors I believe which you could also look out for. 

I have only come across one investment where it required CPA sign off to which I just moved on to the next investment.  : )

Best of luck! 

 

 

Jon, thank you so much for you timely response.  If it won't work work on getting the 3rd party approval via CPA, I will most certainly inquire about the "pass-thru" by being a sophisticated investor.  Great idea.  Thank you so much.  I'll let you know how it pans out.  

@Lucas W. Emhof I am not an attorney.

If you make over $200k, it is my understanding that you can subscribe as a sole subscriber.

If both you and your spouse want to sign the subscription booklet, you are correct regarding the $300k income limit.


Hi Lucas,

Just a side note.

You won't be a Sophisticated Investor on a deal unless the Deal Sponsor (and possibly his legal council) believes you really are a Sophisticated Investor.

What makes a Sophisticated Investor is not something that's as set in stone as an Accredited Investor though. 

Good Luck!


@Lucas W. Emhof

Assets - liabilities = Net Worth.  So if you have $1,000,000 in buildings but $600,000 in debt your Net Worth is $400,000.

I believe you only need to meet one of the criteria, income OR net worth not both. (but double check, it has been a while for me)

@Lucas W. Emhof

Do either you or your spouse make $200k? Even while married if you make $200k my understanding is that you’ll qualify, though I let my attorneys verify everyone.

The $300k is if for example you and your wife each make $150k.

@Brian Adams Thank you.  Unfortunately I don't quite reach the Income levels of $200K sole and $300K married, so my next step is showing that I have a net worth of $1M and understanding exactly what qualifies as such.  Thank you for reaching out. 

@Lucas W. Emhof This link explains it in more detail, but basically for the net worth requirement it’s the common definition of net worth (assets - liabilities): 

https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/updated-investor-bulletin-accredited-investors

@Lucas W. Emhof

As others pointed out, your Net Worth should be calculated by taking into account all your assets, (401k, IRA's, brokerage accounts, boats, etc, whatever else assets you own) and subtracting your liabilities. Your CPA should be able to guide you in the right direction here. Note that your primary residence is not considered an asset to be included in such calculations.

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