Accredited investors can access securities offerings that are not available to the general public. If you are interested in particular types of passive real estate investments such as debt syndication or private money lending, you may have realized that you must be an accredited investor to participate. So here is how to become an accredited investor.
Accredited Investor Qualifications
The SEC, in Regulation D, Section 501, has established guidelines that define who can be an accredited investor. The criteria laid out by the SEC include the following:
- A natural person with individual income in excess of $200,000 in each of the previous two years, or $300,000 combined with a spouse. The individual or couple must also have a reasonable expectation of maintaining at least the same income level in the current year. In addition, during all three years, the income must be met in the same way – i.e. the calculation must be made all three years as an individual, or all three years as a couple.
- Net worth in excess of $1 million as an individual or as a married couple (excluding the value of the primary residence, but including liabilities exceeding the value of the primary residence and liabilities incurred on the primary residence within the last 60 days).
Individuals with these types of financial resources are assumed to have the ability to absorb potential losses, and also the financial understanding or shrewdness to handle more complicated investment opportunities and transactions. If you are one of these individuals, you can easily apprehend how to become an accredited investor.
The Screening Process
No official government agency provides you with a sealed accredited investor status document indicating your status as an accredited investor. One important reason is that your status could change from time to time.t.
Diligent issuers of exempt securities put in place a process in which they take reasonable steps to verify potential investors to make sure they qualify as accredited investors under law. Once you have been verified as an accredited investor, you may be able to use that status to invest in multiple offerings for up to 90 days, until or unless there is a change in the company’s policies or your financial circumstances.
The process of how to become accredited investor and gain eligibility to participate in confidential private placement investment opportunities, you may be required to provide the following:
- Tax returns
- Credit report
- Financial records (from banks or other financial entities)
- W-2s
Now that you know how to become an accredited investor, you may want to consider the potential investment opportunities available in the marketplace.
