Some real estate crowdfunding platforms are open to only accredited investors, and you might be wondering why. We have answers to your questions. Technically, accredited investors are people who have earned a minimum of $200,000 for over two years, including this current year or $300,000, if you intend to file for it alongside your spouse. Suppose you have at least $1 million net worth, minus your primary residence; you’re also eligible to be accredited.
At this point, you may be wondering why the standard? Stick with us as we explain what an accredited investor implies and ways to discover accredited investor investment opportunities so you can start making money immediately as a newly-accredited investor.
Investment Opportunities Available to Accredited Investors
What passive income generation opportunities are available to accredited investors? As a newly accredited investor, suppose you’re wondering about the accredited investor opportunities to earn passive returns; here’s a list of potential options.
- Real Estate
There are numerous ways to invest in real estate, and the good news is, some don’t require accreditation to start them. However, accredited investors have more investment options. For instance, Holdfolio contains many real estate products for accredited investors, such as crowdfunding debt on various property types.
- Crowdfunding Platforms
Over time, FinTech companies have made more investment opportunities available to accredited investors. Many of these companies list their accredited investor investment opportunities in single asset classes such as real estate or offer various alternative asset classes.
- Hedge Funds
One best way to take advantage of being an accredited investor is through hedge fund investment. You can choose a fund manager from the numerous ones available in your location. Also, ensure you do your due diligence before making any investments.
You can find hedge funds to invest in various asset classes ranging from real estate and cryptocurrencies to bonds and stocks. Ensure you check the fund manager’s recent returns before hiring them to ensure you don’t make a mistake.
- Venture Capital/Angel Investing
Angel investing or venture capital firms invest in new businesses. Although venture capital is a form of private equity; it’s riskier. Before startups are acquired or go public, they usually receive growth capital via venture capital investments.
- Private Equity
Called PE for short, private equity involves buying shares in private firms. There are often more risks in private equity because the investors don’t have much public information about the firm selling the shares.
Accreditation is the Securities and Exchange Commission (SEC) brainchild, created to serve as a distinction between those considered “sophisticated investors” and those who aren’t. Accredited investors might not really require the same protection as a novice, and smaller investors might when investing.
Accreditation was established as a protective measurement against novice investors to prevent them from investing in riskier projects, seeing as they might not have reserve funds to endure such loss.
As a matter of fact, the SEC employs this label to regulate firms against soliciting or advertising investments from non-accredited investors.
Advantages of Accreditation
One of the advantages of being an accredited investor is that you’ll quickly hear more deals and decide if you want to invest in them. Like we mentioned earlier, some of the opportunities available to newly accredited investors include real estate crowdfunding, real estate syndications, hedge funds, and angel investing/venture capital.
While some will argue that accreditation makes the rich richer, the government seems to share that sentiment. Therefore, in 2016, they passed the Title III of the Jobs Act. This new law has opened some investments to non-accredited investors under great sites like Holdfolio. However, it’s subject to certain conditions.
Accredited Investor Eligibility
Suppose you’re wondering about the best investment for 2021 for beginners that recently got accredited and how to become eligible for them; it might interest you to know that there isn’t a specific application process to becoming an accredited investor.
Suppose you saw investment opportunities that caught your attention and are open to only accredited investors; you’ll need to follow a few steps. For example, if you’re interested in investing in Rule 506(c) of Regulation D security, the company managing the investment opportunity will have to verify that you’re eligible.
It’s either they verify your income or net worth based on the Regulation D rules. You’ll be required to submit documentation demonstrating your accreditation status. Some documents you’ll need include:
- Bank statements
- Credit report disclosing any liability
- Brokerage accounts
- Professional certifications or proof of knowledge
- Specific third-party statements from relevant institutions
- Business ownership documentation and operating agreement, like tax filing
Don’t forget that the value of your primary home or residence isn’t part of your net worth. Nonetheless, you can include investment and vacation properties in your net worth. You’ll need to undergo proper valuation and submit proof of ownership.
Once you’ve submitted your documentation, the managing firm will check it, accept or reject your status. Immediately, the managing firm approves your accreditation; it becomes valid for a year until the next time you pay tax. Thus, you can start investing.
Investors using the Holdfolio crowdfunding platform can own multi-family properties from the site while the company handles the due diligence and financing. Investors can then decide to contribute capital and become a partner to the LLC holding the investment.
Initially, Holdfolio was limited to only single-family homes investment. However, since 2019, the company is now focused on multi-family property investments. With as little as $20,000, you can become an investor in Holdfolio.
Being an accredited investor will give you special access to specific deals. However, some deals like crowdfunding are more open; thus, you can easily find them online than investors’ meetings and dinners or country clubs.
Suppose you’re looking for accredited investor investment opportunities in country clubs or investors dinners; other investors are likely to become more open to you once they identify you as an accredited investor in compliance with regulations.
However, if you don’t meet the requirements to become an accredited investor, don’t fret. Real estate crowdfunding platforms like Holdfolio offers many opportunities to even non-accredited investors.
While some of these investment options are riskier, you can easily pick the ones you want and invest in them.