Limits on sophisticated / non-accredited investors syndications?

[Jordan Lamarre-Wan]

Hi BP community,

I recently invested in a real estate syndication as a passive non-accredited investor. Syndicators that I have spoken with say there are no limits to investing but I wanted to see what others had to say on this topic.

Here is a paragraph describing investment limits for CROWDSOURCING deals found on investopedia. Please note that my question is not for crowdsourcing; it's whether or not any similar limits apply to private deals.

Thank you for reading and commenting. Any input is greatly appreciated!

[Brian Burke]

There are a number of different regulations allowing a company to raise capital from individual investors without the requirement that the securities being offered become publicly  registered.  It sounds like this issuer is using one of the Reg A exemptions.  This framework allows them to advertise their offering and raise money from non-accredited investors, but it places limits on how much a non-accredited investor can invest.

Most real estate syndicates use the Reg D exemptions, either rule 506(b) or 506(c).

506(c) allows the issuer to advertise, but does not allow them to raise money from non-accredited investors under any circumstances.

506(b) allows the issuer to raise money from up to 35 non-accredited investors, and there are no limits on how much the non-accredited investors can invest.  BUT, the issuer is prohibited from advertising the offering.

So the answer to your question is “it depends.”  The majority of syndicates use the 506(b) exemption so there wouldn’t be limits for you here, except that you might not even know these offerings exist.  The only way to find out is to get to know some sponsors and wait for their next offering to come out.