Unaccredited Investors in an Investment Partnership?

Question

When forming an investment partnership for the sake of purchasing multifamily investment properties, is it possible to include unaccredited investors?

Second part, does your fund have a specific definition of "Sophisticated" investor that you reach out to for involvement?

Mark Allen Kenny · Answer

Yep, that's correct. @Benjamin A Ersing feel free to message me if you need a recommendation for a great SEC attorney.

Jaysen Medhurst · Answer

No, they don't, @Benjamin A Ersing. Talk with a lawyer about the specifics, but unless you're bringing in a whole bunch of people, no need for them to be accredited. Even if you were doing a 506(b), you can have up to 30 (I think) unaccredited "friends and family" in the deal. No such exception for a 506(c), though.

Chris Seveney · Answer

@Jaysen Medhurst

Not an attorney but have a 506b and a 506c fund

506c - can advertise - must be accredited

506b - cannot advertise, must have prior relationship and up to 30 non accredited investors (read rules).

To set one up will run you $10-20k.

Jaysen Medhurst · Answer

Joint Venture (JV) partnerships, syndications, and funds are all different things, @Benjamin A Ersing. JV partners are usually "active" to some extent. Investors in a syndication are "passive," which is why they must (mostly) be accredited. Funds are a different thing altogether. Investors aren't putting money down on a specific property, but the portfolio that will be acquired and managed by the fund.

Sophisticated Investor and Accredited Investor have qualifications outlined by the SEC.

Charles LeMaire · Answer

I believe you will find Reg D 506(b) is up to 35 sophisticated investors with a preexisting substantive relationship with the General Partner. If one of your "Friends" is not really sophisticated and gets their nose out of joint, your deal could be in for a ride through the legal world. I suggest you are sure each understands what they are getting into.

Regards,

Charles LeMaire

Regards,

Charles LeMaire

Benjamin A Ersing · Answer

Thank you @Jaysen Medhurst. I should have been more specific with my language.

If I want to bring together a number of friends & family to invest in a property (or properties) (deal structure aside), does each of them need to be Accredited?

Unaccredited Investors in an Investment Partnership?

Unaccredited Investors in an Investment Partnership?

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