Becoming an Accredited Investor

The opportunities that come with being an accredited investor surpass that of standard investors. Accredited investors are able to transition into private investment options like private money lending and debt syndication. If you’re interested in these rare but lucrative kinds of investments, it’s worth taking a little time to determine the qualifications needed to become an accredited investor.

What Does Being An Accredited Investor Mean?

If you’re looking for a particular certification, course, or training you need to become an accredited investor, you won’t find it. The term accredited is applied to an investor based upon their previous experience in investments, existing financial position. The Securities and Exchange Commission (SEC) sets forth certain criteria for investors who wish to participate in certain private placement real estate deals.

Accredited Investor Qualifications

In order to be considered an accredited investor, you must meet the following qualifications outlined by the SEC in Section 501, Regulation D:

· Previous two years earnings equal to or exceeding $200,000 as an individual or $300,000 as a married couple. Further, the investor as an individual or as a couple must show that they are likely to sustain this income threshold for the current year. A total of three years are reviewed and assessed in order to receive this accredited status.

· Net worth exceeding $1 million aside from the value of your primary residence value. This may include things like commercial properties, turnkey rentals, stock portfolio, etc. Net worth can be calculated either as an individual or with your spouse.

Accredited Investor Screening

Companies that offer debt syndication investment opportunities and private money lending options typically have some screening steps to ensure that they are adhering to SEC guidelines for accredited investors. They will gather documentation such as:

· Tax returns

· Credit report

· W-2s and/or 1099s

· Financial statements from banks and/or brokerage accounts

No two companies will have the same screening process because it’s discretionary, but you should expect to provide the aforementioned documents at a minimum.

Become an Accredited Investor Over Time

Most people won’t automatically meet the qualifications necessary to be considered an accredited investor. But over time, with wise investment choices it’s definitely possible to build your net worth so you qualify. Once you do, an entire new world of investment opportunities will open up to you, allowing you to earn double digit, fixed returns through private placements and other private lending programs. It’s certainly a goal worth keeping in mind as you become more financially successful.