Are you an accredited investor?
Or maybe you’ve never even heard of this term before or know what it means, which is unfortunate—because if you qualify, there’s a whole world of high-level and high-growth investment opportunities you can take advantage of. Imagine getting in on Apple in the startup days or tremendous multifamily real investment opportunities that put monthly passive payments into your account!
It’s not too late to build more wealth for your future (and your family). If you qualify as an accredited investor, we’ll show precisely how you can leverage your accredited investor status to build generational wealth and a healthy portfolio in real estate syndication.
The Different Types of Investors
Becoming an “investor” can seem daunting until you understand the different ways many physicians and professionals invest to build more wealth. Here are just a few.
The Personal Investor
A personal investor is an individual who invests their income into low-barrier-to-entry opportunities. For example, a middle-class earner might allocate some of their income to stocks and bonds for retirement as a personal investor.
The Angel Investor
Angel investors are not necessarily accredited investors but, more often than not, fulfill the criteria as they are business professionals with corporate experience. In addition, angel investors are commonly founders and are high-income, highly liquid investors who provide capital to startups in exchange for a share in the business.
Angel investors invest in the early stages of the business, which is a point of difference from a Venture Capitalist who supports at a slightly later stage when the company or concept is more established.
Being an angel investor is risky but can sometimes pay off. In the words of entrepreneur and investor Naval Ravikant, “Being an experienced angel investor is like knowing one of the six winning lottery numbers in advance.”
The Sophisticated Investor
Sophisticated investors are defined by three critical criteria— capital, experience, and net worth. However, there’s more emphasis on the knowledge and experience component, representing a sophisticated investor.
Sophisticated investors are not accredited but can access higher-level deals. The SEC defines a sophisticated investor as follows: “they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.”
A sophisticated investor is considered a level below an accredited investor.
What Does It Mean to Be an Accredited Investor?
An accredited investor status is the gold standard of investment statuses. This status provides investors with high-level investment opportunities such as hedge funds, real estate trusts, syndications, and more.
The status is based on strict SEC thresholds, which we will discuss below.
How to Become an Accredited Investor
To become an accredited investor, you must fulfill one of the following financial or educational benchmarks. This is the accredited investor definition as outlined by the SEC.
- An income of more than $200,000 per year (plus proof of this income for two years previous) or joint income with a spouse of over $300,000 plus the reasonable expectation that this income will remain consistent in the future
- A net worth of $1 million, either individually or with a spouse, not including primary residence as an asset
- Knowledgeable employees of a private fund, i.e., you are working in a fund you plan to invest in
- Individuals who hold specific licenses or certifications relevant to investment
Why Is Accreditation Necessary?
Investing in hedge funds or multifamily real estate deals requires a much higher capital expenditure than buying stocks on the top exchanges. Due to this, there are several justifications for why accreditation is necessary.
The SEC’s justification for accreditation is based on the assumption that accredited investors are:
- Good with money: The underlying rationale is that the difference in personal wealth indicates high-level or skillful management of private funds
- Risk-resilient investors: Accredited investors can financially recover from any losses in the deal due to higher income.
- Top researchers: In the eyes of the SEC, accredited investors reach their status through wise decision-making—meaning they are thorough researchers who do their homework and due diligence.
What Are The Types of Investment Opportunities For Accredited Investors?
So, when you become an investor at this level, what are some of the opportunities that open up for you? Before choosing an investment strategy, weigh the benefits and drawbacks against your long-term wealth goals.
Real Estate Crowdfunding
Crowdfunding is a group investment in which a pool of investors contributes to purchasing real estate assets that would otherwise be out of reach if investing individually. This is usually administered through a finance or real estate technology platform.
While there are crowdfunding opportunities for personal investors, the high-level investments with the most significant potential are only accessible to accredited investors.
A REIT is a Real Estate Investment Trust company that invests in income-producing real assets such as office buildings.
Similarly to investing in a company, shares are issued to investors in a REIT. This makes it a far more liquid investment option than some other real estate strategies.
Again, there are private REITs only open to accredited investors with set minimum investment amounts—the benefits being much higher equity and dividend payments.
Private equity is an investment fund that invests in companies and projects not publicly listed on stock exchanges.
Private equity also exists in the real estate markets with a strategy based on investing in ground-up projects and developments as opposed to existing income-producing assets. Real estate private equity usually requires investors to be accredited.
Real Estate Syndications
Multifamily real estate syndications involve a group of syndicators known as “general partners” who locate, underwrite, and propose a deal. Investors, known as “limited partners,” invest capital into the agreement in exchange for monthly payments from net rental income and a payout upon the asset’s sale due to their equity in the deal.
Investors must be accredited due to the minimum investment amount, commonly $50k-$100k.
Multifamily Real Estate Investing With Viking Capital LLC
When you invest in a real estate deal with Viking Capital, you’re investing in a team of real estate specialists with experience managing over $640 million in assets. The Viking Capital team secures low-risk, high-value-added potential (building your equity) assets and has consistently maintained 90% occupancy and 7% cash on cash returns.
Astute Accredited Investors Go For Multifamily Real Estate
Any experienced accredited investor acknowledges the value and benefits associated with real estate investments. If you’re at accredited investor status and not taking advantage of the opportunities (like syndication with an experienced investment group), the time is now.
For a hassle-free introduction to the world of real estate syndication, join the free Viking Investors club or reach out to a team member today.