What The SEC’s Expanded Definition Of An Accredited Investor Means For You

Remember back in high school when all social groups were divided into cliques?

There were jocks, nerds, cheerleaders, theater kids, band geeks, and every other division of people either by interest, attitude, or even ethnic group you could imagine and it was pretty much unheard of for anyone to move from one clique to another.

Geeks and drama nerds didn’t get invited to the jock/cheerleader parties (or vice versa). As adults, we think we left all that drama behind, but did we really?

At first glance, it might seem like real estate syndications are the same way, like an exclusive party that only certain people get invited to attend. Most people haven’t heard about them because you have to qualify to be told about the opportunities.

Luckily, the SEC just issued an amended definition of an accredited investor in August of 2020, expanding the pool of people who can qualify to participate in the exclusive “party” of real estate syndication investors.

Most real estate syndication deals are only available to accredited investors, but some are available to sophisticated investors. Before you can get investing, you need to know which clique you’re in (sophisticated or accredited) and how to leverage your assets to gain access to the investment opportunities you deserve. In other words, you at least want a chance to be invited to the party!

So, you might be wondering – Am I an accredited investor, and do the new rules help me?

 

The Old Definition Of An Accredited Investor

According to the SEC, you must qualify as an accredited investor by meeting at least one of the monetary requirements, deeming you financially stable enough to invest in private deals like real estate investment syndications.

You can qualify as an accredited investor with an individual income of over $200K per year or a joint income of over $300K per year. If you don’t meet the income requirements, the net worth requirement is + $1M in assets outside of your primary residence.

Remember, you don’t have to meet both requirements. If you do, great, but only one is required.

If you don’t meet either of these requirements, don’t give up yet! It’s possible the amended definition of an accredited investor might include you, or you might fall into the non-accredited, sophisticated bucket of investors, which is also great news.

 

The New/Expanded Definition Of Accredited Investor

The December 2020 update expanded the exclusivity to extend beyond just an income or net worth requirement. Highlights of the updated definition include spousal equivalents and qualifications based on licensure, knowledge, and professional investment experience.

As of the recent amendment, the joint income requirements not only qualify legally married, traditional couples but also include “spousal equivalents,” allowing non-traditional couples to pool their income and assets to meet the income or net worth requirements from the original definition. This breaks down barriers for LGBTQIA+ couples and allows all spousal equivalents to qualify as accredited investors just as any traditional partners would. Yay for inclusivity!

The recent update also provides that professionals with certifications, experience, or knowledge of investment securities and the risks associated, such as those licensed with a Series 7, 65, or 82, or who are knowledgeable employees of a private fund may qualify as an accredited investor. This means that even if you don’t meet the income or net worth requirements, but you’re knowledgeable of or experienced in these types of investments, that you may have a foot in the door.

The amended definition of accredited investor provides access to those who previously couldn’t qualify simply because of their lifestyle and for those who are knowledgeable and experienced with these types of investments, regardless of their income or net worth. If you are in either of these buckets, we welcome you with open arms!

 

How Non-Accredited Investors Can Still Participate

It’s no secret that real estate syndication investments are exclusive, and even though you don’t quite meet the accredited criteria, you’re a high-net-worth individual determined to build wealth! So, how can you get in?

You might be what’s referred to as a sophisticated investor. The SEC provides a broad definition of a sophisticated investor as someone with sufficient capital or net worth and experience to weigh the risks and merits. Industry-wide best practices classify a sophisticated investor as someone with +$100K individual income (+$200K joint) or +$350K in assets outside the primary residence in combination with sufficient experience.

The key here is “sufficient experience,” which is why we want to have a conversation with you! We invite you to not only leverage your capital in a way that works as hard as possible toward building wealth, but to also leverage your relationships, namely, the one between you and the Sage Investing Group. Even if you meet the income or net worth requirements, we can’t share deals with you (or even mention certain deals) without establishing a relationship first.

Even if the thought of talking finances on a call is something you’d rather avoid (we aren’t scary, I promise!), it’s never too early to begin a working relationship if it means you gain access to otherwise exclusive investment opportunities.  Plus, since very few deals are available to a limited number of sophisticated investors, you don’t want to miss your chance!

 

How The Updated Accredited Investor Definition Affects You

The amended definition of an accredited investor expands the criteria to include non-traditional couples, experienced investors, and licensed investment professionals who, according to the original guidelines, would have been excluded before December of 2020. If that’s you, this is your invitation to the party! We’re so excited to welcome you and those you know who are newly-qualified (according to this amendment), high-net-worth individuals to the exclusive world of wealth-building real estate syndication investments.

Whether you think you’re accredited, sophisticated, or unsure, the important takeaway is that we create a relationship beginning with a call in which we discuss your experience and your investing goals so that we can share deals with you and allow you to gain access.

No Relationship = No Access = No Opportunity

You deserve to know about opportunities for which you qualify. It’s time to reach out and seize the chance to Join the Sage Investor Circle and build the life and the passive income you deserve.

 

Want to Learn More?

Ready to learn more about passive investing? Join our community and sign-up for the Sage Investor Circle. Next, schedule a call so we can learn more about you and your investing goals. As a part of our community, you’ll be invited to our bi-weekly live webinars, and you’ll receive our quarterly newsletters, weekly blogs, and other valuable educational content to help you become a well-informed investor. Our members will be notified first when a syndication deal passes our rigorous vetting process and becomes available.



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