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Why You Should Become An Accredited Investor



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hey this is Brandon from bigger pockets

calm hosted the BiggerPockets podcast

and today I wanted to find what an

accredited investor is and why you want

to become one stay tuned

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hey what's going on my name is Brandon

Turner the author of the book on rental

property investing in a bunch of other

books and today I want to explain what

an accredited investor is the short

answer is a credit investor somebody who

makes a lot of money and the government

knows are smart enough to handle more

complex investments but today I want to

explain the details being an accredited

investor can mean a lot of different

things both in the legal sense and in

the financial opportunities available to

you so before diving fully into what

legally defines an accredited investor

let's begin quickly with a tangible real

world example of the super powers and

accredited investor has don't laugh at

my small muscles so let's say a real

estate investor like myself wants to

raise money from people in a real estate

deal something I'm actually doing right

now that's called a syndicator or in a

syndication so when you start raising

money at least here in the United States

the government gets pretty involved they

don't want you losing poor grandma's

money so the government requires

syndicators like myself to follow

certain rules when raising that cash now

there are a couple options for

syndicators and the specific way that

you set up your syndication or your fund

will determine what kind of investors

you can bring in accredited or not for

example i just opened something called a

506 c fund which means i can publicly

talk about my real estate fund like i'm

doing right now but i literally cannot

accept money from anybody who's not an

accredited investor like even my own mom

do you see what I mean by superpowers if

you're an accredited investor you can

get into some pretty awesome deals that

the rest of the population just can't

now if you're not accredited don't fret

there are other ways for syndicators to

raise money I mean there's a thing

called a 506 B which allows for up to 35

non-accredited investors to join as long

as they are sophisticated which I'll

talk about in just second and they have

some kind of relationship with the

investor the syndicator so what a

sophisticated mean well that basically

just means they know their way around a

real estate deal

but it's something that's really kind of

subjective a little bit vague and of

course because it's the government there

are other avenues as well but for now I

hope this provides a clear example of

the perks that an accredited investor is

entitled to besides just sounding

impressive accredited investors find

themselves in a financial class above

the average investor while the average

investor only has access to

opportunities limited within the

regulated public markets accredited

investors are eligible to invest in

private offerings like syndications like

I just talked about or early-stage

business startups with the potential for

both huge reward but also huge risk so

since these small private offerings are

not regulated by the SEC the Securities

and Exchange Commission the investor

assumes the total responsibility and a

higher potential for losing their

investment you know with this risk

though comes potential for astronomical

financial gains if the business succeeds

there'll be one of the first people in

the door will have all the perks that

come with it so let's get to it

legally what is an accredited investor

well good question because even if you

are one nobody would have told you that

although the designation of accredited

investor carries huge implications for

you in your financial life and the

opportunities that you can participate

in there's no like formal process

there's no exam there's a document that

says now you are accredited

congratulations nothing to hang on your

wall accredited investors are considered

to be such only if they meet certain

legal definitions spelled out by the SEC

it's the duty of the businesses

accepting investors or selling the

shares in exchange for capital to

confirm that they're investing partners

meet the legal requirements so in other

words I have to double check that my

investors are accredited although there

are regulations that dictate how an

organization or a corporation can be

considered an accredited investor for

our purposes we're gonna focus

specifically on how individuals and like

couples can become accredited the SEC

deems an individual or married couple to

be accredited if they meet one of the

following criteria either a they have a

minimal annual income for the past two

years of 200 grand a year for the

individual or 300 grand a year for

married couples and that income must be

reasonably expected to continue or be

have an individual or combined net worth

of at least a million dollars not

including their primary residence you

know the reason the SEC has these rules

listed in Regulation D right D we call

it goes back to the very purpose of the

SE C's creation which is to protect

investors the above requirements are to

ensure that anyone assuming these

substantial risks has a financial

backing to weather and withstand the

worst-case scenarios

this is the government's equivalent of

saying you're a big boy now figure it

out

the kid gloves are coming off so you're

deemed to be an accredited Wester

Congrats you're now held responsible to

make your own informed and calculated

decisions I know that just because

you're now labeled accredited doesn't

mean that you will necessarily feel any

more proficient than before it is

actually now more important than ever to

educate yourself and thoroughly analyze

every deal that you participate in

proficiency will come only through

education and experience so diligently

do your due diligence you now have entry

into the world of real estate

syndication venture capital angel

investing and other opportunities that

are not accessible to the average person

make sure to not take this

responsibility lightly quite something

that you've made it this far to earn the

title so take a moment to be thankful

for where you are and then go out and

make the most of it

and hey if you like this video today do

me a favor and click that little thumbs

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for more real estate investing wealth

building personal finance videos for

BiggerPockets com my name is Brandon

Turner signing off

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