For today’s episode, we will be discussing what an Accredited Investor is.
We will go over the SEC criteria and what it takes to become Accredited as a single person and as joint.
We will talk about these things…and more in another episode of Multifamily Investing Made Simple in under 10 minutes.
Tweetable Quotes:
"you don't you're not getting kicked out of all the parties if you're not accredited, but you just aren't going to be able to invest in any of the stuff you see advertised online." - Dan Kreuger
"That's the thing with being an accredited investor is that it's a high hurdle." - Anthony Vicino
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Anthony Vicino: [00:00:14] Hello and welcome to the Family Investing Made Simple podcast, it's all about taking the complexity out of real estate investing so that you can take action today and we do it while having fun. Thank you. I am your host, Anthony Ticino of Invictus Capital, joined as always by Dan. I hate having fun, Kruger.
Dan Kreuger: [00:00:32] I'm a fun sponge. I soak it up and I leave
Anthony Vicino: [00:00:37] You, fucks it up, takes it with them, and then I leave and then he squeezes it out into a bucket and then the bucket of fun.
Dan Kreuger: [00:00:45] Fun.
Anthony Vicino: [00:00:47] Ok, so Dan, what are we doing here today besides having fun?
Dan Kreuger: [00:00:50] We're not I don't even know at this point. We are talking about accredited versus not accredited investors. It's a very common question we get and Victus and I just that even mean can I
Anthony Vicino: [00:01:03] Just say this like before I started investing in real estate, I had never heard the term accredited accredited investor. And so the first time it came onto my radar, which was, you know, when I started investing in real estate and became a thing that mattered, I was like, OK, can I just take a test? Like, I'm really good at taking tests. So I was safe. I was like, I'm going to be accredited in no time. That's not how it works. There is no test. Well, there is there are tests their criteria.
Dan Kreuger: [00:01:32] There is no test.
Anthony Vicino: [00:01:33] And there's a lot of criteria. We're not going to talk about them all. But let's first talk about what is and what is an accredited investor. First of all, why does it even exist?
Dan Kreuger: [00:01:42] Yes. So real quick, basically the idea is that if you are identified as an accredited investor, you can invest in certain types of deals. And if you are not an accredited, accredited investor, there, certain types of deals that you can't invest. So right off the bat, that's kind of one of the major components. If you're a non-accredited investor, there's going to be certain things that are off-limits to you. So what the heck are those?
Anthony Vicino: [00:02:08] So the criteria or what are the things?
Dan Kreuger: [00:02:11] One of the things, I guess, is it's in space and that's probably what people are looking at.
Anthony Vicino: [00:02:15] Yeah. So let's so in the real estate syndication space, there are two ways that a private placement can be presented. It can be a five or six B or a five or six C offering and a five or six C offering that can be marketed to the big whole wide world. I could put my offering on a billboard, I could put it on the Internet, I could put it wherever I want to because the only people who are allowed to invest in that deal are accredited, investors. And the SEC says, you know, accredited investors, they know what they're doing. They can withstand the risks. So go ahead. You can solicit them five or six B offerings, on the other hand, cannot do that. You cannot publicly market your deal. I can't even go up to a stranger on the street and say, hey, you want to take a look at my deal? Can't do that unless I have a pre-existing condition.
Dan Kreuger: [00:02:59] Yes. To that question.
Anthony Vicino: [00:03:00] Nobody would say yes to that. First of all, it's a very bad marketing strategy. And those deals, if you're an accredited investor, you can invest in those nonmarketable deals. But it also allows for non-accredited investors to participate. And those are the types of deals that we put together. We'll talk about that in a different episode. For now, let's nail down who is exactly an accredited investor. So what are these criteria that we have to hit?
Dan Kreuger: [00:03:24] Yeah, there's a couple of them. Number one is your income, I should say. It's one or the other both. So the one thing you could do to establish yourself as an accredited investor is having made two hundred and fifty thousand dollars per year for the last two years, if you are filing tax and single and if you're married filing jointly, you want to see an annual income for the last two years on your tax return of at least three hundred thousand dollars. So if you could check that box, then you are an accredited investor, and or you could also have a net worth of over a million dollars, not including your primary residence. So it's either one of those or both that'll get you in the door for being an accredited investor. If you can't check either one of those boxes, then you are by default put into the non-accredited bucket.
Anthony Vicino: [00:04:12] Now, just to clarify, as you were talking about the income qualification, I think you said two hundred and fifty thousand for individuals, it's actually two hundred thousand. So if a little is a little bit less, but it's still a high hurdle. That's the thing with being an accredited investor is that it's a high hurdle. You have to be making some pretty good what are the kids call it these Grella. Yeah. Coin or that one I've never heard. Yeah, I'm trying to be cool. It's not working, but you have to be making some pretty good money or have some pretty good money to qualify. And this is why only 10 percent of the American population even qualifies as an accredited investor. So not very many people hit that lofty standard. And you might be listening to this and thinking, yeah, I don't hit that. Like I say, I can't invest. Well, just like I was mentioning before, you can still invest in private placements in these apartments. Syndications just have to be registered in a very specific way. And you need to be what's considered a sophisticated investor. So this is actually a pretty grey term the SEC hasn't really done. Find this precisely what it means to be sophisticated, but in general, it means that you have to have enough understanding of financial instruments and investing, and that is dangerous and understanding how the business model works. And if you do, then you can invest in these vehicles. And that's a good thing. If you're listening to this podcasting, you're not an accredited investor. You're becoming more sophisticated just by spending some time with Dan and me. How about that?
Dan Kreuger: [00:05:38] That's neat.
Anthony Vicino: [00:05:39] Yeah, nobody has ever called me sophisticated. I'll just. I'll just go ahead. Put that right out there.
Dan Kreuger: [00:05:44] Yeah, well, I guess that's the main point, is that you don't you're not getting kicked out of all the parties if you're not accredited, but you just aren't going to be able to invest in any of the stuff you see advertised online. For the most part, it's really going to be those deals that you find your way into from networking. You find people online, you start following their content, you start calling them, ask them questions about their business model. Right. If those people start to align with you, if they have deals that they're not publicly advertising, then, you know, those will be the opportunities that are available to you. So.
Anthony Vicino: [00:06:18] And that's really all the accredited investor is, again, there's a lot of other ways that you could qualify as an accredited investor. If you think that you're on the fence, you're not sure if I would go look those up. But in general, not a big deal. If you're not an accredited investor, it's not like you get a plaque. You don't get any kind of certificates put on the wall. It's really just kind of a self-selected title. And so you do with that what you want. But if you're not an accredited investor, don't lose sleep over it. It's OK. But you should do you should go invest in real estate. Go find yourself a good old five or six, be offered, get your money working for you and you'll get there quicker than you think. So just saying, yes, sir. All right. So that's going to do it for us here at multifamily investing made simple in under ten minutes. I hope you had some fun with us today because I sure did. Dan didn't suck all the fun out of me. Left a little bit on just dry. All right.