To invest in most of the real estate crowdfunding platforms you need to be an accredited investor. There are a few platforms that allow individuals to investment if they are non-accredited investors, but those carry restrictions (they’re not too bad). This post will be a quick review of what it takes to qualify as an accredited investor and what your limitations are if you are a non-accredited investor.
Accredited Investor Definition
According to the SEC (Securities and Exchange Commission), an accredited investor is someone who either
1) Earns income that exceeds $200,000 ($300,000 jointly with a spouse) in each of the prior two years and expects the same for the current year.
2) Has a net worth over $1,000,000 (excluding the value of the person’s primary residence) either alone or together with a spouse.
You don’t have to be a person to meet the requirements of being an accredited investor. In addition to the above, any of the below criteria qualifies an entity as an accredited investor:
3) A bank, registered investment company or small business investment company, business development company, or a registered investment company
4) A trust, charitable organization, partnership or corporation with assets exceeding $5,000,000
5) A business in which all the equity owners are also accredited investors
6) A director, executive officer, or general partner of a company selling securities of the company in which they work.
7) An employee benefit plan which has total assets greater than $5,000,000 and where the financial decisions of that employee benefits plan are made by a bank, an insurance company or a registered investment adviser.
If you meet any of the above accredited investor definitions, you’re pretty much good to go to invest in any real estate crowdfunding investment available.
Real Estate Crowdfunding for Non-Accredited Investors
If you are a non-accredited investor, your crowdfunding investment options are limited. I have only seen a few REITs in which non-accredited investors can invest in, but I like to look at the bright side – having some options is better than having no options. These REITs make investments available to everyone as long as their investment meets the following restrictions:
1) The investment does not represent more than 10% of the investor’s annual income
2) The investment does not represent more than 10% of the investor’s net worth
whichever is greater.
One of the REITs that is available to non-accredited investors has a minimum investment of $1,000, so that means you only need an annual income of $10,000 or a net worth of $10,000 to invest in the REIT. This barrier of entry is low enough to include almost everybody in the United States. Happy investing!