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Accredited Investors in Commercial Real Estate
When a commercial real estate investment is solicited to investors, they must typically be accredited investors. According to the Securities and Exchange Commission (SEC), accredited investors have an annual income of at least $200,000 (or $300,000 if married) and a net worth of at least $1 million. This does not include the value of the investor’s primary residence.
- Accredited Investors and Commercial Property Investing
- Why Do Most Commercial Real Estate Investors Need to be Accredited?
- What are Examples of Accredited Investments?
- Can Non-Accredited Investors Place Funds in Accredited Investments?
- How Does the JOBS Act and Crowdfunding Affect Investor Accreditation Requirements?
- Questions? Fill out the form below to speak with a commercial real estate loan specialist.
- Related Questions
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Accredited Investors and Commercial Property Investing
When a commercial real estate investment is solicited to investors, they must typically be accredited investors. According to the Securities and Exchange Commission (SEC), to qualify as an accredited investor, an individual must have an annual income of at least $200,000 (or $300,000 for married couples) and a net worth of at least $1 million (for both individuals and married couples). This does not include the value of the investor’s primary residence.
Why Do Most Commercial Real Estate Investors Need to be Accredited?
After the passage of the Securities Act of 1933, all financial securities offerings were required to register with the SEC. This can be a long and time consuming process, especially for commercial real estate deals, which may need to gather investors under a tight deadline. However, there are a few exceptions; if the deal is done privately, and is only offered to accredited investors (those meeting the criteria mentioned above), the offering will not need to register. The purpose of these regulations is to prevent inexperienced investors from being taken advantage of and placing their money in investments that they may not fully understand.
What are Examples of Accredited Investments?
In addition to commercial real estate and commercial real estate syndications, other types of common accredited investments include private equity and hedge funds, oil and gas investments, limited partnerships, and the stock of privately held firms.
Can Non-Accredited Investors Place Funds in Accredited Investments?
In some cases, non-accredited investors can invest in accredited investments, albeit with certain stipulations. In addition to providing a “safe harbor” for investments that are not publicly offered, Regulation D of the Securities Act of 1933 states that an investment offering will not have to register with the SEC, as long as it sells investments to 35 or fewer non-accredited investors.
How Does the JOBS Act and Crowdfunding Affect Investor Accreditation Requirements?
The JOBS Act of 2012 permits crowdfunding for equity investments, including commercial and multifamily real estate offerings. This means that real estate investments can be offered to the public and solicited to non-accredited investors. However, there are still some limits; individuals earning, or worth, up to $100,000 can invest $2,000 or 5% of their income (whichever is greater), and individuals earning, or worth, more than $100,000 can invest $10,000 or 10% of their income (whichever is less). This has led to a variety of online real estate crowdfunding platforms, including Fundrise, EquityMultiple, Realty Mogul, and others.
Questions? Fill out the form below to speak with a commercial real estate loan specialist.
Related Questions
What is an accredited investor in commercial real estate?
An accredited investor in commercial real estate is an individual who has an annual income of at least $200,000 (or $300,000 for married couples) and a net worth of at least $1 million (for both individuals and married couples). This does not include the value of the investor’s primary residence. Accredited investors are exempt from certain securities regulations, such as the requirement to register with the Securities and Exchange Commission (SEC). This is to protect inexperienced investors from being taken advantage of and placing their money in investments that they may not fully understand.
What are the requirements to become an accredited investor in commercial real estate?
According to the Securities and Exchange Commission (SEC), to qualify as an accredited investor, an individual must have an annual income of at least $200,000 (or $300,000 for married couples) and a net worth of at least $1 million (for both individuals and married couples). This does not include the value of the investor’s primary residence.
SourceWhat are the benefits of being an accredited investor in commercial real estate?
The main benefit of being an accredited investor in commercial real estate is that it allows investors to access private offerings that are not registered with the SEC. This can be beneficial for investors because it allows them to invest in deals that may not be available to the general public. Additionally, accredited investors may be able to access more favorable terms on loans, such as lower interest rates and longer repayment periods.
Source: www.commercialrealestate.loans/commercial-real-estate-glossary/accredited-investors
What types of investments are available to accredited investors in commercial real estate?
Accredited investors in commercial real estate can invest in commercial real estate and commercial real estate syndications, private equity and hedge funds, oil and gas investments, limited partnerships, and the stock of privately held firms.
According to the Securities and Exchange Commission (SEC), to qualify as an accredited investor, an individual must have an annual income of at least $200,000 (or $300,000 for married couples) and a net worth of at least $1 million (for both individuals and married couples). This does not include the value of the investor’s primary residence.
What are the risks associated with investing in commercial real estate as an accredited investor?
The risks associated with investing in commercial real estate as an accredited investor are similar to those of any other type of investment. These include market risk, liquidity risk, and the risk of not being able to sell the property when needed. Additionally, there is the risk of not being able to find tenants for the property, or of tenants not paying rent. There is also the risk of not being able to get financing for the property, or of not being able to refinance the loan when needed. Finally, there is the risk of not being able to manage the property effectively, or of not being able to keep up with maintenance and repairs.
For more information, please see Investopedia's article on the risks of investing in commercial real estate.