Deaton Equity Partners

Expanded Access! Updated SEC Definition for Accredited Investors

Are you part of “the in-crowd”?  Remember back in school when at some point we all started associating in smaller groups, our little tribes…cliques?


There were jocks, nerds, cheerleaders, theater kids, band geeks, freaks and countless other divisions 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, the world of investing seems much the same way, like an exclusive party that only certain people get invited to attend. The rich get richer, right? Most people haven’t heard about some types of investments because you have to “qualify” to even be told about the opportunities.


Luckily, in August of 2020, the SEC issued an amended definition of what it means to be an accredited investor, expanding the pool of people who can qualify to participate in the exclusive “party” of some investments, including real estate syndications. 


Most real estate syndication deals are only available to accredited investors, but there are some that are available to what’s known as sophisticated investors. So before you can even get access to an investment, 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 these new rules help me in some way? Well let’s dive in and figure it out!


Accredited Investor – the Old Definition


According to the SEC, you must qualify as an accredited investor by meeting at least one of a set of monetary requirements, deeming you financially stable enough to invest in private placement investments, such as real estate syndications.


You could 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, not including 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 because there are some investments that have seats on the plane for you.

The New/Expanded Definition Of Accredited Investor


The August 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 LGBTQ+ couples, and allows all spousal equivalents to qualify as accredited investors just as any traditional partners would. Hooray for inclusivity!


This update also provides that professionals with certifications, experience, or knowledge of investment securities and the associated risks, 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 exclude a large segment of people, and even though you may 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 (and have 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 Deaton Equity Partners. And even if you do meet the income or net worth requirements, we legally cannot share investment opportunities with you (or even mention certain deals) without establishing a relationship with you first. 


The bottom line is, even if the thought of talking about finances on a call is something you’d rather avoid (we aren’t scary, I promise!), it’s never too early to begin developing a relationship if it means you gain access to otherwise-exclusive investment opportunities with great returns and epic tax benefits. 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 August 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 get to know you, discuss your investing experience and your investing goals so that we can share deals with you and provide you 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 your chance.  Join our Passive Income Investor’s Group and take steps to build the life and the passive income you deserve. It’s what we call

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