Skip to content

← THE BAM COMPANIES

Is Being An Accredited Investor Worth It?

They say it takes money to make money, and accredited investors are a good example of that. With access to investment opportunities that are not available to less experienced investors, an accredited investor is able to participate in riskier investments. Depending on the type of investment and the level of risk, this may turn out to be a good or a bad thing.

The US Securities and Exchange Commission (SEC) limits access to certain investment opportunities in order to protect people from these riskier investments. The idea is that accredited investors have a big enough financial safety net due to their net worth and income that they can be protected even if an investment does not work out.[1]

To become an accredited investor, one must follow the guidelines of the SEC and meet their requirements. As long as companies and private funds are able to sell the assets to accredited investors, the SEC allows them to skip the need to register these investments. Accredited investors can invest in private equity funds, private placements, venture capital, hedge funds, and equity crowdfunding.[1] Real estate syndication is another type of investment that is exclusive to accredited investors. 

Here we will be discussing the updated accredited investor definition, the benefits of being accredited, and whether or not it is worth it.

Who are Considered Accredited Investors by the Securities and Exchange Commission

The SEC’s definition of an accredited investor determines who can take part in these lucrative investment opportunities.

An accredited investor, according to Regulation D of the Securities Act of 1933, is someone with at least $200,000 of earned income over the past two years, with a reasonable expectation that they will earn the same amount in the present year. For a married couple, they need to have a joint income of $300,000. [2]

A person’s net worth may also be used to determine accredited investor status. An individual with a net worth exceeding $1,000,000 is considered an accredited investor. However, this value must exclude their primary residence. [2]

In August 2020, the SEC modernized this definition to include even more people, which means more investors are now considered accredited and have access to things like syndication deals. While income and net worth are still part of the equation, the SEC has expanded the requirements to include investors with certain professional certifications, including those who hold Series 7, 65 or 82 licenses.[3]

Under the new definition, accredited investors may also be limited liability companies (LLC) with $5 million in assets, Indian tribes, government bodies, and entities or funds that are organized under the laws of foreign countries that own investments over $5 million. [4]

Knowledgeable employees of a private fund, including general partners, directors, and board members are also classified as accredited investors.[4]

The SEC has also expanded on the definition to include “spousal equivalent”, in order to include those who are not legally married. Thanks to this expanded definition, more investors have access to these wealth-building opportunities, including hedge funds, venture capital, and multifamily syndication.[4]

How to Become an Accredited Investor

It is a common misconception that there is some sort of “accreditation process” that exists for an individual to achieve the accredited investor status. There is actually no agency or independent body that reviews the credentials of an investor. 

The burden of proving the investor’s accreditation falls on the investment vehicle itself. The company that issues the unregistered securities will usually require the investor to provide financial statements and other requirements before allowing them to participate. This screening process is done by investment managers.

The SEC requires anyone selling to accredited investors to take certain steps in order to verify their status. The investor may be asked to fill in a questionnaire and provide a specific set of attachments, including financial statements, tax returns, W-2 forms, etc.

Accredited investors may also submit letters from reviews by tax attorneys, CPAs, investment brokers, and advisors. Once their status has been confirmed, they can participate in the investment.

Is It Worth It Being An Accredited Investor?

Being an accredited investor comes with plenty of benefits. If you qualify, you can participate in investments that are not available to the general public. Accredited investors have access to opportunities that have generally higher yields compared to what is available in the public markets. 

With access to more investment opportunities, accredited investors can easily diversify their portfolio. The public markets usually have limited options for diversification, but finding alternative assets as an accredited investor is much easier.

Accredited investors have a financial advantage because of their high net worth and salary. If we are to talk about the cons of being an accredited investor, it’s the fact that exclusive investment opportunities are usually on the riskier end of the spectrum. These investments also require higher minimum investment amounts. 

Plus, depending on the type of investment, it may involve long capital lock up time, so you can expect your funds to be inaccessible for a significant period. Whether it’s a hedge fund or a venture capital, being an accredited investor comes with a lot of illiquidity. 

Being an accredited investor comes with the expectation that you are experienced and knowledgeable regarding investments and can therefore make better financial decisions.

Overall, being an accredited investor is worth it because gaining this status opens up a lot of opportunities for you to grow your wealth over time.

Investment Opportunity for Accredited Investors: What is Multifamily Syndication?

Aside from hedge funds and venture capitals, real estate syndication is another investment type that is exclusive to accredited investors. Real estate syndication is when multiple investors pool their resources together to purchase a single real estate property. [5]

Multifamily syndication is the most popular type of syndication deal because multifamily properties are larger and can generate a bigger cash flow. Multifamily properties like apartment buildings and condominiums have plenty of units that can generate a steady and reliable income through monthly rent. [5]

Multifamily properties are generally more expensive and therefore harder for a lone investor to purchase on their own. But through a syndication deal, this type of investment becomes much more accessible.

A syndication deal is put together by a syndicator who locates the property, coordinates the funding, and looks for investors who will participate. Passive investors will provide most of the capital needed to purchase the property in exchange for equity and a share of the cash flow, depending on the deal structure. [5]

This is the ideal setup for accredited investors who want a passive investment. Since the syndicator will take charge of property management, accredited investors don’t have to worry about becoming a landlord, dealing with tenants, collecting rent, and handling emergencies. You get to enjoy all the benefits of owning multifamily real estate without the associated hassles.

Limited liability companies (LLC) or limited partnerships (LP) may be formed for the sole purpose of the multifamily syndication. Limited partners are the passive investors while the sponsor serves as the general partner or manager. [5]

There are many ways for accredited investors to participate in exclusive investment opportunities and grow their investment portfolio. They can become equity owners, look into venture capital firms and hedge funds, or find unregistered securities. But multifamily syndication is one of the most reliable sources of passive income, and should definitely be on your priority list if you are an accredited investor.

Why Invest with BAM Capital for Multifamily Real Estate Investing

If you want to invest in multifamily apartment complexes without the headache of running them yourself, you should work with BAM Capital.

This Indianapolis-based syndicator has a strong Midwest focus, prioritizing multifamily real estate properties that are Class A, A-, and B++. BAM Capital uses an award-winning multifamily investment strategy that allows investors to grow their wealth through syndication. [7]

BAM Capital aims to mitigate investor risk and uses a vertical integration strategy to create forced appreciation. They have a consistent track record of providing a safe and passive investment for their investors.

BAM Capital negotiates the purchasing and financing of high quality multifamily properties on behalf of passive investors. Their vertical integration strategy has worked wonders for the company so far. In fact, BAM Capital currently has over $700 million AUM and 5,000+ units. [7]

No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions. Accredited investors can schedule a call with BAM Capital and invest today.

 

 

BAM Multifamily Growth & Income Fund III

BAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.

  • Consistent passive income
    Lower-risk assets with in-place cash flows with the ability to distribute preferred return after acquisition.
  • Significant tax benefits
    A cost segregation analysis allows for accelerated deprecation to years of ownership. This large passive loss gets passed onto investors through a K1.
  • Vertically integrated company
    In-house property management and construction allow for predictable cost reduction and value add.

The above link will take you to the free Investor Portal to view all current offerings. If you do not have an account already, please create one to view the information.

The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.  

send the report