Table of Contents
1. Are Investments that Need Accredited Investor Status Risky?
2. Why Did the Government Create the Accredited Investor Title?
3. Are Accredited Investors More Risk Tolerant Than the General Public?
4. What is Multifamily Real Estate Syndication?
5. Work with BAM Capital for Multifamily Syndication
6. The BAM Multifamily Growth & Income Fund IV
The term ‘accredited investor’ is used by financial regulators to describe individuals or institutions that have sufficient financial knowledge, experience, and resources to invest in certain securities that may not be available to the general public.
In the United States, an accredited investor is defined by the Securities and Exchange Commission (SEC) as an individual who has a net worth of at least $1 million (excluding the value of their primary residence) or an annual income of at least $200,000 in each of the two most recent years (or $300,000 together with their spouse if married), with a reasonable expectation of the same income in the current year.
Investors who want to become an accredited investor simply have to meet these requirements set by the SEC. The primary benefit of being an accredited investor is that they are allowed to invest in securities that are not registered with financial authorities. 
Under Regulation D of the SEC, financially sophisticated investors have a reduced need for the protection provided by regulatory disclosure filings. Many accredited investors are high-net-worth individuals (HNWIs), brokers, trusts, banks, and insurance companies.
The accredited investor definition was also modified in 2020 to include individuals with enough professional knowledge and experience, as well as those who have specific certifications. This expanded the list of entities that may qualify as accredited investors based on defined measures of investment knowledge. For example, knowledgeable employees of a private fund are considered accredited.
The company selling unregistered securities can only offer them to accredited investors. Thanks to their high net worth, income, and investing experience, accredited investors are considered financially sophisticated enough to bear the risks associated with these unregistered securities. 
With this in mind, many people wonder if these exclusive investments are really considered risky. Let us take a closer look.
Are Investments That Need Accredited Investor Status Risky?
By meeting the criteria to be an accredited investor, individuals can gain access to investments that are not available to the general public.
There are several types of investments that are exclusive to accredited investors, including hedge funds, private equity funds, venture capital funds, private placements, and real estate syndications.
Generally speaking, hedge funds are typically only available to accredited investors because they are considered to be high-risk investments. Hedge funds are investment funds that use various strategies, such as leverage, derivatives, and short selling, to generate high returns for investors.
Similarly, venture capital firms work with accredited investors to invest in early-stage companies that have high growth potential.
Private equity funds invest in private companies that are not publicly traded. These funds typically have a long-term investment horizon and seek to generate high returns by acquiring, improving, and then selling companies. Accredited investors can become equity owners through these private equity offerings.
All investment opportunities carry their own unique risks and rewards. Accredited investments are generally considered riskier than non-accredited investment opportunities. These investments tend to require more capital investment and have long hold periods. They are not as liquid as other investments, meaning investors have to spend more and lose access to their funds for a longer period of time. Even when they are not riskier, they tend to be more complex than your average investment opportunity. 
That said, these investments are exclusive to accredited investors precisely because they know what they are doing and have the financial safety net to recover even if an investment does not work out. While they are not completely immune to losses, they are better equipped to evaluate and manage risk.
Just like any other investment, accredited investments have different levels of risk. The reason certain investments require accredited investor status is because they are not registered with regulatory authorities and do not have to comply with certain disclosures. Under federal securities laws, only accredited investors can participate in these securities offerings. This exemption from regulatory requirements allows issuers to offer investments that may be riskier or have fewer investor protections than registered securities.
As with any other type of investment, it is important to carefully evaluate any investment opportunity before investing. Consulting with a financial advisor or other professional can also be helpful in evaluating investment opportunities.
Why Did the Government Create the Accredited Investor Title?
The concept of accredited investors came from the government’s decision to protect novice investors from investments that they did not have sufficient knowledge or experience to evaluate properly. Thus, The Securities Act of 1933 was created. 
Having the ability to assess the risks and merits of a specific security is crucial regardless of the type of investment. Uneducated investors tend to make poor decisions that create poor outcomes. On the other hand, knowledgeable investors can make smarter investment decisions that can help them reach their financial goals. Accredited investors have the financial means to achieve these goals without putting themselves at significant risk.
Accredited investors are presumed to have enough investing experience to make the right decisions.
The SEC aims to reduce the potential harm that could result from unsophisticated investors making high-risk investments they don’t fully understand.
It is important to note that there is no formal process for becoming an accredited investor. It is the seller’s responsibility to make sure their investors are accredited before they allow them to participate in these unregistered securities. They will take a number of steps to verify the status of individuals or entities who wish to invest. 
The investor will have to answer a questionnaire and provide various documents such as financial statements, W-2 forms, salary slips, and tax returns to confirm their status as an accredited investor. They may also provide letters from reviews by tax attorneys, CPAs, investment brokers, or advisors who have previously confirmed the investor’s annual income and net worth.
History of the Accredited Investor Status
For years, the SEC held the challenging task of protecting investors in private offerings and securities while supporting the growth of young companies and startups. Even during the early 1930s, federal government regulators already struggled with finding the right balance. This eventually led to the SEC’s creation of the term “accredited investor”. 
This concept was developed to protect investors who did not have the resources or experience to properly evaluate private securities offerings. On the other hand, accredited investors are considered financially sophisticated and therefore have the means to participate in these private offerings even without full protection from state or federal securities laws.
Initially, Regulation D of the Securities Act of 1933 defined accredited investors as individuals that have reached a certain level of net worth or income.
However, in 2010, President Obama made an important amendment to this definition by signing the Dodd-Frank Wall Street Reform and Consumer Protection Act. This amendment is what now prevents the value of an investor’s primary residence from being included in their net worth. 
What is Multifamily Real Estate Syndication?
Real estate syndication is one example of an investment opportunity that is limited to accredited investors.
Real estate syndication is a type of investment wherein multiple investors pool their financial resources together to invest in a real estate project. The project can be anything from purchasing a single-family home to developing a large commercial property. The investors combine their resources to purchase the property and share in the profits or losses that the investment generates. 
Typically, a real estate syndication is structured as a limited liability company (LLC) or a limited partnership (LP). The syndicator, also known as the sponsor, creates the LLC or LP and sells shares to the investors, who are known as limited partners. The syndicator retains a portion of the ownership and is usually responsible for managing the property.
Real estate syndication is often used to fund larger and more complex projects that would be difficult for a single investor to undertake. It can provide investors with the opportunity to participate in real estate projects that they may not have been able to invest in on their own. It can also provide access to a wider range of real estate opportunities. 
Multifamily properties like apartment complexes are the most popular among investors because multifamily properties are usually more expensive and therefore harder to acquire as a lone investor. Apartment complexes and condominiums also tend to generate a strong and reliable cash flow because they do not have to worry about vacancies. Due to the number of units available to renters, the cash flow is not interrupted even if one or two units become vacant.
Multifamily syndication is a passive source of income for investors because the sponsor handles everything. That includes property management. Either the syndicator will take care of the day-to-day tasks of the apartment building or they will hire a third party property management company to do it for you. In any case, accredited investors do not have to worry about it. You don’t have to play the role of landlord for this investment.
The syndicator and the passive investors will split the monthly cash flow and appreciation on resale depending on the deal structure.
Work with BAM Capital for Multifamily Syndication
One example of an investment opportunity that is exclusive to accredited investors is real estate syndication.
A real estate syndication deal is a type of investment wherein a group of investors pool their capital in order to purchase a single real estate property. This can be done with any type of real estate, but multifamily properties like apartment complexes are the most popular among investors. This is because multifamily properties are usually hard to obtain if you are a lone investor and they tend to generate a strong and consistent cash flow due to the number of units available to renters. 
A real estate syndication deal is put together by a sponsor or a syndicator who initiates the deal and looks for investors who will provide the capital needed to purchase the property. This is a passive source of income for investors because the sponsor will take care of everything including property management. They will make sure the property is profitable.
Depending on the deal structure, the syndicator and the passive investors will split the monthly cash flow and appreciation on resale.
Multifamily syndication offers plenty of benefits for investors. It’s a passive investment, plus it’s a good way to diversify your investment portfolio. There’s also a significantly lower risk compared to purchasing a large multifamily property all on your own.
If you are an accredited investor looking to participate in a multifamily syndication deal, you need to work with a trustworthy syndicator.
BAM Capital has more than enough experience when it comes to acquiring and managing multifamily properties in the Midwest. This Indianapolis-based syndicator focuses on Class A, A-, and B++ multifamily properties that have a proven upside potential and in-place cash flow.
BAM Capital is known among investors for its consistent track record and ability to guide you through every step of the syndication deal. Being vertically-integrated allows them to handle everything from negotiating the purchasing to managing the multifamily syndication property. 
BAM Capital even has its own property management team and construction team that handles renovations. Its award-winning investment strategy allows BAM Capital to create forced appreciation. This syndicator mitigates investor risk while helping them grow their wealth.
BAM Capital now has over $700 million AUM and 5,000+ units, making it one of the most reliable syndicators for accredited investors. 
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.
For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, look no further than BAM Capital. Schedule a call with BAM Capital and invest today.