Do YOU Qualify as an Investor?
In the syndication of multiple apartments, there are two types of investors: Accredited and Sophisticated.
(If you don’t know what an Apartment Syndication is, go here to read my blog that explains everything!)
What Is A Multifamily Apartment Syndication?
An accredited investor is a person or organization that meets certain financial standards set by the SEC (Securities and Exchange Commission). To be accredited, a person must either:
- Have a net worth of at least $1 million (excluding their primary residence), OR
- Have a consistent annual income of at least $200,000 ($300,000 for married couples) for the past two years, with the expectation of the same income for the current year.
A sophisticated investor is someone with a top hat, monocle and a butler.
No, I’m kidding (I’m also not judging if that describes you!).
A sophisticated investor is someone who has knowledge and expertise in economics and finance to understand the benefits and risks of an investment. They may not meet the financial requirements of an accredited investor, but they have the necessary information and expertise to evaluate investments.
Here is some additional information about accredited and sophisticated investors:
There are regulations called Regulation D that allow private investment without registering with the SEC. Two exemptions under Regulation D are called 506(b) and 506(c).
Under 506(c), private enterprises, like those involved in real estate syndication, can advertise and ask for funds from unlimited accredited investors without registering as a public offering. Rule 506(c) only allows investments from accredited investors.
Under 506(b), issuers can raise an unlimited amount of capital by offering private placements to qualified investors and up to 35 non-accredited individuals who meet certain financial sophistication requirements. However, they cannot advertise or solicit the offering to the general public.
To summarize, when syndicating multiple apartments, the syndicator may require that investors be accredited or sophisticated. Accredited investors meet specific criteria while sophisticated investors have the knowledge to evaluate investments. There are regulations such as 506(b) and 506(c), that provide exemptions for private investments, but they have different rules regarding who can invest and how the offering can be advertised.
Whether you’re an accredited investor or a sophisticated one, we’d love to talk shop with you to help you maximize your investment opportunities. If you have any questions, feel free to reach out to us at in**@ea***************.com
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