An accredited investor is a term used by the Securities and Exchange Commission (SEC) in the United States to refer to individuals or entities that are eligible to deal in securities that may not be registered with financial authorities. They are deemed capable of investing in more complex and riskier investment vehicles because they meet certain income and net worth criteria.
In the real estate industry industry, an accredited investor would be someone who is financially eligible to participate in more complex real estate investments, such as DSTs.
To qualify as an accredited investor, an individual must meet at least one of the following criteria:
- Have an annual income of $200,000 or more, or $300,000 or more together with a spouse, for the last two years and the expectation of the same income level in the current year.
- Have a net worth exceeding $1 million, either individually or together with a spouse, excluding the value of a primary residence.
- Hold certain professional certifications or designations or other credentials issued by an accredited educational institution, which the SEC may designate from time to time.
- Be a “knowledgeable employee” of a private fund with respect to that fund.
- Entities such as banks, insurance companies, registered investment companies, and certain employee benefit plans with over $5 million in assets qualify.
However, the SEC has periodically revisited these criteria, so it’s recommended to verify the most current requirements if you’re considering investing in real estate or other securities transactions as an accredited investor.