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How to Become an Accredited Investor

August 27, 2020

As you embark on your journey to become a multifamily apartment investor, you’ll see two terms thrown around quite a bit: Sophisticated and Accredited.

The more you hear these terms, the easier it can become to assume they are much more complicated than they actually are. The good news is, the distinction between the two is easy enough to discern.

So, what does it mean to be an accredited investor? It means you meet one of two criteria: you possess a net-worth of at least $1,000,000, or you earn at least $200,000 each year (a combined income of $300,000 if you’re married). Once you’ve cleared at least on of these requirements, you’re automatically an accredited investor; no forms, applications, or effort required.

If you don’t meet the $200,000 in income each year requirement, having a net-worth of $1,000,000 may seem like a lot, but knowing how net-worth is calculated may make the difference in knowing your accreditation status.

To put it simply, net-worth is the dollar amount of all of your assets, minus your debts. It’s important to note that your homestead does not factor into your net-worth calculation. Many investors are also unaware that items like your 401k, pension, and even the cash value of your life insurance policy all factor into net-worth. That means even though you may not think your net-worth surpasses $1,000,000, it may still be worth calculating.

Now that you know what being accredited means, it will be easier to explain what being a sophisticated investor is. While definitions may vary, a sophisticated investor is typically someone who is non-accredited, but still knowledgeable enough and possessing enough equity to invest in various opportunities while understanding their risks and benefits.

The next time you see an opportunity that says accredited-only, or one the is open to non-accredited sophisticated investors, you’ll know whether or not it is open for you to invest in. You can look deeper into it, however. Often times, our multifamily investors will invest in a deal through an entity like companies, trusts, and IRA’s.

How do you know if an IRA is accredited? There a few different criteria, but the two most popular are for the entity to possess assets in excess of $5,000,000 or for each of the entity’s equity owners to be individually accredited.

Are you an accredited investor? That means you qualify to invest in our latest opportunity: Rockstar Capital New Opportunities I, LLC! Last night, we unveiled the first property the partnership will invest in, and you can watch the webinar replay here! You can also click here to view the offering on our investor portal, but what if you’re not registered on the portal yet? Don’t fret! You can sign up in just a few minutes by clicking here!