Accredited investors are considered to be sophisticated, with a good understanding of the risks in a deal. For that reason the laws and rules for dealing with them are more flexible. For example you can have an unlimited number of accredited investors in a private-placement (non-public) offering, but in many states such as California you are limited to a maximum of 35 non-accredited investors. Keep this in mind when you go out to find investors.
See a good securities lawyer for details and exceptions; however in general terms you want to find investors with a net worth of at least $1 million or who have had an annual income of at least $200,000 for the past two years, with the same or higher income expected for the following year, for them to qualify as accredited investors in real estate deals, or any other kind of offering.
For real estate investors, using accredited investors is a key to long-term success, particularly for bigger deals, and developing relationships with them over time is important.
On the other hand smaller deals, such as for a small rental house, to find investors who are wealthy is one way to get started. Many people who do not meet the income or net worth standards for accredited investors nonetheless have significant amounts of money in IRA accounts, certificates of deposit and the like.
Plan to develop relationships with accredited investors, but move ahead now with smaller money sources. That is a good way to find investors get your first deals funded!
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G. Patrick Dague, Business Coach
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