Accredited Investor Meaning: Do You Qualify?

As of this writing, we’re in the middle of a capital raise for a private fund in Spain, and one potential investor is looking at a larger commitment. When Mike was talking with that investor, they said, “Hey, I’m not accredited. Can I still invest?”

Here’s the thing. I know that person is accredited. They just don’t know the accredited investor meaning or how it applies to them.

If you’re new to investing in private real estate syndications, you may not have heard that term before. Financial planners don’t talk about it because it doesn’t apply to the public stock market. But this term does come up in real estate investing because of SEC regulations.

This article covers what accredited investor status means, how to tell if you qualify, and what options are available either way.

Introduction to accredited investors

First of all, the term accredited investor comes from the Securities and Exchange Commission (SEC). It’s a designation they created to make sure that if people invest in alternative investments, they have the financial ability to take on that risk. They are also the ones who decide what the qualifying levels are.

Their rules are based on income, net worth, or professional experience. If you meet certain criteria, you get access to opportunities like private real estate, private equity, or hedge funds.

How to qualify as an accredited investor

The specific qualifications include meeting one of the following:

• Net worth: You must have a joint net worth of over $1 million, excluding your primary residence, or a joint income of over $300,000 for two years with a reasonable expectation of the same income level in the current year.
• Entities: Other groups, like private companies and family offices, can also qualify as accredited investors based on their total assets or the accredited investor status of their equity owners.
• Certifications: Some professional certifications, like a general securities representative license or an investment adviser representative license, can also qualify as an accredited investor.

Path to qualify	SEC requirement	Key details
Net worth	Over $1 million joint net worth	Primary residence does not count
Income	Over $300,000 joint income	Must be for the last two years with the same expected this year
Entities	Qualifying entity or owners	Includes some companies and family offices
Professional licenses	Certain securities or adviser licenses	Based on specific SEC-approved credentials

Verifying you meet accredited investor rules

When you look at investment funds, syndications, or other types of alternative investments that aren’t in the stock market, they’re considered unregistered securities. The sponsor or general partners who raise capital for real estate investments have to verify that you qualify as accredited before they can allow you to participate in the deal.

For our hotel syndications, the sign-up process for any particular fund or project requires us to verify that you’re an accredited investor. We do that through software, and it’s a pretty quick process. That’s how we’re able to offer opportunities while still following securities laws.

Types of opportunities for accredited investors

Being an accredited investor changes what you can invest in. It opens the door to private deals that usually aren’t available to the general public. These are the kinds of opportunities that institutions invest in, and in many cases, they can offer better risk-adjusted returns than what you find in the stock market.

Types of opportunities can include:

• Private equity funds: Direct ownership stakes in private companies or real estate syndication funds.
• Venture capital funds: Early-stage startup investments with high growth potential.
• Hedge funds: Alternative strategies including long/short equity, distressed debt, and arbitrage.
• Private credit: Lending directly, with the potential for higher returns.
• Private REITs: Real estate investments that aren’t tied to public markets.
• Regulation D private placements: Most syndications are in this category of securities offerings that follow federal securities laws and are exempt from SEC registration.
• Alternative investment platforms: Technology-enabled access to alternative investments like crowdfunding sites.

Qualified purchasers vs accredited investors

You might also hear the term qualified purchaser, which is a subset of accredited investors, with a higher net worth threshold of $5 million or more in investments. This group has access to a broader range of investment opportunities, including direct investments in private equity and hedge funds.

Qualifying as an accredited investor

To qualify as an accredited investor, you’ll need to demonstrate that you meet SEC guidelines around income, net worth, or certain professional credentials. In practice, that means verifying financial information through documents like tax returns or brokerage statements. It also assumes you understand the risks that come with private investments.

Even after you are verified as an accredited investor, you’ll still receive the required legal and financial information for each investment. Sponsors are still obligated to disclose things like risks, fees, and material details about the deal. Being accredited does not remove those protections or disclosures.

Proving your accredited status

When investing in private securities, we must properly document our accredited investor status to meet regulatory requirements. The verification process varies based on your qualification method, but issuers must take “reasonable steps” to confirm your status.

Required documentation by qualification method

As I mentioned, we use software that verifies accreditation status, but other syndicators or investment companies may ask you to verify your status with documentation.

Income-based qualification:

1. Federal tax returns for the two most recent years
2. Recent pay stubs or employment verification letters
3. W-2s and 1099s for comprehensive income verification
4. Signed representation letters confirming income expectations

Net worth-based qualification:

1. Bank statements from the past 90 days
2. Brokerage and investment account statements
3. Real estate appraisals (excluding the person’s primary residence)
4. Credit reports showing liabilities
5. Debt statements for accurate net worth calculation

Professional license verification:

1. FINRA BrokerCheck verification
2. State licensing board confirmations
3. Current certain professional certifications

Third-party verification letters

Third-party verification is often the easiest way to meet issuer requirements for a prospective investment. They confirm your accredited status by reviewing recent financial documents from the last three months. Acceptable third parties include:

• Certified Public Accountants (CPAs)
• Licensed attorneys
• Registered investment advisers
• FINRA-registered broker-dealers

Timeline and best practices

Verification documents should be current within 90 days of investment. It’s a good idea to keep organized digital files of all qualifying documents and update them quarterly. Consider setting up relationships with qualified third-party verifiers before you hear about investment opportunities.

For ongoing private fund investments, many general partners accept annual re-verification rather than per-transaction documentation. Always check with your legal counsel to verify compliance with specific offering requirements and keep proper documentation for potential regulatory review.

Responsibilities of investors

Being an accredited investor also comes with some responsibility. You are expected to do your own due diligence, understand how a deal works, and be comfortable with the risks involved, including the possibility of losing money.

The SEC assumes that accredited investors can evaluate private investments on their own and make informed decisions without the same protections required in public markets. That also means following applicable rules and disclosures, and considering how each investment fits into your overall portfolio and risk tolerance.

Regulatory environment

The SEC sets the rules around who qualifies as an accredited investor and how private investments can be offered. They also provide guidance and oversight, along with educational resources that explain how private markets work and the risks involved. Because these regulations can change, accredited investors are expected to stay informed and keep up with updates that could affect their investments.

What if you don’t qualify as accredited?

There are still syndicators that offer opportunities for non-accredited investors. Some of the paths I’ve seen are:

• Investment clubs: These clubs qualify for SEC exemptions that allow a limited number of non-accredited but financially sophisticated investors to participate. These deals are not publicly advertised, and the group invests together through a direct relationship with a syndicator or fund sponsor.
• Private JV agreement: This is exactly how we invested in our first hotel. If you already have a relationship with a real estate investor and they’re not advertising the opportunity, you don’t have to be an accredited investor to participate. These deals are structured as private joint ventures between a small group of investors and an operator.
• Certain crowdfunding sites: Some crowdfunding sites have gone through the higher levels of SEC paperwork and regulations to be able to offer investments for non accredited investors.

Final thoughts on accredited investor designation

You’ll find that most real estate syndications require accredited investors because it’s the easiest way for sponsors to raise capital and stay compliant with Securities and Exchange Commission requirements. If you’re not accredited, don’t worry. The path is relationship based. Build direct relationships with real estate investors and let them know you’re interested in investing in opportunities.

If you’re curious about investing with Gateway Private Equity Group, you can check out our current offering, the Barcelona Hotel Fund, which focuses on acquiring boutique hotels in Spain.

Accredited investor meaning: FAQs

What qualifies you as an accredited investor?

An accredited investor is someone who meets specific financial or professional criteria set by the SEC. These rules exist to limit private investment opportunities to people the SEC believes can evaluate the risks on their own.

You qualify as an accredited investor if you meet one of the following:

• Net worth: Joint net worth over $1 million, not including your primary residence.
• Income: Joint income over $300,000 for the last two years, with the expectation of the same this year.
• Professional credentials: Certain securities or investment adviser licenses that the SEC recognizes.
• Entities: Specific structrures like a private business development company or family office, qualify based on assets or the accredited status of their owners.

Is it worth becoming an accredited investor?

Whether it’s worth becoming an accredited investor depends on what you want access to and how you plan to invest. The designation does not make someone a better investor, but it does change the types of opportunities available to them.

For many investors, it’s worth it because it opens access to:

• Private real estate and syndications: Deals that are not available in public markets.
• Private equity and private credit: Opportunities that involve direct ownership or direct lending.
• Less exposure to public markets: Investments that are not tied to daily stock market movements.
• Direct relationships with operators: The ability to invest alongside sponsors and understand how deals work.

Can a non-US person be an accredited investor?

Yes. A non US person can qualify as an accredited investor. The SEC rules are based on financial thresholds and sophistication, not citizenship. Non-d US investors can qualify if they meet the same standards, including:

• Income or net worth: Meeting the required income or net worth thresholds, even if assets or income are held outside the US.
• Entities: Foreign entities can qualify based on assets or the accredited status of their owners.
• Documentation and verification: Providing financial documentation and completing the same verification process required of US investors.

Additional tax or structuring considerations may apply, but being non-US doesn’t prevent someone from qualifying as an accredited investor.

This information is for informational purposes only and does not constitute tax, legal, or investment advice. Consult your own professional advisors before making any decisions. This is not an offer to sell or solicitation to purchase any securities. Investment opportunities with Gateway Private Equity Group are available only to accredited investors.