Are You an Accredited Investor And Why Does It Matter?

Ellie Perlman By Ellie Perlman
2 min read
Jun 18, 2018

Topics:

Tax Matters

When you buy an apartment building with a syndicator, you are not buying real estate. You buy a security. Yes, a security. Sound strange? Perhaps. The reason you buy a security is that the syndicator creates an LLC (Limited Liability Company) which they manage. The LLC owns the property, and each investor owns a portion of the LLC. Since it’s a security, which normally requires registration, most syndicators try to avoid going through the registration process, which is long and expensive. 
 

The SEC (Securities and Exchange Commission) allows syndicators to “skip” registering their securities if they offer them to accredited investors. Agree with their logic or not, the SEC believes that Accredited Investors are capable of accepting economic risks associated with investing in unregistered securities. However, there are specific requirements for those wishing to qualify as an accredited investor.

Who are Accredited Investors?

 

Without getting into too many legal terms, according to Regulation D of the Securities Act of 1933 you are an Accredited Investors if you: 1) Made at least $200,000 of annual income in the previous two years, or $300,000 for a married couple; or 2) Have a net worth in excess of $1,000,000, excluding the value of your primary residence.

So, I am an Accredited investor, so what?

Rule 506c allows syndicators to market their deals – but only to Accredited Investors. As an Accredited Investor, you have access to marketed passive investments, which non-Accredited Investors don’t have access to. You will need to prove your eligibility as an Accredited Investor, but you gain an advantage many don’t have. 

What if I am not an Accredited Investor? 

 

The other part of Regulation D - Rule 506(b) - allows investors who are not accredited, to participate in a syndicated deal, if they are “sophisticated.” The law defines an investor as sophisticated if he or she has sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of a prospective investment. Last year, over $36B was raised in syndications; and generally speaking, over 85% of all Regulation D offerings are Rule 506(b). 

The SEC limits each deal to a maximum of 35 sophisticated (and non-accredited) investors. Since syndicators cannot advertise investment opportunities for non-accredited investors, sophisticated investors who wish to invest should be active and network with syndicators to get access to deals. The law requires syndicators to have pre-existing relationships with sophisticated investors, so building relationships with syndicators is key to gaining access to passive investments. 

 
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About Ellie Perlman

Ellie Perlman is the founder and CEO of Blue Lake Capital, a woman owned multifamily real estate investment firm focused on partnering with family offices and accredited investors to build and preserve generational wealth. Since its founding in 2017, Blue Lake has successfully acquired and operated multifamily assets across high-growth U.S. markets, completing $1B+ in transactions.
 

At Blue Lake Capital, Ellie and her team work exclusively with family offices and accredited investors, offering carefully curated investment opportunities that emphasize long-term wealth creation, stability, and risk-adjusted returns. A defining aspect of Blue Lake’s investment strategy is its integration of advanced AI-driven analytics and data science into the entire lifecycle of acquisitions and asset management. By leveraging cutting-edge technology, the firm executes data-driven forecasting on market trends, asset performance, and tenant behavior, ensuring strategic decision-making and optimized returns.

In addition to leading Blue Lake Capital, Ellie is the original founder and host of "REady2Scale - Real Estate Investing" podcast, which provides insights into multifamily real estate, alternative investments, and finance.

Ellie began her career as a commercial real estate attorney, structuring and negotiating complex transactions for one of Israel’s leading development firms. She later transitioned into property management, overseeing over $100M in assets for Israel’s largest energy company.

Ellie holds a Master’s in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.

You can learn more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.

 *The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.
 
 
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