The short answer is NO
While most commercial real estate syndication deals restrict participants to accredited investors, some companies, like McKee Capital Group, permit a limited number of non-accredited participants.
The SEC refers to opportunities allowing both accredited and non-accredited investors as 506(b) deals. Because the offers do not allow public advertisement, you must know someone in the general partnership to participate. Regardless of the property size and cost, a 506 (b) real estate syndication can have a maximum of 35 non-accredited investors.
Non-accredited investors must be able to leave funds in the property for the duration of the hold period, typically three to seven years. Minimum investments usually start at $50,000. Due to the lack of advertising, you must network to find opportunities permitting non-accredited investors.
Even though McKee Capital Group does not require all investors to be accredited, it is good to know the distinctions and why the rules are in place.
SEC Investment Requirements
The Security Exchange Commission (SEC) restricts participation in certain ventures they consider to be sophisticated investments. These opportunities do not abide by the same regulations as those available to everyone. Unregistered investments have significant minimum investments, longer mandatory hold periods, and lack the disclosure requirements of more traditional options. It becomes your responsibility to complete a higher level of due diligence to vet the opportunity for suitability.
The SEC created the accredited investor distinction to shield everyday stakeholders from the risks of more complex investment schemes. It distinguishes who can participate in opportunities operating with fewer regulations than those available in the traditional stock market.
Who Qualifies as an Accredited Investor?
You must meet one of the requirements below to qualify as an accredited investor and unlock access to more opportunities.
- Income test: Earn a minimum of $200,000 for the last two years with the expectation that you will maintain those levels in the coming year. Couples can qualify by earning a combined income of at least $300,000 annually.
- Asset test: Have a net worth of a least $1 million, excluding your primary residence. You can qualify individually or by combining assets with a spouse.
- Professional investor status: Holding a valid securities license (7, 65, or 82) could also qualify you as a sophisticated investor.
Investments Typically Requiring Accreditation
- Venture capital opportunities
- Hedge Funds
- Private equity funds
- Real estate investment funds
- Other specialty investments
Investments only available to accredited investors are typically referred to as private placements, or Reg D offerings, which are exempt from certain SEC rules and regulations. The company provides regulators with basic information about the company and the offer in a private placement offering. Any additional information is provided directly to investors at the company’s discretion.
Public offerings (available to everyday investors) require a lengthy and expensive application process with extensive disclosure requirements. Due to the time sensitivity, the procedure is often prohibitive in commercial real estate transactions and can be better suited as a private placement.
Who Verifies Accredited Investor Status?
Without a federal verification process, individual companies verify the status of each investor. To qualify for your chosen investment, expect to validate your income or assets through bank statements or tax returns.
When Can Non-Accredited Investors Participate in Commercial Real Estate Syndication Deals?
At McKee Capital Group we work with both accredited and non-accredited investors. Learn how to invest in our commercial real estate syndications in our short introductory video.