Accredited vs. Non-Accredited Investor

Diversifying your financial portfolio is common and sound, practical advice but has it seemed that this is the language of high net-worth people? How do ordinary folks who don’t run in millionaires’ circles do this? 

The great news is that you don’t need a six-figure income to diversify your portfolio. We’re going to discuss investment opportunities for a non-accredited investor including non-accredited real estate investing, crowdfunding, and how to get started. But first, we need to explain what a non-accredited investor is. 

What is a Non-Accredited Investor?

Simply put, a non-accredited investor is someone who doesn’t meet the SEC (Securities and Exchange Commission) guidelines for an accredited investor. It becomes easier to grasp what a non-accredited investor is by first understanding the definition of an accredited investor

There are a few defining differences between an accredited vs non-accredited investor. To become an accredited investor you must:

  • Have a net worth of $1 million (this excludes a primary residence)
  • Have an earned income of at least $200,000 ($300,000 if you have a spouse) in the two years prior. 
  • Show that your $200,000 minimum income is reasonably expected in the current year.

Accredited investors are considered sophisticated enough in financial dealings that they avoid getting themselves into a position where they need the protection of the SEC. Their high income and net worth allow them to take high risks for high rewards and absorb any losses they might incur. 

If you haven’t met the SEC requirements for being an accredited investor, you are considered a non-accredited investor. While you don’t have access to the same opportunities as accredited investors, there are still many non-accredited investor opportunities within your reach. 

According to the SEC, roughly 13% of American households qualified as accredited investors in 2020. As a non-accredited investor, this means you are in the majority. Up to this point, it’s likely the value of your net worth is heavily tied to the value of your home and your investments have been through your employer’s 401(k). 

Let’s take a look at how you can expand that financial portfolio and investigate ways to take advantage of non-accredited investor opportunities. 

Crowdfunding: A Non-Accredited Investor Dream

Certain types of bonds, equities, other securities, and non-accredited real estate investing are opportunities available to the non-accredited investor. Crowdfunding - raising funds in small amounts from a large group of investors - continues to be popular among non-accredited investor opportunities. 

In April 2012, the JOBS (Jumpstart our Business Startups) Act was the catalyst that created the crowdfunding equity industry. At first, this kind of fundraising was limited to accredited investors but three years later, in June 2015, the act was modified, opening the doors to non-accredited investors.  

There are different types of crowdfunding, including real estate crowdfunding, equity crowdfunding, and peer-to-peer lending. Startups are now able to raise the capital they need from ordinary people who earn equity shares on their investments. This is great news for both the non-accredited investor who can enjoy opportunities previously out of reach and for the startups who don’t have to battle in the tough competition of attracting high net-worth venture capitalists and angel investors!

Non-Accredited Real Estate Investing: Getting Your Feet Wet in Real Estate

Non-accredited real estate investing is an excellent way to get into real estate without shouldering the burden of ownership or becoming involved in real estate investment trusts (REITs). 

When you go with non-accredited real estate investing, you have two choices. 

  1. Debt investing: You are investing in a mortgage or lending money to a firm or project with the expectation that it will be paid back with interest. The loan is secured by the property and the rate of return on your investment is fixed. 
  2. Equity Investing: As an investor in this scenario, you are a shareholder in a specific property and your stake is in proportion to the amount of your investment. Your return is your share of the property’s rental income, less the crowdfunding platform fees. 

Other Non-Accredited Investment Opportunities

We hope that you can see that as a non-accredited investor, you have access to many excellent opportunities. Let’s take a look at a few of them:

  • Stocks: With a bit of research and some careful consideration, non-accredited investors can do well for themselves by investing in the stock of publicly traded companies. There are many brokerages such as J.P. Morgan Self-Directed Investing that you can use to become a player in the stock market.

  • Mutual Funds or ETFs: Think of mutual funds as a bundle of several investments. The beauty of mutual funds is that you are investing in multiple companies without needing to invest thousands. The diversification protects you if one of the companies ends up going bust.

  • Real Estate: Even though real estate crowdfunding often demands that investors be accredited, there are still many opportunities for non-accredited real estate investing! Platforms like Connect Invest, make it easy to invest for as low as $500.

  • Start Your Own Business: Starting a business is rewarding, but it takes a lot of time, hard work, unwavering vision, and a bit of luck thrown in for good measure. A successful business certainly is a way to grow your wealth and you may find yourself in a position where it grows to the point that you’ll need investors!

Connect Invest: Helping the Non-Accredited Investor Connect With Real Estate Crowdfunding

We’ve covered a lot of information and answered the question, “What is a non-accredited investor?” Now we’d like to assist you in becoming an investor in real estate crowdfunding. 

At Connect Invest, you, as a non-accredited investor, have the chance to invest in real estate like high-net-worth individuals do. Our varied short note offerings have a low barrier to entry - only $500 to start and no account fees.

These short notes fund a diversified portfolio of residential and commercial real estate projects. You become a “lender” to borrowers who are seeking to acquire, develop, or construct real estate projects. The return on your investment is in the form of monthly fixed-rate interest payments. As an investor, you never have the worries associated with owning or managing real estate. 

Let’s Get Started!

Start earning passive income with Connect Invest. Signing up is easy and takes just a few minutes. Over the investment period of the short note, you automatically earn interest and principal payments, with the interest paid in arrears one month after activation. It’s that simple! 

If you have any questions about becoming a non-accredited investor, our team is ready to assist you!

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