what is an accredited investor?

As you are getting started real estate investing, you might be seeing offerings for passive investment.

Some of these investment offerings require their investors be accredited. So what does that mean?

The full requirements are linked here:

Electronic Code of Federal Regulations

For an individual to be considered an accredited investor:

  • their net worth (not counting their primary residence) is $1,000,000 + OR

  • they make $200,000/year in gross income in the past 2 years OR

  • they make $300,000/year in gross income filing jointly with a spouse in the past 2 years

These rules exist to help protect investors who could be “duped” by investment offerings, hoping that investing in these types of offerings wouldn’t be catastrophic for the average individual.

It is still very possible to invest in real estate without being accredited, but certain offerings are only available to those individuals.

Case Study - Welby Fix n Flip

After

After

This property was purchased at the end of June 2018 for $195k by an experienced flipper. This borrower requested a hard money loan amount of $180k. Rehab for the property was $35k. The flip took 4 months.

Basics

  • Source - Referral to Borrower

  • Status - Estate

  • Condition - Poor / Hoarder Home / Arson Property - see below before picture

full gut - during construction photo

full gut - during construction photo

Obstacles

  • Title took a good deal of time to close because several deceased persons were on title. All parties of the transaction had to be patient to await clean title from seller’s representatives.

  • Gas and Electric had been off at the home for a significant amount of time that Xcel required the borrower to obtain new service as if the home was newly constructed. This line item was over budget as that was unforeseen for the borrower.

before

before

condition at time of purchase - hoarder home

condition at time of purchase - hoarder home

Home Value