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Funding

What is an “Accredited Investor” and Why Does It Matter?

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sharksIf you’re in the private money getting arena at all, one term you should get familiar with is “accredited investor”. 

And no matter how you plan on structuring your investment opportunities, you must know whether the people you’re working with are accredited or not and keep this information on record.

Accredited Investor Defined

The term, accredited investors, has to do with securities laws – both federal and state – and making sure you comply with the restrictions that go with setting up a private lending transaction. While these securities laws can vary by area, an accredited investor is defined as:

  • A “natural” person whose individual net worth, or joint net worth with spouse, at the time of purchase, exceeds $1M, excluding the value of their primary residence, calculated by subtracting from the estimated FMV of the property the amount of debt secured by the property, up to the estimated FMV of the property;
  • A “natural” person with income exceeding…

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