Accredited Investor vs Sophisticated Investor Reg D 506b 506c - YouTube

so much activity here description box below

imagine this let's call you Parker you are scrolling on Facebook on your laptop

or Instagram on your cell phone and you come across an ad WHOA, not that kind of video! You see it ad for a

real estate investment from what you see it looks pretty good so far

10% annualized return 17% IRR 1.5x equity multiplier 50k minimum

investment looks like a screaming deal you Parker want to invest your like, just take my money already!

but then you see the words for accredited investors only

What is that?

What does that even mean?Are you an accredited investor? Am I an accredited investor?

Who accredits people anyway? So can I invest or not?

if you've ever asked yourself these questions then keep on watching because I'm gonna be explaining

what an accredited investor is how you can become one and why it matters

Hello my beautiful people and welcome back to my channel I asked on Instagram

and in my latest video what kind of topics you want to see shout-out to Alex

and Michael who said they wanted a video differentiating between accredited

investor and sophisticated investor if you aren't already following me on

Instagram or my facebook page I'll go ahead and leave it in the description so

you can check it out before we go over what an accredited investor is it's

beneficial for you to understand where it came about in order to do that let's

go back to 1933 after the Great Depression people were getting scammed

left and right by get-rich-quick Ponzi and pyramid schemes so much so that the

US government had to step in they couldn't just continue to let these

scammers run wild that's when the Securities and Exchange Commission or

SEC was founded to regulate

offerings their registration and only accredited investors could partake now I

don't know about you but if you're a scammer you probably don't want a

regulatory body like the SEC knowing who you are and what kind of business you're

doing so this definitely helped but at the same time it created a barrier to

entry the thought behind this was that an accredited investor could take a hit

if an investment went south and the assumption was that they had the

knowledge to understand what they were getting themselves into that's why they

were allowed to invest in things that didn't have the same kind of protections

as the general public however as a result only companies that could afford

the costly and lengthy registration process could get funding from investors

and not only that only accredited investors could invest in these

offerings so workarounds were created for smaller companies with smaller

offerings so that they could be more nimble and opened up opportunities to a

wider range of capital but still wanting some protection in place the SEC made

exceptions as long as certain provisions and qualifications were met the rules

allowing some companies to sell their securities securities security security

securities without having to register with the SEC are detailed in Title 17 of

the Code of Federal Regulations part 230 sections 501 through 508 I actually read

through the entire Regulation D of the Securities Act of 1933 so you don't have

to according to rule 501 of Regulation D which is like the dictionary of reg D it

basically goes over all the definitions and terms used in the regulation but the

only definition we care about for the sake of this video is the definition of

accredited investor before making this video I actually didn't know that there

are a lot of qualifiers for accredited investor it could be a bank a financial

institution it could be a insurance company and all these other different

things, but the two most common qualifiers for accredited investor are income and net

worth now let's take a look at Parker Parker makes a hundred and fifty

thousand dollars a year that's a lot of money but alone as an

individual Parker would need to make $200,000 in order to qualify however

with a spouse Parker could qualify if together they make $300,000 for the last

two years and are expected to make this same level of income for the following

year as well additionally if Parker and spouse had a

combined net worth of over a million dollars not including the price of their

primary residence then they would also be considered an accredited investors

well as too bad Parker isn't married and Parker's net worth is just shy of a

million dollars but what's the big deal why should you or Parker care anyway well

more investment opportunities are available for accredited investors you

might be asking yourself but why oh how am I supposed to catch a break then

aren't the rich just going to keep getting richer although no one is

actually handing out accredited investor certificates like congratulations you

make a sh*t ton of money the SEC does require issuers to thoroughly verify investor

status so I would not advise you to go around telling people you're an

accredited investor if you are not one yet with that being said I don't want to

discourage you from real estate investing if you aren't an accredited

investor there still might be hope left for you and Parker a sophisticated

investor is a person with a high net worth but no income requirement who also

has investment experience and market knowledge companies who are exempt under

rule 505 and 506 of Regulation D are allowed to take up to 35 non-accredited

investors in their deals so Parker is back in the game and can invest in this

opportunity after all whoa keep in mind that people say what's more important to

them than the numbers being advertised than the deal is the deal sponsor the

person you're going to be investing your money with because anybody can make a

deal look good but you invest with people you like and trust if you do

decide to invest in a deal consider looking up a companies filing with the

SEC using their EDGAR system or calling your state regulator to see if

they received a notice of offering for the sale in your state accredited

accredited or not

investors can do great in real estate that's why in my next video if you're

interested in seeing unique and different listings that are killing it

in terms of marketing be sure to hit the notification bell not only this if you

want to learn more about the current state of real estate and more about real

estate syndications in general then make sure you also check out these two videos

because I guarantee you're gonna learn something new if there's any topic you'd

like to see please let me know in the comments below I'd love to hear from you

I hope you have a great day and I'll see you in the next video bye my beautiful

people