An Ignoble Experiment: What is an Accredited Investor?

Dear Investor,

Let's talk about what an accredited investor is and why it is important to consider being accredited when looking at alternative investments like real estate.

By way of disclosure, we have an advertising relationship with Mortar Group, meaning we get paid for making this introduction and sharing this content. As always with these types of deals, consider this an introduction and not a recommendation. Every deal is unique and the responsibility to vet any and every deal you invest in still lies with you. This opportunity is available to accredited investors only.

What is an Accredited Investor?

Typically, accredited investors can include high-net-worth individuals (HNWIs), banks, and insurance companies. In the U.S., the term accredited investor is used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors that meet one of the following requirements:

A person must have an annual income exceeding $200,000 (or $300,000 with a spouse or domestic partner) for the last two years with the expectation of earning the same or a higher income in the current year. An individual must have earned income above the thresholds either alone or with a spouse over the last two years. One important note to this is this requirement cannot be satisfied by picking one year of individual income and one year of joint income, it must be continuous 2 years of the income that satisfies this requirement.
A person is also considered an accredited investor if they have a net worth exceeding $1,000,000, either individually or jointly with their spouse or domestic partner. This amount cannot include a primary residence.
A person who is a general partner, executive officer, or director for the company that is issuing such unregistered securities or a "knowledgeable employee" of a private fund.
A financial professional who has a Series 7, Series 65, or Series 82 financial securities licenses.
An entity that is a private business development company or an organization or trust with assets exceeding $5,000,000.
An entity that is a bank, investment broker-dealer, insurance company, charitable organization, and any entity in which all equity owners are accredited investors.

Benefits of being an Accredited Investor

At the basic level, an accredited investor gets access to offerings or investments that most traditional investors do not get access to. Accredited investors can benefit from higher returns, greater portfolio diversification, and access to opportunities not available to the general public – but also higher risk offerings.

The government, and in particular the SEC, places strict criteria for accreditation designed to protect individuals and investors who might not have the experience to protect themselves or the money to weather a significant loss. From the perspective of the SEC, less experienced investors could get in over their heads, especially since these offerings can also have high minimum investment amounts to participate.

Not all investments require you to be an Accredited Investor.

If someone is looking to purchase stocks, bonds, mutual funds, or a REIT (publicly traded real estate investment trust), you do not have to be an accredited investor. There are many options for the unaccredited investor – with ETF's recently being one of the more popular. But, to invest in private, unregistered security offerings, you must meet the accredited investor requirement.

Some types of investment that may require accredited investors are:

Venture capital / Angel investments
Real estate
Private equity funds.
Hedge fund investments

How do companies verify you are an Accredited Investor?

There's no formal process to get accredited with the government or SEC. It is up to each investment company to verify the accredited investor status of prospective partners before allowing them to invest. It's common for a company to use a third party like verifyinvestor.com. Many firms complete the verifications internally by requesting income and net worth verification, such as bank and investment statements, proof of securities licensing or employment, and tax returns.

The accredited investor rules are designed to protect potential investors with limited financial knowledge from risky ventures and losses they may be ill-equipped to withstand. But it also gives people with large financial assets and/or income a major advantage in diversifying their portfolio. As we are all aware, all types of investments, whether those requiring you to be accredited or registered with the SEC come with risk of loss.

If you believe you meet the requirements for accreditation, you should educate yourself on the benefits and responsibilities of this status, as every investment has advantages and disadvantages.

Feel free to view Mortar Group's new offering for Urban Landing - a New York based, cash-flowing value add offering.

Urban Landing is a multifamily Value-Add offering that is cash flowing at acquisition. They are providing this opportunity to investors by targeting distressed assets located in some of New York's best neighborhoods. With the submarkets experiencing high and stable growth during the last few years – Urban Landing is expected to provide investors with the excellent opportunity to capture outsized demand in thriving locations with strong local demographics.

Over three years, Urban Landing is projected to deliver a high 75.76% Cash on Cash Return at exit, with a quarterly distribution targeting over 7% in the first year. Mortar Group believes these opportunities represent some of the highest risk-adjusted returns in the current environment.

View the Urban Landing offering here.

This content has been shared by Mortar Group. If you're interested in discussing this topic more, or you are interested learning more about Mortar Group, you can schedule a call here: Schedule a Call

Also feel free to view other recent resources from Mortar Group.

Mortar believes in experience and smarter real estate investing. Their fully integrated in-house design, development, and asset management expertise has resulted in dozens of successful privately syndicated deals. This, combined with skin-in-the-game co-investments and in-depth local neighborhood knowledge, helps Mortar mitigate risk and maximize investor returns. Focused opportunities combined with an intimate knowledge of New York's prime niche neighborhoods allows investors to diversify and deploy capital conservatively in projects and divest risk throughout the real estate lifecycle.

Mortar Group extends White Coat Investors access to exclusive opportunities on new offerings. If you would like to know more, please visit their website, or reach out to their Investment Relations Manager – Francesca Gaccione at 646-559-9471, or gaccione@mortargroup.com.