The Beginner’s Guide to Becoming an Accredited Investor

Summary: In this blog post, we’ll be diving deep into everything about being an accredited investor, from requirements to drawbacks to benefits and everything in between. Use this as an opportunity to calculate your net worth and find whether or not you’re eligible.


Whether you’ve been investing for a while or you’re new to the real estate investment game (welcome 😍), you’ve probs heard the term accredited investor.

And, trust us: if you haven’t heard it yet, it’s just a matter of time.

To give you the good ole’ ~professional~ government definition, “an accredited investor is either an individual or an entity that is allowed to buy or invest in securities that are not registered with financial regulatory agencies.”

Shoutout to our friends at the SEC for that one 🥳

To put it simply, an accredited investor has to meet certain criteria in order to invest in certain properties, and there are quite a few requirements + fine print words within that meaning. We’ll share ‘em all.

In this blog post, you’ll learn:

The Beginner’s Guide to Becoming an Accredited Investor | The Kitti Sisters

The requirements for becoming an accredited investor

When it comes to the requirements for being an accredited investor, your location is what matters first and foremost — and, in the United States, these fun rules are outlined by the Securities & Exchange Commission, or the SEC. However, there are also local regulatory rules to follow, too.

T’is life. 🥴

However, the main criteria for being an accredited investor is outlined in Regulation D, Rule 501 of the 1933 Securities Act. These are the most important parts:

  • An individual with an income over $200,000 (or a joint income over $300,000)
  • An individual or couple with a net worth exceeding $1 million, excluding the value of the primary residence
  • Business entities worth over $5 million
  • An individual with a professional certification, or status as a private fund’s “Knowledgeable Employee”

Here’s the thing: all these rules come down to one thing — that the SEC wants to protect investors and companies alike. The SEC doesn’t really want beginner investors to take huge risks, which is why these regulations were designed — AKA, to limit large, risky investments to people who are more likely to withstand significant risk and loss.

Plus, being an accredited investor really means that you’re knowledgeable in investing itself, which, TBH, is pretty important when you’re investing in things that require hefty investment 🙌

Wondering if you can be an accredited investor?

If you’re not sure whether or not you can be an accredited investor yet, we’ ve got you. The key? Analyzing and calculating your net worth 🥰

First up, create a balance sheet with allllllll your asset AND liabilities. Add up those assets of yours (bank account balances, retirement accounts, investment values, physical assets you own, like your car, etc.)

Psst…. Don’t include your home in this, since your home doesn’t reflect your net worth.

Then, start calculating your liabilities — AKA, student loans, car loans, credit card debt, things like that.

Now, it’s time for some math! Subtract your total liabilities from your total assets, and look at that final number. Is it over $1 million? Then you qualify as an accredited investor! Is it under $1 million? Then you don’t qualify… yet. But, now you know what to work to 🤟

The special things you can do as an accredited investor

You’re probably wondering what kind of special, fun powers accredited investors have in the first place, yeah? Well, first off, the specific responsibilities and requirements are always going to vary based on the investor. However, here are just a few examples of things you can invest in as an accredited investor:

  • Hedge funds
  • Apartment syndication investing (🤪)
  • Venture capital funds
  • Real estate crowdfunds
  • Angel investing

This is a level-up from so-called regular investors, who can only really invest in things like stocks, bonds, and mutual funds! Accredited investors have access to exclusive investment options that they’d never otherwise hear about, but here’s the kicker: accredited investors often assume a much larger amount of risk.

Risk = reward, but it’s still risk, you know?!

See, by law, companies have to register their investment options (also called securities) with the SEC. But, companies can sell unregistered securities to accredited investors, which is an incentive since registering with the SEC can be a long process! However, yet again… accredited investors do assume some risk.

Note: At The Kitti Sisters, we accept both accredited and sophisticated investors. We do 506(b) offering syndication, which means we must have existing relationships pre-investment (hi, let’s be friends 🤗)

How to become an accredited investor

Now that we’ve dug into why accredited investors have it made (and the requirements to be one), it’s time to talk about how you can actually become an accredited investor. By knowing all the deets, it’s much easier to verify yourself and rock it.

Follow these steps to become an accredited investor:

No. 1 Calculate your net worth

Like we talked about above, you’ll need to calculate your net worth:

  • Add up your assets (excluding primary residence per SEC rules)
  • Add up your total liabilities
  • Subtract your total liabilities from your total assets

If that number is equal to or greater than $1 million, voila!

No. 2 Be able to back up your data 

You’ll have to prove the net worth number you’ve calculated, so get to work collecting documentation! You’ll need (but this isn’t an exhaustive list):

  • Tax returns going back several years
  • Credit report
  • Bank statements
  • Retirement account statements
  • Other investment account statements
  • Appraisals of assets 

No. 3 Get verified!

Next up, you’ll have to get verified, and there are a couple different ways this happens. The SEC will require that companies collect investor questionnaires so that they can prove their investors are properly qualified, which is where this comes into play. 

You’ll have to provide lots of personal and financial info here, so we’d recommend keeping all the documentation you need nearby as you get into investing for easy access. Plus, always *always* keep copies of every verification process you go through.

Plus, friends, this is SO FUN! Once you have all of these steps done and all of your info gathered, it’s so much easier to keep an eye out for an potential funds or investments to add to your portfolio 😍

Pros + cons of accredited investing

Being an accredited investor gives you tons of instant access to tons and tons of new investment opportunities, which is a massive win for growing wealth and getting really, really rich. In a sense, you’re really being rewarded here for being great with money and achieving cool things with your finances, you know? 

Some of our fave benefits of being an accredited investor are:

  • Higher returns, baby: You’ll likely be able to make much higher returns and you’ll be able to build your wealth faster.
  • Diversify that portfolio: You’re able to get access to tons of opportunities as an accredited investor, which means you can instantly start to diversify! From hedge funds to real-estate projects, you have access.
  • Set yourself apart: Being an accredited investor gives you the ability to set yourself apart in any financial environment, even the ones full of the finance bros. 🤪

However, where there are pros, there are also cons! Investment goes hand in hand with challenge, espesh in the world of high-risk investments. Here are some cons to keep in mind:

  • High-risk, high-reward… hopefully: It should come as no surprise, but investment opportunities that promise higher rewards pretty much allllllways equal facing increased risk. Also, these types of investments typically require a high minimum investment.
  • Biiiiig minimums: As an accredited investor, you’re making big bucks… but you’re investing big bucks, too. You HAVE to realize that this means you could lose lots of money just as easily as if you could make it.
  • Higher hold periods: A lot of these bigger investments go hand in hand with bigger hold periods.
  • Ew, fees: Accredited investment opportunities = higher fees, sometimes closer to 15 to 20 percent. 🥴

Alright, friends… there ya HAVE it, AKA your primer on all things accredited investments. You’ve got this, we just know it!  And, if you’re ready to try your hand at some truly accredited investment, we’ve got YOU. Let’s chat and get rich together, yeah?

P.S. Though recently there’s a new proposal to 10X the requirements of what it means to be accredited at the time of this publication the above info still reflects the status quo… ✨

 


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Fortified with years of experience, fierce passive investors (we ALWAYS in our own deals), and selected high qualities investment opportunities to help build your long term wealth no matter what stage in life you're on. We will show you the ropes, help you build out a powerful, personalizes strategy, and give you masterful, financial freedom focused on living your lifestyle dreams.

We're Palmy ➕ Nancy Kitti 〰️ The Kitti Sisters

A sister duo team obsessed with all things financial freedom, passive income, and apartment investing + apartment syndication, who turned a $2,000 bank account into a nine-figure empire.  Now, we're sharing with you the behind-the-scenes secrets of our wealth building strategy.

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