Being an accredited investor places you amongst the elites. Here, you have access to regulatory clearance and financial backing required to invest in portfolios that aren’t accessible to everyone. To become eligible for varying accredited investor opportunities, you must meet certain prerequisites.
That said, are you new to the concept of accredited investor opportunities and would like an insight into the requirements necessary to access this profitable venture in 2022?
Well, look no further.
This article explains how to know if you qualify as an accredited investor and the best investment opportunities for this set of people. Stay tuned!
What Does It Mean to Be an Accredited Investor?
An accredited investor is an individual or firm with the leeway to invest in unregistered securities and stake a claim on high-risk investments.
That said, it’s important to note that regulators restrict less financially capable investors from getting exposed to higher risks and losses by limiting access to these investments. Click on the link to read more about the definition of an accredited investor.
How to Qualify for Accredited Investor Opportunities
According to SEC guidelines, you must meet one of these requirements to become a certified accredited investor:
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Have a net worth of over $1 million (either with your spouse or individually), excluding your primary residence value.
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You must have earned over $200,000 (or a joint balance of over $300,000 with your partner) in each of the two most recent years. Here, you’ll also need to present evidence stating you’ll earn something similar in the current year.
Individual investment providers may request financial documentation certifying that you’re an accredited investor. The same applies when you engage certain online investment platforms.
While an entity or individual must meet certain net worth and income guidelines, note that becoming an accredited investor has no formal process.
List of Accredited Investor Opportunities
To access accredited investor opportunities, you don’t have to register with any financial authority. Thus, these investments have less transparency and fewer required disclosures than registered securities.
While the accredited investor opportunities here might seem incentivizing, curating a solid financial strategy and conducting due diligence before investing is a must.
Here’s a list of the best investment opportunities for accredited investors below:
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Real Estate Syndication
Real estate syndication or property syndication is an investment practice that involves a group of investors pooling funds to buy a property they can’t afford individually.
For example, accredited investors can pool resources and capital to purchase a strip mall or an apartment complex they wouldn’t have been able to purchase on their own due to financial limitations.
Real estate syndication is a popular investment model structured by a property syndicator, who identifies, secures, and manages the investment property for a fee. They’re also vital in pairing a group of investors together to generate capital.
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Crowdfunding
Crowdfunding involves raising funds for a business or project from the public online. To make things easier and convenient, some crowdfunding platforms have gone the extra mile to provide dedicated apps and websites for investors to pool their resources.
Real estate crowdfunding helps accredited investors explore several new opportunities (commercial real estate, multi-family housing, and so on) beyond the regular buy-and-hold strategy.
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REITs
REITs (Real Estate Investment Trusts) are companies that pool and manage funds invested in various profit-generating properties. Most times, they might possess various holdings, including retail locations, warehouses, hospitals, apartment buildings, and other commercial structures.
REITs offer accredited investors a chance to invest in various real estate properties and earn income on them without encountering managerial hiccups.
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Private Equity Real Estate
Private equity real estate uses a pooled public or private investment fund to purchase, finance, and own a property. While it might bear some semblance to REITs, private equity real estate is distinct.
In REITs, investors can access publicly traded shares for investments that mainly generate revenues through rental income. On the other hand, private equity real estate involves investing in managed funds that can be used to purchase speculative real estate structures like undeveloped land or develop new luxury apartments.
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Convertible investments
These are financial securities (like preferred shares and bonds) that investors can convert into common stock. Convertible investments rank high amongst investors due to its increased potential over time.
Most accredited investors use them as tools to back businesses believed to have strong revenue potential and long-term growth.
Convertible investments typically combine both equity and debt-type features. They’re excellent in splitting between bonds and stocks. Here, you’re eligible for decent profit margins while safeguarding against loss.
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Hedge Funds
Like mutual funds and ETFs (Exchange Traded Funds), hedge funds come under the control of career investors. Since they’re subject to less scrutiny and regulation, investors can invest in more sophisticated and complex asset classes.
Hedge funds can utilize many investment approaches (such as shorts, derivatives, options, etcetera) and still make viable alternative investments. Therefore, accredited investors can secure exclusive investment opportunities with them.
Those who prefer a specific investment approach can select their preferred hedge funds based on a specific investment strategy or particular funds manager.
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Venture Capital
Risk capital or venture capital is an equity financing method used by angel investors and venture capitalists to provide funding for promising startups in exchange for the company ownership shares. The money helps the receiving company with seed capital (finance for testing and developing a new product or business ideas) vital in growth and expansion.
As the firm increases in value, investors are eligible for an increased ROI (Return on Investment). These profits generally commensurates their investments and ownership holdings.
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Hard Money Loans
This is a short-term loan provided by private companies or persons who accept real estate or other valid assets as collateral.
Hard money loans are perfect for borrowers whose mortgage loan has been denied or who can’t meet the requirements of the traditional loans.
How do hard money loans work?
Here, the money lent is secured and guaranteed by the borrower’s asset. If they default, the lender takes over the asset and sell it to recoup funds.
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Interval Funds
Interval funds are closed-end mutual funds that aren’t featured on exchanges. Here, investors can only repurchase shares periodically in limited amounts.
Repurchases are extended annually, semi-annually, or quarterly. Shareholders don’t have to accept them and can wait until pricing becomes profitable enough to sell shares.
Interval funds are great investments for accredited investors looking towards a diversified portfolio bound to yield profits in the long run.
Final Thoughts
One of the most significant benefits of being an accredited investor is that you have access to more investment opportunities than the average investor. Although these opportunities provide greater potential rewards, they also come with higher risks attached.
Thus, we advise you to do due diligence before investing in any of the investments for accredited investors. If you’re on the lookout for a valid platform to commence investment-related, it might be time to set sail to Peoples Capital Group.
