ACCREDITED INVESTOR DEFINITION
An accredited investor is considered “financially sophisticated” enough to buy unregistered securities. Unregistered securities are generally riskier because they don’t require the typical disclosures that come with offerings registered with the U.S. Securities and Exchange Commission (SEC).
However, since accredited investors tend to be more knowledgeable and financially secure, they can better handle the risks of buying these unregistered securities. The SEC believes these accredited investors have a reduced need for the protection provided by regulatory disclosures.
Both individuals and business entities may be considered accredited investors if they meet designated requirements related to their income, net worth, or professional experience.
CASH ON HAND OR LIQUID HOLDINGS: WHAT DO YOU NEED TO BE AN ACCREDITED INVESTOR?
An accredited investor is an individual with an annual income of at least $200,000 (or $300,000 for joint income) or a net worth of at least $1 million (for both individual and joint net worth), excluding the value of their primary residence. However, requirements vary depending on individual versus spousal.
According to the SEC, an accredited investor can also be a general partner, executive officer, or director of the company issuing the unregistered securities.
REQUIREMENTS FOR ACCREDITED INVESTOR STATUS
People must understand that there is no specific “process” that individuals or entities must go through to become accredited. No government agency or independent body reviews an investor’s credentials, and no certification exam or legally binding document shows someone has become an accredited investor.
The responsibility of determining whether or not someone is qualified to buy unregistered securities falls upon the companies that issue them. Issuers must conduct varying levels of due diligence before conducting official business. [2]
DOES YOUR HOME EQUITY COUNT TOWARD ACCREDITED INVESTOR STATUS?
Although it used to be that someone’s home equity could count as an asset, it is no longer the case. This means your primary residence is no longer counted as an asset when calculating your net worth. Because of this, some investors can no longer meet the requirements for the accredited investor status.
For those who qualify to become an accredited investor, the issuer of securities may give a questionnaire to see if they fit the bill. You may also be required to attach your financial statements and information on other accounts. Some companies may evaluate your credit report to assess any debts.
WHY WOULD SOMEONE WANT TO BE AN ACCREDITED INVESTOR?
Being an accredited investor comes with its perks. They are legally authorized to purchase unregistered securities. Many companies even offer these securities to accredited investors directly, called private placement, opening up plenty of exclusive opportunities.
Accredited investors are legally authorized to buy securities not registered through the SEC and other regulatory authorities.
WHY DOES THE SEC PUT RESTRICTIONS ON ACCREDITED INVESTORS?
Despite the benefits, being an accredited investor also comes with its cons—the main one is that unregistered securities are inherently riskier. These investors need to be “accredited” beforehand because authorities want to ensure they are financially stable and knowledgeable about ventures that may be slightly riskier. Accredited investors need to know what they are doing. That is the purpose of all the SEC restrictions and requirements.
Regulators also want to protect less knowledgeable investors who may not have the financial cushion to survive high losses. That’s why these provisions exist. Accredited investors are financially well-equipped and experienced.
Individuals who want to become accredited investors can simply approach the issuer of the unregistered securities and respond to their questionnaire. If the applicant is qualified, they are deemed accredited and are eligible to invest. Some companies may ask for attachments such as paystubs, tax returns, W-2 forms, and even their credit report.
Because of these risks, vetting any business that works with accredited investors is essential. You should always use a sponsor who can provide details on their track record and reputation.
EXAMPLE OF AN ACCREDITED INVESTOR
Someone with a primary residence value of $1 million and a mortgage of $200,000, plus a 401(k) account with $500,000, a car worth $100,000 with an outstanding loan of $50,000, and a savings account with $450,000, has a net worth of exactly $1 million. This is because their net worth cannot include the value of their primary residence.
So, if there are liabilities that drop someone’s net worth below $1 million, then they are not qualified to become an accredited investor.
CAN COMPANIES BECOME ACCREDITED INVESTORS?
A company can be an accredited investor if it is a private business or an organization with assets exceeding $5 million.
If an entity consists of equity owners who are also accredited investors, it is also an accredited investor by extension. However, organizations cannot be created for the sole purpose of purchasing unregistered securities. [1]
BENEFITS OF BEING AN ACCREDITED INVESTOR
The main benefit of being an accredited investor is that it opens many doors and gives you a potentially significant financial advantage over others. Being an accredited investor allows you to see investments closed off to other investors with less wealth. This could help you increase your wealth even further. [1]
These unregistered securities may have higher rates of return and better diversification. These investments have many attributes that could allow you to build more wealth in a shorter period.
Being an accredited investor also allows you to invest in hedge funds, which is one of the many benefits of getting accredited. One of the reasons why most hedge funds are only accessible to accredited investors is that they sometimes require a high minimum investment amount. The risks associated with them also tend to be higher—with a substantial return potential. [1]
WHY DO I NEED TO BE ACCREDITED TO INVEST IN PRODUCTS OR SECURITIES?
The benefits also come with a few risks from the investments themselves—and that’s primarily the downside of being an accredited investor. You need to invest wisely, or you could lose money in the process.
For example, many funds use strategies with more risk to beat the market. Regulatory authorities aim to promote these investments but also want to ensure investors are protected. That’s why you need to be accredited before investing in these securities.
Accredited investors tend to commit to a few hundred thousand dollars—or even a few million dollars to invest in these securities. They can lose a significant amount if the investment doesn’t work out. Being an accredited investor has its perks, but you must also be careful.
WHY ACCREDITED INVESTORS WORK WITH BAM CAPITAL
BAM Capital is an Indianapolis-based company founded in 2010 that specializes in acquiring and managing income-producing properties, primarily multifamily apartment communities. It is also known as multifamily real estate syndication. Accredited investors trust BAM Capital because it provides an array of real estate services that work to achieve maximum benefit. Investors love the company’s low-risk business model.
BAM Capital prioritizes accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying the most profitable assets and staying disciplined in its investment thesis. BAM Capital’s investment strategy creates forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.
What makes BAM Capital different is its people. The award-winning team makes all investors, partners, and employees feel part of our BAMFAM.
Remember that no investment is risk-free. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.
Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect Bam Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Bam Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.
© 2025 Bam Capital. All rights reserved.
SOURCES:
[1]: U.S. Securities & Exchange Commission. (2021). “Accredited Investors – Updated Investor Bulletin.” https://www.sec.gov/node/172921
[2]: Investopedia. (n.d.). “How to Become an Accredited Investor.” https://www.sec.gov/education/smallbusiness/exemptofferings/rule506c
[3]: BAM Capital. (n.d.). “Current Portfolio.” https://capital.thebamcompanies.com/
