Understanding the distinction between an accredited investor and a qualified purchaser is crucial when considering private investments. These terms are often used interchangeably but have distinct definitions and criteria, particularly when it comes to eligibility for private equity and other non-public investment opportunities.
What is an Accredited Investor?
An accredited investor meets certain income, net worth, or educational requirements that allow them to invest in private financial products such as securities or real estate. These investments are not registered with regulatory authorities, and as such, they carry higher risks and lower levels of disclosure compared to publicly registered securities.
Here are the key criteria to qualify as an accredited investor:
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Net worth: A person’s net worth, or joint net worth with a spouse, exceeds $1 million (excluding the value of a primary residence).
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Income: A person’s annual income exceeds $200,000 in each of the past two years and is expected to meet the same level this year.
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Couple’s income: A couple’s annual income exceeds $300,000 in each of the past two years and is expected to meet the same level this year.
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Business/Entity: A business, investment company, or family office holds more than $5 million in assets or all equity owners are accredited.
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Licensing or expertise: A person is a licensed investment adviser or a knowledgeable employee of a fund.
Keep in mind, there’s no central registry or government certification for accredited investors. Companies that offer private investment opportunities are responsible for determining who qualifies as an accredited investor through their own due diligence process.
What is a Qualified Purchaser?
A qualified purchaser has a higher threshold for eligibility than an accredited investor, and the criteria are based on investment holdings rather than income or net worth. Because of this, qualified purchasers typically have access to a broader range of investment opportunities, including private offerings that accommodate up to 2,000 qualified purchasers—whereas accredited investor groups are often limited to just 100 participants.
Here’s how you can qualify as a qualified purchaser:
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Individuals: A person with $5 million or more in investments, either independently or with their spouse (excluding the value of primary residences or business property).
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Family entities: A family with $5 million or more in investments through a charity, company, estate, or trust.
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Trusts: A trust managed by qualified purchasers that is not solely formed to invest in a fund.
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Discretionary control: A person with discretionary control over at least $25 million in assets for others or their own accounts.
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Entities: An entity consisting solely of qualified purchasers.
The higher threshold for qualified purchasers grants access to more exclusive accredited investment opportunities, allowing for more flexibility in private equity investments.
Whether you are an accredited investor or a qualified purchaser, the investment opportunities in multifamily real estate funds offer an array of benefits tailored to various financial goals and risk profiles. Explore our available funds today to learn how we can help you achieve financial freedom and long-term wealth through Passive Real Estate Investing.
