Home Business Understanding The Difference Between Accredited vs Non-accredited Investors – 2021 Guide

Understanding The Difference Between Accredited vs Non-accredited Investors – 2021 Guide

by Tracy Finke

Real estate investments have set some new trends in the last few years. This type of real estate investing brings in tons of benefits. However, to grasp the full potential of real estate investment, you have to be an accredited investor.

Perhaps, you have little experience investing, so you don’t want to get more advanced yet. So why get an accreditation?

Here’s a more thorough breakdown of the difference between non-accredited and accredited investors.

What is an accredited investor?

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Technically, accredited investors must meet specific criteria to qualify as such. In most cases, the accreditation starts with your income. In other words, you have to show a minimum of $300,000 revenue in the past 12 months. The other way to get a qualification is to have net personal assets higher than $2 million. Moreover, your net financial assets have to be over $1 million. Of course, there are some more criteria to meet.

If you’re eager to become an accredited investor, you may need to consult with professionals like Real Vantage. The company will provide you with top-quality offers from all around the world and help you manage them. You can find more information on becoming an accredited investor. You can find more information about the topic by following the link –https://www.realvantage.co/insights/what-is-an-accredited-investor-ai/.

Why being an accredited investor is crucial

The main advantage that accredited investors have is that they can invest in various asset classes. The most prominent ones may include real estate syndications, crowdfunding, venture capital and hedge funds. The idea behind the criteria is to minimize the risk when making high-scale investments.

New or inexperienced investors are more prone to losses, which may follow up with insufficient fund reserves. While this may relieve non-accredited investors from investing in more significant projects, it may save them from losing big. Still, it’s important to note that higher risk can also bring higher rewards.

What is a non-accredited investor?

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As the name suggests, non-accredited investors include everyone that don’t meet the AI requirements. The so-called “retail” investors usually have a net worth less than $1 million and an income under $300,000. Unfortunately, they can’t invest in accredited investor-only investments, but that doesn’t mean you can invest at all. It merely means that you can’t invest in high-budget and high-risk investments.

Suitable investments for non-accredited investors

In reality, most investors don’t have proper accreditation but still get lots of opportunities. Perhaps, the only difference is in the availability of prospects. Typically, the most suitable investments here are equities, real estate and bonds.

Still, retail investors must ask themselves the same questions as accredited investors. While the investments here are less risky, they may still leave you broke if you fail. That’s why it may be a good idea to consult with an expert before you make a real estate investment. Here’s a more detailed breakdown of the possible investments for non-accredited investors:

Stocks

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This type of investment is relatively easy, especially when you’re putting money in publicly traded companies. When you choose an individual company, finding the stocks with the highest potential return is more accessible. However, you can put yourself at the risk of losing big if the company doesn’t perform well.

Mutual funds

Mutual funds and ETFs allow investors to diversify their portfolios by putting small amounts of money in multiple companies. This method is quite effective when you want to invest in lots of businesses without the risk of going bankrupt.

Real estate

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Real estate is another suitable business for non-accredited investors. While you may not invest in all real estate crowdfunding companies, there are still some offers there. Ultimately, you can start a portfolio of real estate investment with REITs and collect money from rents.

Starting a new business

Starting a new business is often an arduous task that requires lots of finances. Luckily, you don’t have to be in the accredited investors’ group to start your own business. Still, you can quickly begin getting investments from such people if you get your business to a certain point.

Non-accredited vs accredited investors – Which is better?

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Without a doubt, each side has its perks and downsides. While it’s easy to see that accredited investors have more options, retail investors’ job brings fewer risks. But if you want to have a considerable annual income and be a millionaire, become an accredited investor. Bear in mind that accredited investors must first apply to specific criteria to become so. Consequently, they have to work hard to achieve and maintain their fortune from REITs, etc.

On the other hand, many people find no difference between being an accredited and non-accredited investor. Also, more investment options don’t always equal more income. After all, higher budget opportunities may pose a higher risk. This double-edged sword may make you both a millionaire and go broke at the nick of time. In such cases, being a non-accredited investor may be better.

Final Thoughts

All in all, it’s safe to say that there are two unique levels of investing. If you’re a regular person looking to dive into real estate investment, you’re still a non-accredited investor. As your income grows, you may one day reach a point where you want to become an accredited investor. After you become one, you’ll see endless options open up before you. Just make sure you’re confident at what you do and work hard to achieve it.

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