While investing is an activity nearly every adult can participate in, specific types of investments are usually limited to accredited investors. The issue is that the vast majority of the population isn’t eligible to become an accredited investor. Fortunately, that doesn’t mean non-accredited investors can’t tap into more investment options. Here’s a look at the difference between an accredited and non-accredited investor, as well as five platforms that every non-accredited investor can use to access more asset types.
Accredited vs. Non-Accredited Investor
In the simplest sense, an accredited investor is an individual or entity that’s allowed to engage with investments that aren’t registered with the US Securities and Exchange Commission (SEC). That can include investments like private equity placements and hedge funds, among many others.
Typically, individuals aren’t eligible to become accredited investors unless they have substantial earned income or a high net worth. Usually, an annual income of $200,000 for an individual or $300,000 for a couple is the lower limit. Additionally, the minimum net worth is typically $1 million. However, there are other rules and requirements that can apply, and they may vary based on the company issuing the unregistered securities.
Non-accredited investors are essentially everyone who doesn’t meet the conditions to become an accredited investor. As a result, most people are considered non-accredited investors.
The reason unregistered securities are typically limited to accredited investors is that they’re often high-risk. Usually, the goal is to protect individuals without significant financial cushions from experiencing significant financial hardships if a risky venture doesn’t pan out. Since income or net worth requirements are common for becoming an accredited investor, it limits that type of investing to individuals or entities that could likely survive if a risk investment proves unsuccessful.
5 Platforms That Every Non-Accredited Investor Can Use
1. DiversyFund
With DiversyFund, non-accredited investors can secure shares in non-traded real estate investment trusts (REITs). The funds invest in larger multifamily properties, typically ones with a minimum of 100 units.
The platform essentially allows anyone to invest in apartment buildings, something that’s difficult to do without substantial income or savings. The minimum holding time is five years, and dividends are reinvested automatically. However, the properties are continuously improved over time, which allows the value of the investment to potentially grow significantly.
2. Fundrise
Fundrise is a real estate investment platform that allows individuals to buy shares of private REITs, allowing investors to invest in new home developments, multifamily properties, and other types of commercial real estate. It’s also possible to invest in both the debt and equity sides of the equation.
The minimum investment required can be as low as $10, though some investments need significantly more. Holding lengths vary as well, but many come out nearly five years. Return rates can also differ depending on the exact investment, though annual returns at or above 4 percent are relatively common.
3. Roofstock
The Roofstock platform allows investors to functionally buy individual rental properties. It’s a passive investment, as investors don’t take a direct part in property management and daily operations. Instead, a property manager is selected, and they handle the legwork.
A benefit here is that the rentals are typically tenant-occupied when the investment takes place, which results in immediate income generation. However, the process is complex since it does involve direct ownership of properties. Additionally, there are many fees to navigate, and the required down payments are often quite high.
4. Arrived Homes
With Arrived Homes, investors can use the platform to purchase shares in rental properties, including traditional residential rentals and vacation properties. The company identifies suitable houses, handles property management, and takes care of finding renters. As a result, investors don’t have any operational burdens when they invest.
After investing in a property, investors receive quarterly dividends if the property generates a profit. The minimum investment is low, starting at $100. However, the platform doesn’t have a wide variety of properties available, and there are fees to contend with that can reduce what’s received.
5. Groundfloor
Groundfloor is a platform that allows investors to support residential projects, particularly flips. It’s essentially like contributing to a hard-earned loan that’s provided to the property owner. The benefit is that the loan terms are usually short, with many investment lengths being nearly 12 months. Earnings come in the form of monthly interest payments.
However, Groundfloor investments are generally higher risk than some alternatives. Earnings rely on the borrower repaying the loan, which means losing an investment is a genuine possibility.
Do you know of any other platforms a non-accredited investor may want to check out? Have you tried any of the options above and want to tell others about your personal experience with them? Share your thoughts in the comments below.
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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
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