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Accredited Investors vs. Qualified Purchasers

You’re interested in growing your net worth through real estate, and you’re approaching the prospect with a “go big or go home” mentality, so to speak.

The question is, do you have what it takes to make it happen? And no, we’re not just talking about having gusto and a can-do attitude. We’re talking about what you’ve got in the bank or in your current real estate portfolio.

To be in the best position when it comes to investing in real estate, you need to be an accredited investor or a qualified purchaser.

Let’s take a look at the differences between an accredited investor vs. a qualified purchaser, including what the qualified purchaser and accredited investor qualifications are.

A Glimpse at Accredited Investors

We’ll delve into the accredited investor requirements first. Please note that, as a general rule of thumb, you can certify yourself as an accredited investor.

According to the Securities Act’s Rule 501, current accredited investor qualifications include earning an income exceeding $200,000, or earning more than $300,000 in tandem with your spouse, during the past two years. In addition, you must expect to attain the same level of income this year.

Furthermore, the net worth of an accredited investor and his/her spouse must exceed a million dollars. This amount excludes how much the investor’s primary residence is worth.

In addition, an entity falls under the category of an accredited investor if accredited investors exclusively own the entity and have over $5 million worth of assets.

Now, let’s take a look at the difference between an accredited investor vs. a qualified purchaser.

A Rundown on Qualified Purchasers

Qualified purchasers can be either family-owned companies or individuals who own at least $5 million in investments.

Qualified purchasers may also be entities or individuals who invest a minimum of $25 million in private capital on other people’s behalf or for their personal financial accounts. For example, corporations or professional investment managers fall under this category.

Note that, if you are part of a qualified purchaser entity, all of the entity’s beneficial owners must be qualified purchasers. Also, a qualified purchaser can be a trust that is sponsored/managed by multiple qualified purchasers.

Other Important Points

As you explore the difference between an accredited investor vs. a qualified purchaser, it’s critical that you understand what “investments” means for the qualified purchaser. Investments include securities, such as bonds and stocks, along with real estate, cash, financial contracts, futures contracts, and physical commodities.

Also, a term related to qualified purchasers is “qualified institutional buyers.” This type of buyer is any institution that owns and invests at least $100 million in securities. It also refers to a bank that owns and invests securities worth a minimum of $100 million and that has a net worth totaling a minimum of $25 million based on an audit.

Comparing an Accredited Investor with a Qualified Purchaser

Now that we’ve outlined the qualified purchaser as well as the accredited investor qualifications above, let’s look more closely at what makes these two so different, even though they are often viewed as synonymous.

The key difference between an accredited investor vs. a qualified purchaser is that the financial threshold for an accredited investor is a lot lower when compared to that of a qualified purchaser. As a result, becoming an accredited investor is far easier than reaching the status of a qualified purchaser.

In fact, a qualified purchaser is sometimes called a super-accredited investor, since these professionals must attain higher financial levels.

Accredited Investor and Qualified Purchaser Scenarios

Let’s take a look at a few examples of what an accredited investor vs. a qualified purchaser looks like.

One person may have a stock portfolio worth $10 million. In addition, their total net worth may be around $15 million.

Meanwhile, a second person is a wealth manager responsible for investing $22 million for their clients. Some of these clients are not qualified purchasers.

Also, a third person makes $500,000 per year with their spouse and has a net worth of $2 million.

Here, the first individual is a qualified purchaser, as their value of investments is over $5 million. The second person happens to be a wealth manager but, because they don’t invest a minimum of $25 million for clients, they’re not a qualified purchaser.

The third individual is an accredited investor because they earn more than $300,000 jointly with a spouse and has a joint net worth greater than a million dollars.

Become a Successful Real Estate Investor

When it comes to being an accredited investor vs. a qualified purchaser, both roles offer solid benefits in the current real estate market. However, even if you meet the requirements for the net worth of an accredited investor or qualified purchaser, you may be short-changing yourself if you don’t know how to capitalize on deals in today’s dynamic, constantly evolving market.

I have experience working with accredited investors and qualified purchasers who are seeking passive real estate investing opportunities. I will find the perfect apartment property for you to invest in with me, develop a solid plan for boosting the property’s cash flow, and negotiate the real estate deal. In the end, you’ll be able to generate income without having to work a 9-5.

Get in touch with me today to learn more about being an accredited investor vs. a qualified purchaser, including qualified purchaser and accredited investor qualifications, and how I can help you to boost your bottom line as an investor or purchaser in the months ahead.

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Joe Fairless