Have you recently found out that you’re a non accredited real estate investor? Then, you’ll also know that you have limited real estate investment opportunities available to you. We know that feeling. Thus, it may be comforting to know that you aren’t alone in it; there are hundreds of thousands of others like you. But you know what else?
There are numerous non accredited investor opportunities to invest in these days. In this lesson, we’ll identify the primary sources of passive income for non accredited investors and also the active sources.
However, let’s take a brief look at who a non accredited real estate investor is because millions of people still don’t have any idea what this term means.
Who is a Non Accredited Investor?
A non accredited investor is an investor who doesn’t meet any of the two requirements of the Securities and Exchange Commission (SEC) for real estate investment. These conditions are:
- Having a net worth of at least $1 million
- Earning at least $200,000 or $300,000 as an individual or a couple respective over the immediate two years
A net worth of $1 million regardless of your annual income and vice versa satisfies the SEC. An investor who meets either of both conditions is an accredited investor.
Five Excellent Investment Opportunities for Non Accredited Investors
The law only started allowing non accredited investors in real estate in 2020. Consequently, there are fewer options to try out. However, this restriction doesn’t deprive you of the chance to earn well with real estate properties.
You can invest in real estate as a non accredited investor through the following means:
● Real Estate Crowdfunding
Real estate crowdfunding platforms provide you with a wide range of projects to invest in, ranging from small fix-and-flips to large-scale multi-family apartments. The typical deal is to invest your capital in projects with satisfactory terms and expect your returns within a specified period.
However, there’s a catch. These platforms don’t require any effort on your part. Therefore, crowdfunding is a passive income stream from real estate. So, what’s the problem?
Most real estate crowdfunding platforms present their most significant projects to accredited investors only. As such, your potential returns tend to be smaller than you’d appreciate.
Fortunately, there are modern real estate P2P platforms offering considerably larger project sizes through the application of REITs. REITs (real estate investment trusts) are similar to company shares. They’re a mechanism that allows you to become a stockholder in a real estate project.
There are various opportunities to invest in, whether as a small or big-time investor. Crowdfunding is a popular non-accredited investor option. You may take advantage of this innovation to start non accredited investor crowdfunding with HoldFolio and similar sites.
● Private Real Estate Syndication
Syndications are real estate group investments. They form when similarly-minded investors pool their resources to finance a project. These groups are similar to joint partnerships between two or more, but syndications have passive members, unlike joint venture partnerships.
Typically, a small group of managers manages syndication. These people handle all development parts like asset identification and acquisition, terms and conditions, and ideal rents. Therefore, they must be competent for the role.
You can ensure your real estate syndicate maximizes profits by appointing only skilled and well-experienced persons to the management team.
The buy-and-hold investor is the one that acquires a small-scale rental property, typically a single-family apartment, to let out to a tenant. It’s one of the non accredited investor opportunities that allows you absolute control. You decide the market, select the ideal property, and hire your tenant yourself.
Like crowdfunding for non accredited investors, this strategy may be completely passive, too. You can earn passive income from this scheme by hiring a management company.
However, a manager may be inadvisable in some cases, even if they take the stress off your hands and guarantee rent in your absence. Why? Most single-family homes don’t generate sufficient revenue to pay the management company and still be significant to your pocket.
As such, some experts suggest that you manage your rental yourself when starting. However, you’ll have to vet your tenant thoroughly before accepting them. State your rules and the implications of breaking the rules.
A fix-and-flip investor acquires a property that needs renovation, renovates it, and leases the asset to a renter. It’s a popular strategy, which we must mention isn’t stress-free. Why?
“Fixing and flipping” requires active effort. You have to find the asset that meets your specifications and capital. Then, you’ll need to renovate the property and sell it to those who are interested.
The technique is straightforward and profitable, but it requires supervision to work out ideally. In addition, buying fix-and-flip properties may be expensive to start in high-cost environments.
Remember, the project requires supervision. Therefore, it’ll be advisable to secure one not too far from your resident. However, should you live in places like the San Francisco Bay Area, where tear-downs cost as much as a million, you’ll need a significant down payment to begin.
● Private Lending
Private lending is another passive approach to revenue generation as a non accredited investor. In this tactic, you’re investing in debt.
Suppose your job doesn’t grant you to engage in fix-and-flip as we mentioned above. You may loan your cash to an active investor who’s interested in the same project but without capital.
The loan usually requires total repayment between 12 to 24 months, but you may extend as much as you like for more significant amounts. At the end of this period, the active investor should have finished renovating the property and should have sold it too.
As such, you’ll get your investment and returns (determined according to percentage) while the other party gets something tangible too. Real estate is generally low-risk, so you’ll hardly lose your capital.
Want our advice? Ensure the borrower is investing in an attractive property. Ascertain the proposal’s feasibility before financing the project.
Non accredited investor opportunities are strategies that allow you to benefit from real estate without meeting the requirements of the SEC. Crowdfunding is one of the most popular of these alternatives.
Luckily, there have been non accredited investor crowdfunding limits recently. But — hold up — there’s more.
As a real estate investor, you can make excellent returns through numerous options, including buying-and-holding, fixing-and-flipping, and private lending. Start your non accredited real estate foray with ease with these options.