SS109: Non Accredited Real Estate Investing

Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing non-accredited real estate investing.

You do not need to be an accredited investor to invest into real estate. In this episode, Charles discusses what an accredited investor is and investment options for non-accredited investors.

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Talking Points:

  • How can non-accredited Investors invest in real estate? First off, what is an accredited investor?
    • There are 3 ways to be considered an accredited investor. 1 is by license, 2 is by income and 3 is by net worth.
    • First, if you hold a Series 7, 65, or 82 license in good standing
    • Second, if you have earned over $200k or $300k with a spouse during each of the last 2 calendar years and you plan to maintain that income level
    • Third, if your net worth exceeds $1 million; excluding the value of your primary residence
    • It is normal to have a professional like your financial advisor, accountant, or attorney complete and sign your accredited verification letter.
  • There are 3 main ways to invest in real estate as a non-accredited investor; REITS, becoming an active real estate investor, and passive real estate syndications.
    • Real Estate Investment Trusts or REITs are essentially mutual funds that invest in commercial real estate. This includes; retail, offices, multifamily apartment complexes, hotels, medical office space, warehouses, and more. Most REITs will focus on 1 or 2 specific niches. The 4 main advantages of REITS are; there usually is no accredited investor requirement, they are traded on major stock exchanges and are available through most brokerage accounts and typically there is no minimum investment required.
      • One of the drawbacks of REITs is there are no tax advantages. REITs are required to distribute 90% of income to investors and investors are taxed at ordinary income tax rates (up to nearly 40%).
      • REITS returns are said to outperform the S&P 500 over the last 50 years by about 0.9%. That is great, however, you need to pay taxes on this.
    • Secondly, you can become an active real estate investor through a number of different strategies.
      • Buy and hold rental properties – traditionally buy properties, rent them out and manage them or hire a manager. You can also refinance the property and use those proceeds to purchase more properties.
      • House hacking – you can purchase a 2–4-unit property, live in one unit, and rent the others out.
      • Fix and flips – You purchase properties that are foreclosed or in poor shape; renovate them and resell them. Lots of work and you get paid one time.
      • Private lending – you can lend your money to other investors; house flippers and investors and make money off the interest and fees you charge them.
      • Lastly, joint venture partnerships – allow you to partner with other investors to invest using any of the active strategies I just spoke about. This is great for busy investors or new investors with limited capital.
    • Third are private real estate syndications. The caveat is finding an operator, a syndicator that will accept non-accredited investors. Most syndicators only accept accredited investors. Harborside Partners, our firm, accepts both accredited and non-accredited investors however; you need to have a relationship with one of the general partners on a deal and the deal cannot be publicly advertised.
      • There are many benefits to passively investing in a real estate syndication. Many tax benefits, regular distributions, and higher returns than REITs (in most cases). Real estate syndications are 100% passive; there is nothing required on your end.
      • A couple of drawbacks would be the minimum investment; usually, $50k and syndications are long-term investments; typically, 3-7 years.

Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing non-accredited real estate investing.

New Speaker:
Have you always wanted to invest in real estate, but didn’t have the time, didn’t know where to find the deals, couldn’t get the funding and didn’t want tenants calling you. Since 2006, I’ve been buying income producing properties and great locations that provide us with consistent passive income. While we wait for appreciation in the future and take advantage of tax laws while we’re waiting and unlike your financial advisor, we invest alongside our investors in every property we purchase. Check out to investwithharborside.com. If you like the idea of investing real estate, if you like the idea of passive income partner with us at investwithharborside.com, that’s investwithharborside.com.

Charles:
So how can non-credit investors invest into real estate? First off, what is an accredit investor? Well, there are three ways to be considered an credit investor. One is by license, two is by income, and three is by net worth. First, if you hold the series 7 65 or 82, license in good standing. Second, if you’ve earned over $200,000 or $300,000 with a spouse during each of the last two calendar years, and you plan to maintain that income level. And third, if your net worth exceeds $1 million, excluding the value of your primary residence, it is normal to have a professional like your financial advisor, accountant or attorney complete and sign your accredited verification letter. Now, there are three ways to invest in the real estate as a non-accredited investor. REITs becoming an active real estate investor and passive real estate syndications. Now, real estate investment trust or REITs are essentially mutual funds that invest into commercial real estate. This includes retail offices, multi-family, apartment complexes, hotels, medical office space, warehouses, and more.

Charles:
Most REITs will focus on one or two specific niches. The four main advantages of REITs are there usually is no accredit investor requirement. They’re treated on major stock exchanges and they’re available through most brokerage accounts. The last thing is they’re typically is there’s no minimum investment required. One of the drawbacks with REITs are there are no tax advantages. REITs are required to distribute 90% of income to investors, and investors are taxed at ordinary income tax rates up to 40%. Now, REITs returns are set to outperform the s and p 500 over the last 50 years by about 0.9%, which that’s great. However, you need to pay taxes on this versus if you own the s and p 500 through an etf, you wouldn’t have to pay taxes except for on the small dividend receive every year of about 1.5%. Secondly, you can become an active real estate investor through a number of different strategies.

Charles:
Buy and hold properties, traditionally buy properties, rent them out and manage them or hire a manager. You can also refinance the property and use those proceeds to purchase more properties. Next house acting, you can purchase a two to four unit property, live in one unit and rent the others out. Next is fix and flips. You can purchase properties that are foreclosed or in poor shape, renovate them and resell ’em. Lots of work and you get paid one time, but you’re still investing into real estate as a non-credit investor. Private lending, you can lend your money to other investors, house slippers, and investors, and make money off the interest and fees you charge them. Lastly, joint venture partnerships. Now, this allows you to partner with other investors to invest using any of the active strategies I’ve just spoken about. This is great for busy investors or new investors with limited capital and resources.

Charles:
Third are private real estate syndications. The caveat is finding an operator, a syndicator that will accept non-accredited investors. Most syndicators only accept accredit investors. Harborside Partners, our firm accepts both accredited and non-accredited investors. However, you need to have a relationship with one of the general partners on a deal and the deal cannot be publicly advertised. There are many benefits to passive, the investing into real estate syndications, many tax benefits, regular distributions, high returns, and REITs in in most cases, and real estate syndications are 100% passive. There is nothing required on your end. A couple drawbacks would be the minimum investment. Usually $50,000 and syndications are long-term investments, typically three to seven years. So I hope you enjoyed. Please remember to rate, review, subscribe, submit comments and potential show topics at globalinvestorspodcast.com. Look forward to two more episodes next week. See you then.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

Links Mentioned In The Episode:

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