12 Jan 7 Ways Non-Accredited Investors Can Invest in Real Estate
7 Ways Non-Accredited Investors Can Invest in Real Estate
As a new investor, it can be a bit disappointing when you’re exploring passive investing options and realize that a lot of those opportunities are available only to accredited investors. Take heart, we’ll show you lots of options you can invest in real estate as a non-accredited investor.
Let’s First Define What an Accredited Investor Status Is First
So, let’s go over the definition of an accredited investor so that you understand the distinction between accredited and non-accredited.
In order to qualify as an accredited investor, an individual must be in one of the following accredited investor requirement camps (income requirements or net worth requirements) as defined below:
- has a net worth of $1,000,000 excluding their primary residence or
- has had an annual income of $200,00 ($300,000 annual income with their spouse) or more for the last 2 years
When new real estate investors start exploring potential real estate investments they often find that only accredited investors are allowed to invest in certain private placements and public offerings and this can be very disappointing to non-accredited investors. And even more disappointing is that there is no online class or any kind of certification that someone can partake in to get qualified to become “one of them.”
So, then what?
No Problem, Non-accredited Investors – We’ve Got You Covered!
If you’re not an accredited investor, don’t worry, the good news is that there are P-L-E-N-T-Y of real estate investment options for non-accredited investors.
I commend you for being proactive in learning what you can do to take charge of how to level the playing field with knowledge.
So, high five to you!
Investing in Real Estate Investment Opportunities When You’re Not Yet An Accredited Investor
We want you to be encouraged about the vast array of real estate projects that are available to individual investors even if they’re not accredited, which is exactly what we’ll cover here.
Below, are 7 ways ANYONE can invest in real estate. Let’s dive in…
1) Buy and hold rentals
2) House hacking
4) BRRRR Strategy
5) Joint Venture Partnerships
6) Real Estate Crowdfunding Platforms
7) Private Real Estate Syndications
The important thing to remember is that not every type of investment strategy requires you to be an accredited investor AND the best part is that you can still start to acquire passive income.
Buy and Hold Rental Properties
Most everyday investors are familiar with how acquiring residential properties works. You simply purchase a rental property and rent it out. Pretty straightforward.
The best part of this investment strategy is that you’re in charge. You can choose to take care of the property yourself or you can choose to hire a property manager, and you can even decide what kind of renovations, if any, you want to do to the property. You’re the boss!
One caveat – with this much control, comes all (or most) of the responsibility. Everything falls on your shoulders. Rental properties are most definitely available to non-accredited investors but can require a bit of work. These investments should be considered long-term investments that can have low-to-moderate risk but can also have medium to high returns.
House hacking is one of the best ways to get your mortgage paid for by your renters. It was the first way that I broke into real estate investing before it was a “thing”. I bought a 3 bedroom 4 bath townhome in Vail, Colorado where I lived at the time, and I rented out the other two bedrooms to my friends. Their rent covered my mortgage entirely. I paid for all of the utilities and weekly cleanings, so it was a great deal for everyone.
It’s how I became an accidental landlord. The renters don’t have to actually move into your home, as mine did. You might rent out a sectioned-off apartment unit with its own entrance on another level, for instance.
That rental income can pay all or most of the debt on your property, and you could live there at low cost or no cost to you. The best part is you don’t need any rich uncles to begin investing in real estate. It’s a smart way to get started. This is a popular real estate strategy in areas where rents are high and rental demand is high.
This approach can require a moderate amount of work and would be considered a long-term investment with a lower risk profile.
Fix and Flips are one of the best real estate investment strategies if you like a lot of control and want a real “hands-on” approach.
A fix and flip, is a short-term purchase (usually a couple of months – depending on the extent of the rehab) where the property is repaired and remodeled to “flip” for a profit. Your sweat equity alone or in conjunction with contractors will turn an “ugly duckling” into a “beautiful swan” of a home that will attract more buyers and more profit. This is a particularly good strategy if the real estate market is a hot sellers market.
I ran my own fix and flip business for years, and it was a lot of fun fixing up dilapidated uncared-for homes, using your imagination, and seeing the final end product for all of your hard work. It’s actually quite rewarding.
There is more risk with this investment strategy because you have to have a sizable down payment, you likely will be getting a semi-hard or hard money loan if you don’t have the capital to purchase the property outright. Then there is the capital needed to fix up the property and to hold the property and make the monthly payments, utilities, insurance, etc. until the property is sold.
Fix-and-flips require a real hands-on dedication to make sure the process is conducted smoothly. They can be considered higher risk than most other strategies because of the amount of capital needed throughout the process, but they can have higher returns.
The BRRRR strategy is one of the best ways to invest in real estate if you like a bit of both – the buy and hold strategy and the fix and flip strategy. The acronym stands for Buy, Rehab, Rent, Refinance, Repeat.
So, you buy a property that could use some love and then you remodel and repair the property to the standards of the neighborhood. Then you rent out the property to tenants and do a cash-out refinance (because remember the property has been substantially improved since you bought it), and you may be able to take out all or most of your original capital. Then you take the refi funds and repeat the process all over again with another property while you’re holding this property. Rinse and repeat.
Now, a couple of caveats, you never want to do an adjustable-rate mortgage when you are holding any property (always get a fixed-rate mortgage), and all of your debt service and other expenses must be covered completely by the rents when you’re running your numbers to determine if this is a good deal or not. Also, you should always have a good amount of excess capital for reserves when you’re doing your analysis.
The BRRRR strategy, if done correctly, can build your net worth quickly especially in a market that is appreciating quickly. It is available to non-accredited investors, it does require a good amount of work, and would be considered a long-term investment option with a moderate-to-high risk profile.
Joint Venture Partnerships
A joint venture (JV) partnership is where a small group of investors pool their resources (capital and/or expertise) and purchase a larger property like perhaps a commercial property usually to renovate with the intention to hold the property long-term.
Together the small group of investors purchases the property and designate tasks between them. Each individual investor has an active role in the success of the project. There are usually no passive investors in a JV partnership unless there is just a “capital” partner who is bringing in all of the private funds. They may not have any role in the day-to-day operations of the real estate project.
This type of opportunity is open to non-accredited investors, requires a medium-to-high level of work, has a moderate level of risk but can give you medium to high returns.
Real Estate Crowdfunding Platforms
Real estate equity crowdfunding is an online platform designed to allow individual investors the opportunity to invest in real estate. This investment platform contains equity investments in real estate projects such as fix-and-flip projects in single-family homes or large-scale value-add opportunities in commercial properties such as apartment buildings, office buildings, student housing, and various other commercial real estate projects.
With a crowdfunding platform, this is a truly passive income investment strategy. These online platforms usually require low minimums to invest and, in exchange, you receive steady cash flow without having to conduct any of the work. However, most of these types of opportunities are for accredited investors only, but you can find a real estate crowdfunding site that offers investments to the general public by way of investing into REITs (real estate investment trusts) for non-accredited investors.
Public REITs don’t give you the benefits of direct real estate ownership, however, this strategy can be a great option for someone who wants to get their feet wet in real estate by starting with a low minimum investment and a lower risk profile.
Private Real Estate Syndications
Real estate syndications are group investments where people pool their resources to invest in a large commercial asset. This may seem similar to the JV partnership model, but there are many distinct differences between the two investment strategies. The main difference, however, is that with the JV partnership model all of the partners have an active role in managing the asset, whereas, with a commercial real estate syndication, most of the investors are passive investors – meaning they don’t have to do any of the work.
They are true passive investors who invest and collect cash flow distributions and receive a portion of the equity profits when the property sells.
Here’s the rub: the real estate syndication opportunities that non-accredited investors can invest in are not allowed to be advertised to the general public due to SEC regulations, so you would have to know someone in the general partnership of that deal to be given the opportunity to invest in that deal. You must have a “pre-existing” relationship with someone in the general partnership before you can invest, and it is through this relationship that opportunities could be presented to you.
So, if this is an investment strategy that appeals to you, you can start networking with people “in the know” and start establishing those relationships.
These deals require a low level of work (due diligence and your connections upfront) and carry low risk as a long-term investment.
If you’re a new real estate investor and, possibly not accredited yet, my hats off to you for deciding you want to learn how to get in the game. So, let’s recap.
The 7 ways we examined today (out of a VAST number of other possibilities) you can invest in real estate as a non-accredited investor are:
- Buy and Hold Rentals
- House Hacking
- BRRRR Strategy
- Joint Venture Partnerships
- Real Estate Crowdfunding Platforms
Private Real Estate Syndications
When non-accredited investors realize that particular investment opportunities are not available to them, this could be disappointing. But know that just because a deal is available to accredited investors, doesn’t necessarily mean that’s the best choice for an investment.
The good news is that there are all types of investments that non-accredited investors can get involved in to start accumulating wealth and growing their net worth. Just do your own due diligence on each of the strategies to make an informed decision, find which approach is the best fit, and then start building your investment portfolio.
We hope this helped you learn a bit more about how to Earn Passively & Live Abundantly!
Ready to Learn More?
The best way for you to learn more about commercial real estate syndications is to join the PCRP Passive Investor Club.
Through the PCRP Passive Investor Club, you’ll get a priority review of all the deals we offer. We’ll work with you to determine your investing goals and then present you with the best deals to meet those goals. We’ll then guide you every step of the way as you invest in those deals.
So if you’re ready to start investing passively in institutional-grade, commercial real estate in fast-growing, climate-resilient markets in the U.S., join the PCRP Passive Investor Club – IT’S FREE! – and get started on your path to EARN PASSIVELY and LIVE ABUNDANTLY!
If you would like to know more about what we do and how it may be of value to you, please reach out to us anytime. We’re always happy to help!