506(b) vs. 506(c) for Real Estate Syndications

The difference between 506(b) and 506(c) comes down to marketing versus verification. Rule 506(b) bans general solicitation but lets you include up to 35 sophisticated non-accredited investors in any 90-day period. Rule 506(c) lets you advertise publicly, including on social media, but every investor must be accredited and you must take reasonable steps to verify it.

506(b) vs. 506(c) at a glance

Topic	Rule 506(b)	Rule 506(c)
Public marketing	Not allowed	Allowed, including social media
Who can invest	Unlimited accredited investors plus up to 35 non-accredited, sophisticated investors in any 90 days	Accredited investors only
Verification	Self-certification is common, but you need a reasonable belief they qualify	Issuer must take reasonable steps to verify
Disclosure to non-accredited investors	Required, including financial statement information	Not applicable
Form D	Within 15 days after first sale	Within 15 days after first sale
Bad actor rule	Applies	Applies
2025 volume (all issuers)	30,315 offerings, $2,248.4 billion	3,989 offerings, $142.6 billion

When should you use Rule 506(b)?

Use 506(b) when your investors already know you. The SEC lets you avoid general solicitation by offering only to people with whom you have a pre-existing, substantive relationship. "Pre-existing" means it started before the offering. "Substantive" means you have enough information to evaluate, and do evaluate, the person's finances and sophistication.

That makes 506(b) a fit for:

Friends, family and past investors.
Sponsors who want a few non-accredited but experienced investors.
Deals you'll never post about publicly.

Two cautions. A relationship can't be created just by waiting a set amount of time or sending a short questionnaire, according to SEC staff. And if any non-accredited investor buys, you must give them disclosure documents and financial statement information a reasonable time before the sale.

When should you use Rule 506(c)?

Use 506(c) when you'll market the deal: a YouTube video, an Instagram post, a podcast mention, a public deal page. Every buyer must be accredited, and you must take reasonable steps to verify it. The rule lists methods that count:

Income: IRS forms showing income for the two most recent years, plus a written statement that the investor expects to reach the qualifying income again this year.
Net worth: bank or brokerage statements and a credit report dated within the prior three months, plus a statement that all liabilities are disclosed.
A professional's letter: written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney or CPA.

In a March 12, 2025 no-action letter, SEC staff added another route: a high minimum investment ($200,000 for individuals, $1,000,000 for entities) plus written statements that the investor is accredited and isn't financing the investment through a third party, as long as you don't know facts to the contrary. More on this in accredited investor verification.

If you're a creator raising from your audience, 506(c) is almost always the right choice. Posting about a 506(b) deal can be general solicitation, which would break the exemption. See how to raise money on social media legally.

What do both exemptions require?

Form D. File on EDGAR within 15 days after the first investor is irrevocably committed. See Form D filing.
State notice filings. States can't require registration of Rule 506 offerings, but they can require a notice filing and fee.
No bad actors. Sponsors, managers, 20% owners (by voting power), promoters and anyone paid to solicit investors can't have certain disqualifying events, such as a securities fraud conviction within the past 5 or 10 years. Events after September 23, 2013 disqualify the offering. Earlier ones must be disclosed to investors.
Honest disclosure. Antifraud rules apply to every private placement, whether or not you use a PPM.

How DoorRaise handles 506(b) and 506(c)

Offerings on DoorRaise will be made by their sponsors under Rule 506(c) or 506(b). For public deal links, investors verify with a professional letter or income or net worth documents. A recent check can be reused on later deals while it's still current, and each sponsor still decides whether it's enough. Each accreditation check costs $95. DoorRaise also files Form D as part of the launch fee: $7,500 for raises up to $5 million, or $12,500 above that, which adds state filings in up to 10 states.

DoorRaise isn’t open to the public yet.

Built for apartment buildings with 5 or more units: one link for the deal, escrow until closing and a standard fee card.

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FAQ

What is a 506(c) offering?

A private offering under Regulation D that can be advertised publicly but sold only to accredited investors whose status the issuer has verified.

Can I advertise a 506(b) offering?

No. 506(b) bans general solicitation. The usual way to stay within the rule is to offer it only to people you have a pre-existing, substantive relationship with.

Can non-accredited investors invest in a 506(c) deal?

No. Every purchaser in a 506(c) offering must be accredited.

Is 506(b) or 506(c) better for real estate?

Neither is better in general. 506(b) suits sponsors with an existing network; 506(c) suits sponsors and creators who want to market publicly.

Do both 506(b) and 506(c) require a Form D?

Yes. Both require a Form D within 15 days after the first sale, and the SEC charges no fee to file it.

Sources

This post is general information, not legal advice. Talk to a securities attorney before you launch an offering. DoorRaise is not a broker-dealer, investment adviser or funding portal.