Why Do Real Estate Syndications Require Accredited Investors?
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Most real estate syndications require accredited investors because they are sold under Regulation D, an exemption from the SEC's registration process. Rule 506(c) allows only accredited investors, and Rule 506(b) allows a limited number of non-accredited buyers who receive extra disclosure. The accredited standard is a rough test of who can bear the risk of a private, illiquid deal. It does not measure whether a deal is good.
If you are the sponsor, we built DoorRaise to verify that every investor is accredited, in Rule 506(b) and 506(c) raises alike. This guide is for investors who have been told they cannot invest and want to know why. For the definition, see the accredited investor definition.
What does registration have to do with it?
When a company sells securities to the public, the Securities Act requires a registration statement that the SEC reviews, with detailed disclosure and ongoing reporting. That is costly and slow, and it is why public companies and registered funds follow a set path. Regulation D lets a smaller private offering skip registration if it meets conditions. The conditions limit who can buy and how the sponsor can promote, in exchange for lighter rules on disclosure and review. See what Regulation D is.
Why those tests?
The SEC's reasoning is that people with higher income, higher net worth or relevant professional credentials are better placed to get advice, ask for information and bear a loss. The tests are simple lines, so they sometimes include investors who are not experienced and exclude investors who are. The SEC has reviewed the definition over time, and added categories such as licensed professionals. See Series 7, 65 and 82 as a route.
| Route | Basis |
|---|---|
| Income | More than $200,000 alone or $300,000 joint in each of the last two years. See the income test |
| Net worth | More than $1,000,000 excluding the primary residence. See the net worth test |
| Professional credentials | Holders of certain licenses in good standing |
| Entities | Entities meeting asset or ownership tests. See entity rules |
What is the difference between 506(b) and 506(c)?
| Topic | Rule 506(b) | Rule 506(c) |
|---|---|---|
| Advertising and general solicitation | Not allowed | Allowed |
| Who can buy | Accredited investors, plus up to 35 non-accredited who are sophisticated | Only accredited investors |
| Verification | A reasonable belief, often by questionnaire | Reasonable steps to verify |
| Extra disclosure for non-accredited buyers | Required under Rule 502(b) | Not applicable |
See 506(b) vs 506(c). DoorRaise verifies that every investor is accredited in both kinds of raise, which keeps the sponsor's exemption simple.
Why do sponsors avoid non-accredited investors?
Taking a non-accredited investor into a 506(b) deal requires Rule 502(b) disclosure, which resembles registration-style information, and the sponsor must reasonably believe the person is sophisticated. That adds legal cost and risk. Many sponsors choose to accept only accredited investors for that reason, not because they look down on anyone. See Rule 502(b) disclosure.
What can a non-accredited investor do?
- Check whether a 506(b) sponsor accepts sophisticated non-accredited investors. See investing without being accredited.
- Qualify through a professional license, if you hold one.
- Build net worth or income toward the thresholds.
- Look at investments open to everyone, such as publicly traded real estate companies and registered funds, which have their own risks and fees.
- Learn the vocabulary and follow deals, so you are ready when you qualify.
Frequently asked questions
Is the accredited rule a law against ordinary people investing?
It restricts who can buy in unregistered private offerings. Many other investments are open to everyone.
Can I just say I am accredited?
No. In 506(c) deals the sponsor must verify. See verification.
Did the SEC change the definition recently?
The SEC has amended it over time. Rely on current rules and ask a securities attorney.
Does accredited mean sophisticated?
No. It is a financial test, with credential routes.
Are accredited investors protected less?
They get less mandated disclosure in some cases. Antifraud rules still apply to everyone.
Sources
- SEC, Accredited investors
- SEC, Rule 506(b)
- SEC, General solicitation and Rule 506(c)
- 17 CFR 230.501, Definitions and terms used in Regulation D (Cornell LII)
This article is general information as of November 2026, not legal, tax or investment advice. Talk to a securities attorney about your situation. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.