Become an Accredited Investor: Step-by-Step Guide to High-Net Worth & Private, Riskier Investments

by | Feb 27, 2024 | blog

Do you aspire for wealth generation to achieve financial independence and elevated life quality? The aspiration for wealth is universal, but few individuals possess the grit, perseverance and strategic acumen to carve out a high-net-worth status. Individuals prepared to make the right moves can chart a course to become accredited investors with unrestricted access to lucrative opportunities.
Why is becoming an accredited investor a worthwhile pursuit? Accredited investors gain access to a realm of unregulated securities, such as hedge funds and venture capital, offering opportunities beyond the reach of conventional investors. This privilege is bestowed upon those deemed financially adept and equipped to navigate the heightened risks inherent in unregistered assets.
Let’s clarify a common misconception: accreditation isn’t conferred by a governing body, nor does it come with a certificate. Instead, it’s a status determined by diligent evaluation conducted by companies issuing unregistered securities. By setting your sights on accreditation, you forge a path toward enhanced opportunities and a wealth of knowledge.Read on to begin your step-by-step journey toward becoming an accredited investor.

What is an Accredited Investor?

An accredited investor is an individual or entity granted the privilege to participate in unregistered investments, often of a higher risk profile, not subject to Securities and Exchange Commission (SEC) registration.

Accredited investors gain access to a spectrum of investment options, including venture capital, angel investments, real estate and private equity funds, hedge funds, and specialty investments like those in cryptocurrency. These opportunities fall under private placements, exempt from certain SEC guidelines.

SEC Requirements and Amendments

Rule 501 of Regulation D under the Securities Act of 1933 outlines the criteria for accrediting investors. This designation primarily revolves around income and net worth thresholds:

  1. Income Criteria: An individual with an income surpassing $200,000 in each of the two preceding years or a joint income with a spouse exceeding $300,000 for those years, with a reasonable expectation of maintaining the same income level in the current year.
  2. Net Worth Criteria: An individual with an individual or joint net worth (with a spouse) exceeding $1 million at the time of purchase, excluding the value of the primary residence.

A pivotal amendment was introduced by the Dodd-Frank Act in 2010, excluding the value of the primary residence from net worth calculations, offering more clarity to the accreditation process.

Recent Amendments to Accredited Investor Status

On August 26, 2020, the U.S. Securities and Exchange Commission (SEC) enacted substantial amendments to the definition of an accredited investor, broadening the spectrum of qualifying individuals and entities.

These amendments permit investors to qualify as accredited based on defined measures of professional expertise, experience, or certifications in addition to the existing income or net worth tests. Notable expansions include:

  1. Professional Certifications: Individuals holding certifications, designations, or credentials in relevant fields are now recognized as accredited investors. This encompasses individuals with Series 7, Series 65, and Series 82 licenses, with room for future additions.
  2. Knowledgeable Employees of Private Funds: Employees deemed “knowledgeable” within a private fund are now considered accredited investors in relation to that fund.
  3. Inclusion of Various Entities: The SEC has widened the scope to include entities such as Indian tribes, governmental bodies, funds, and foreign entities with significant investments.

These amendments mark a significant evolution in accredited investing, offering a more comprehensive and inclusive definition.

Verification Process for Accredited Investors

Companies issuing private placements verify prospective partners’ accredited status, often requesting income and net worth documentation, securities licensing, employment verification, and tax returns.

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Step-by-Step Approach to Become an Accredited Investor

Becoming an accredited investor necessitates a strategic progression marked by calculated financial moves and adherence to SEC requirements. Here are three goals you must prioritize to gain entry into the realm of high-net-worth and private, riskier investment:

Goal #1: Increase Your Net Worth

Increasing your net worth is the inaugural step towards accreditation. Calculate your current net worth by subtracting your total liabilities from your assets. This evaluation will provide a fair estimate of the wealth you need to generate to become an accredited investor.

Goal #2: Gather Financial Documentation

To substantiate the net worth you’ve calculated, meticulous documentation is imperative. This step entails assembling copies of your tax returns, credit reports, bank statements, and statements from retirement and other investment accounts. This comprehensive financial snapshot fortifies your accreditation endeavor.

Goal #3: Verified Accredited Investor Status

Verification constitutes the final lap in the accreditation process. The SEC mandates companies issuing unregistered securities to collect investor questionnaires, a pivotal measure to substantiate an investor’s eligibility. As an aspiring accredited investor, you must complete these questionnaires for each company you intend to invest in.

This verification process involves furnishing personal and financial information and the documentation gathered in the preceding step. Ultimately, signing the questionnaire signifies the culmination of this critical phase.

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Step #1: Increase your Net Worth through Strategic Real Estate Ventures

To pave your way towards accreditation, a prudent approach is essential. Here are specific real estate strategies that can markedly boost your net worth:

House Hacking

Embrace house hacking as an effective initiation into real estate. This strategy involves becoming a live-in landlord, leveraging your primary residence to generate rental income. Not only does it offer invaluable insights into property management, but it can also offset a significant portion of your mortgage expenses.


Wholesaling is a proactive strategy where you secure a property under contract at a favorable price and then assign the contract to another buyer at a higher price before finalizing the purchase. This method hones your skills in identifying and vetting lucrative deals, establishing vital industry connections in the process.

Real Estate Syndication

Real estate syndications involve pooling resources with other investors to acquire commercial or multifamily properties, typically apartments. As a limited partner, you provide the finances while the general partner manages the project.

Syndications are favored for their potential to yield substantial returns in a relatively short period. For instance, an 8% return over five years and a 50% increase in initial capital investment can nearly double your investment.

Multifamily Properties

Consider investing in multifamily properties, which offer more stable cash flow than single-tenant properties. The risk of cash flow loss due to tenant turnover is significantly lower with multifamily properties, providing a consistent revenue stream. These properties, consisting of four or more units, are an effective means of building generational wealth.

Real Estate Investment Trusts (REITs)

REITs are companies that own, operate or finance income-producing real estate. While you don’t have direct ownership of the underlying real estate, you can purchase shares in a REIT publicly traded on major exchanges. Returns from REITs typically align with stock market returns. They serve as a valuable tool for diversifying your real estate portfolio, especially as your wealth grows.

The BRRRR Method

The BRRRR method involves a systematic approach of buying distressed real estate, rehabilitating it, renting it out, refinancing, and then repeating the process. By leveraging equity, this strategy allows for the expansion of your real estate portfolio.

Short Term Rentals

Opt for short-term rentals by purchasing a property, often a single-family home, and listing it on platforms like Airbnb or VRBO. This approach offers potential income while concurrently building equity in a real estate asset. You can manage the property yourself or enlist a specialized property management company for seamless operations.

Mortgage Note Investing

Mortgage note investing is a pragmatic avenue that can increase your net worth by acting as the lender rather than the property owner. This strategy involves purchasing defaulted mortgage notes from banks and collaborating with borrowers on a repayment strategy. Mortgage note investing with CWS Investments offers competitive advantages such as 8-10% annualized returns, real estate-backed investments, lower volatility and a low cost of entry. Speak with a team member to discuss how you can leverage mortgage note investing to become an accredited investor.

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Step #2: Fulfill Licensure & Professional Designation Requirements

In 2020, the SEC broadened the criteria for accredited investors, now recognizing individuals holding specific professional designations and licenses from the Financial Industry Regulatory Authority (FINRA).

Obtaining Professional Licenses

The following licenses demonstrate professional knowledge, allowing experts to cement credibility as accredited investors:

Series 7 License – General Securities Representative
Series 65 License – Uniform Investment Advisor (According to NASAA)
Series 82 License – Private Securities Offerings Representative

To qualify as an accredited investor, you must pass the relevant FINRA exam for your chosen license. These exams assess your competence in specific areas of the financial industry.

  • Series 65: The NASAA Investment Advisers Law Examination is overseen by FINRA on behalf of the North American Securities Administrators Association (NASAA). It assesses an individual’s understanding of investment adviser regulations.
  • Series 7: The General Securities Representative Qualification Examination (GS) evaluates the competence of an entry-level registered representative in fulfilling their role as a general securities representative. It covers various aspects of the securities industry.
  • Series 82: The Private Securities Offerings Representative Exam measures the proficiency of an entry-level registered representative in executing their responsibilities as a private securities offerings representative. This examination focuses on the specific intricacies of private securities offerings.

Providing Documentation

Once you’ve successfully obtained the requisite license, you can present the documentation to the seller of the unregistered investments you intend to purchase. This validates your status as an accredited investor, granting you access to a broader spectrum of investment opportunities.

Knowledgeable Individuals

Individuals employed by a private fund offering unregistered investments can also attain accredited investor status. Referred to as knowledgeable individuals, their designation stems from their comprehensive understanding of investment opportunities within the fund.

This amendment signifies the SEC’s recognition of the expertise and knowledge held by professionals with these designations, affirming their eligibility to participate in private, potentially higher-risk investment opportunities.

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Step #3: Verify your Accredited Investor Status

Qualifying as an accredited investor involves a thorough assessment by the entity selling unregistered investment assets. The process entails comprehensive verification to ensure income and net worth standards compliance. Here’s an insightful breakdown:

506(b) Self Accreditation

For offerings under Rule 506(b), investors can self-certify their accredited status, making it a straightforward method, especially favored by small issuers.


  • Questionnaire Completion: Expect to provide detailed information about your financial position and investment experience. The issuer relies on your declaration of status.

506(c) Verified Accreditation

Under Rule 506(c), accredited status requires verification by a qualified, independent third party. This could be a licensed CPA, attorney, investment advisor, or registered broker-dealer.

Here are some necessary documentation guidelines:

  • Accredited Investor Letter: Request this letter from your chosen third-party verifier. It serves as formal confirmation of your accredited status.
  • Financial Verification: Be prepared to submit documentation such as bank or investment account statements, tax returns, or other financial statements to confirm your income level or assets.
  • Credit Report: Some issuers may request a credit report as a means to verify your net worth and liabilities.

The choice between self-accreditation and third-party verification depends on the specific exemption under Regulation D that the seller is operating under. Understanding this distinction ensures a smooth verification process.

By adhering to these verification procedures, you’re complying with SEC regulations and establishing your eligibility for participation in private, potentially high-yield investment opportunities.

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Why Become an Accredited Investor?

Becoming an accredited investor grants access to investment opportunities with the potential for higher returns, albeit accompanied by elevated risk. Here are some compelling reasons to become an accredited investor:

Enhanced Returns and Diversification

Accredited investors gain access to a realm of investments that often yield returns uncorrelated with overall market performance. This diversification can be a strategic move for those seeking to fortify their investment portfolio.

Access to Exclusive Investment Opportunities

Accredited status broadens the scope of potential investment avenues. It opens doors to opportunities that may not be available to non-accredited individuals, providing a wider range of choices to consider.

Here are some examples of investment vehicles exclusive to accredited investors:

  1. Hedge Fund Investments: Given the speculative nature of hedge funds, they are typically accessible only to accredited investors.
  2. Private Equity Investments: Various forms of private equity ventures, including venture capital and angel investing, often mandate accredited investor status.
  3. Online Real Estate Platforms: Certain real estate crowdfunding platforms, like Crowdstreet and EquityMultiple, are exclusively available to accredited investors.
  4. Venture Capital and Startups: Due to the higher risks associated with venture capital investments, they typically require accredited investors, as they do not require the same information disclosure level as SEC-registered offerings.

Protecting Investor Interests

The requirement of accredited investor status stems from SEC Rule 501, an integral component of Regulation D under the Securities Act of 1933. Referred to as the “truth in securities” law, the Securities Act of 1933 was crucial in improving financial disclosure requirements.

It was designed to ensure that investors are adequately informed about the investments they choose to engage in. Additionally, it implemented stricter measures against fraudulent activities and misrepresentations in the sale of securities.

Becoming an accredited investor signifies a strategic step towards a more diverse, potentially lucrative investment portfolio. It is a gateway to a broader spectrum of investment opportunities that may not be accessible otherwise.

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Enlisting Support: A Reliable Financial Advisor

Partnering with a skilled financial advisor can be a pivotal step in your pursuit of accredited investor status. Here’s how their expertise can propel you towards becoming an accredited investor.

Navigating Accredited Investor Criteria

Meeting the SEC’s stringent financial criteria, the primary route to accreditation demands a clear strategy. A financial advisor can craft a tailored plan, whether it involves amassing a net worth of $1 million or attaining an individual income of $200,000 (or $300,000 jointly with a spouse). Their insights can be instrumental in achieving these milestones.

Expert Guidance for Net Worth Augmentation

A financial advisor’s expertise becomes invaluable if the objective is achieving a $1 million net worth. They bring specialized knowledge on wealth accumulation, guiding you towards this significant milestone.

Strategies for Income Augmentation

If the path to accreditation hinges on income enhancement, a financial advisor can offer invaluable career and business advice. Their counsel can prove instrumental in augmenting your income, potentially fast-tracking your journey towards accreditation.

CWS Investments stands as a distinguished investing vehicle, boasting a portfolio of over 500 assets valued at $75 million. We specialize in tailored investment solutions and cater to accredited, non-accredited, and self-directed IRA investors.

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Final Thoughts

Becoming an accredited investor opens a gateway to exclusive investment opportunities, offering the potential for higher returns. Mortgage note investing stands out as a powerful avenue to bolster net worth. At CWS Investments, a leading mortgage note investment firm, we have expertly managed a diverse portfolio exceeding $75 million.

We collaborate with a broad spectrum of investors, including accredited, non-accredited, and self-directed IRA investors. Our meticulous approach to mortgage note acquisition and strategic borrower engagement ensures consistent, long-term returns. With above-average returns, real estate backing, and low volatility, CWS empowers investors to fortify their portfolios.

Ready to embark on this transformative investment journey? Speak with a team member from CWS Investments today. Our investor relations team is poised to craft a customized investment plan aligned with your financial objectives. Don’t miss out on the opportunity to elevate your wealth-building potential. Book a call today!

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Frequently Asked Questions (FAQs)

Do foreign investors need to be accredited?

Yes, foreign investors can qualify as accredited investors if they meet the financial criteria set by the SEC.

Does CFA qualify as an accredited investor?

Possessing a CFA (Chartered Financial Analyst) designation alone does not automatically qualify an individual as an accredited investor. Accreditation is determined by meeting specific financial criteria.

Can non-US persons be accredited investors?

Non-US individuals can be accredited investors if they meet the SEC’s financial requirements.

How much money do you need to be an accredited investor?

To qualify as an accredited investor, an individual needs either an annual income of at least $200,000 (or $300,000 with a spouse) for the past two years or a net worth exceeding $1 million, excluding their primary residence.