Are You an Accredited Investor?

(We are not offering tax, legal, or investment advice. Please consult a professional)

There are many opportunities out there for passive investors to take advantage of.  Knowing if you are an accredited investor will help you to navigate the waters.

 “Accredited Investor” is a term used by the Securities and Exchange Commission (SEC) to differentiate between those investors whom the government believes to possess “financial sophistication” and those individuals who might require more protection/oversight. The government believes it is their duty to keep the world’s less savvy investors from so called “riskier projects” since they do not have the sufficient investment knowledge or reserve funds to handle a significant loss.  Unfortunately, this rule excludes many investors from unique high-yield opportunities that could be life-changing. However, the good news is that if you are an accredited investor, your options are endless.

Many accredited investors look for ways to include non-accredited family and friends in their investments. Unfortunately, there is no legal way for them to be directly involved in an accredited opportunity. Always seek guidance from a licensed attorney when structuring your investment.

As of late last year (August 26, 2020) the SEC adopted amendments to the definition of who is considered to be an “Accredited Investor” as defined in Rule 501(a) promulgated pursuant to the Securities Act of 1933 (the “Act”). The great news is that many who did not qualify before do now. You or your entity can be an accredited investor if you are any one of the following:

  • A natural person whose individual net worth, or joint net worth with that person’s spouse or a cohabitant occupying a relationship generally equivalent to that of a spouse (a “spousal equivalent”), at the time of his purchase exceeds $1,000,000 (excluding the value of the person’s primary residence and any debt secured by such residence up to the value of the residence; any debt in excess of such value must be counted as a liability); (MOST COMMON)
  • A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse or spousal equivalent in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (MOST COMMON)
  • A bank as defined in section 3(a)(2) of the Act, or a savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; an insurance company as defined in section 2(13) of the Act; an investment company registered under the Investment company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employment Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
  • A private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;
  • Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership, or limited liability company not formed for the specific purpose of acquiring the securities offered with total assets in excess of $5,000,000;
  • Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership, or limited liability company not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
  • A director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;
  • An entity not otherwise qualifying as accredited that own investments in excess of five million
  • Any entity not formed for the specific purpose of acquiring the securities offered, owning investments in excess of $5,000,000;
  • Any natural person holding in good standing a Series 7, Series 65, or Series 82 license, or any other professional certification or designation or credential from an accredited educational institution that the Securities and Exchange Commission has designated as qualifying an individual for accredited investor status;
  • Any “family office,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 with assets under management in excess of $5,000,000 that is not formed for the specific purpose of acquiring the securities offered and whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment; or Any “family client,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940, of a family office (as defined above) and whose prospective investment in the issuer is directed by such family office.

Prove your Status

There are multiple avenues one can go to get proof of their accredited status. A licensed Attorney or CPA, Investment Advisor, Broker Dealer, or Verification Platform such as, Accredited.AM, and can all be of assistance. Be sure to get verification in the name/entity you plan on using for the investment. For instance, if you are going to invest in your LLC, your LLC will be the one that needs to be verified as different rules are applied to prove status. Once you have received an accreditation letter it is usually only valid for a certain length of time.

To prove one’s status there are multiple assets taken into consideration. For some, verification is quite easy and can be proved by one simple bank statement while others might have a little more legwork to do. Rest assured that knowing and proving your status is well worth it.  While everyone’s situation is different, having an understanding of qualified holdings might make the process less tedious.

Qualified holdings may include:

  • Investment Real Estate (non-primary residence) – Prove ownership through Deed, Note, etc. Be sure to have the valuation, appraisal, broker’s price opinion (BPO), County Appraisal District (CAD) valuation, or other document to prove the assets value.
  • Banks Accounts, Individual Retirement Accounts (IRAs), Certificates of Deposit (CD’s), Brokerage accounts, Annuities, Insurance etc. – Prove value by providing the latest statement or obtaining a letter from the financial institution stating value of account.
  • Vehicles (automobiles, motorcycles, boats, planes, etc.)- Show title and provide a valuation
  • Personal Property– Use a third-party valuation

In short, knowing your status will help aid you in your alternative investments to come. For more information on Investor Loan Source & ILS Capital accredited offerings please visit

Loan Servicing


A real estate loan servicer is a company/person that is tagged in after closing by the lender to handle the administrative aspects of a loan. Surprisingly, many mortgage companies and owner finance lenders do not service their own loans but hire a third-party company to serve as a liaison between themselves and their borrower, ultimately managing the loan.   

There are many companies who specialize in servicing real estate loans, and they often offer an array of services. The type of loan you have, and the lenders needs, will determine what services are opted in to. Often the fee associated with the management of the loan is written into the closing documents and passed on to the borrower.

Finding a loan servicer you can trust, and one that fits your needs is imperative. Always read the fine print and be sure to have a clear understanding of your servicing agreement.  If you operate nationwide, be sure to find a servicer that does, too.  Remember that not all servicing agents are created equal. Some are very specific on the types of loans they can service while others are a one-stop shop.

As a lender there are many things you must stay on top of for things to run smoothly. Your servicer is there to make sure nothing is missed. Depending on your need and/or terms agreed to at closing you may expect your loan servicer to keep track of the following:

Accepting borrower paymentsCollecting fees
Keeping track of loan balances, amortization schedules, and records of paymentsSending out late notices and acceleration/demand letters
Collecting escrow for taxes and insuranceManaging extensions
Paying taxes and insuranceProviding payoff’s
Releasing drawsServing as the main point of contact/interfacing with the borrower

Servicing a loan is not only time-consuming, but one must know how to navigate through the legalities and compliance issues that may arise. Laws vary from state to state and can change over time. Often there are strict rules and timelines when it comes to collections, notifications, etc. and your servicer will help you stay on top of it all.  If you are going to finance the sale of a property yourself, a loan servicer is necessary to ensure everything is done legally and correctly, and protects both the borrower and the lender.