Accredited investors have access to investment opportunities that aren’t available to everyone—think private equity, hedge funds, and real estate ventures with higher return potential. To ensure investors are prepared for the associated risks, the SEC requires specific criteria for accreditation, focusing on financial stability and investment knowledge. This guide explains the general process to become an accredited investor and how Varuna specifically verifies investor status.

Accredited Investor Requirements

Income Requirements:

Earn a pre-tax income of $200,000 (or $300,000 with a spouse) for the last two years with expectations to continue, demonstrating the capacity to manage financial risk.

Net Worth Criteria:

Maintain a net worth exceeding $1 million, excluding your primary residence. This shows financial resilience and the ability to absorb losses from riskier investments.

Professional Certifications:

Holding certain broker-dealer certifications, such as Series 7, 65, or 82 licenses, can qualify you based on knowledge and expertise, rather than just financial standing.

Knowledgeable Employees of Private Funds:

Key employees involved in private fund investment processes may qualify, reflecting their deep understanding of the applicable complex financial environments.

Accredited Investor Status Verification with Varuna Under Rule 506(c)

Varuna specifically uses Rule 506(c) to verify accredited investors, enabling public solicitation (i.e., displaying the investment opportunities) while ensuring compliance with SEC regulations. Here’s how the process works with Varuna and its partners:

Income Verification:

Provide tax documents like W-2s, 1099s, or tax returns for the past two years, plus a statement confirming expected income for the current year. Varuna uses this documentation to ensure compliance with the income thresholds set by the SEC.

Net Worth Verification:

Submit bank and brokerage statements or other asset documentation, along with a recent credit report to verify liabilities. Varuna assesses these documents to confirm a net worth of over $1 million, excluding the primary residence.

Third-Party Verification:

Alternatively, you can provide an accredited investor verification from a qualified third party, such as a CPA, attorney, broker-dealer, or registered investment advisor who may be familiar with your circumstances. These professionals would review your financial information and provide a written statement confirming your accredited status.

Principles-Based Approach:

Varuna may also apply a principles-based approach, considering factors like the investor’s previous accreditation status and the nature of the investment. This flexible method allows for tailored verification, especially for repeat investors or those with unique financial profiles.

Documentation and Compliance

Varuna, working with its broker-dealer and other partners, thoroughly documents each step of the verification process, ensuring compliance with SEC rules. This includes maintaining records of income and asset verification, as well as third-party confirmations. If Varuna identifies any uncertainties, it may request additional documentation or verification steps of you, to ensure full compliance.

Benefits of Becoming an Accredited Investor

Exclusive Investment Access: Gain entry to private investment offerings, which may include real estate syndications, venture capital, and hedge funds. Varuna focuses on real estate syndications.
Potential for Higher Returns: Access investment opportunities that often can potentially outperform traditional publicly available investments, albeit with their own set of risk.
Tax Advantages: Direct investment structures, like LLCs, can offer tax benefits such as pass-throughs deductions on depreciation and interest expenses.

Accredited Investors vs. Non-Accredited Investors

Access to Investments: Accredited investors gain access to private placements, venture capital, and institutional-grade real estate investments. These investments can potentially come with higher returns, but they may also be accompanied by greater risk, including less regulation, and limited liquidity compared to publicly traded options.

Direct vs. Indirect Investment Structures: Platforms like Varuna enable accredited investors to invest directly in property-specific LLCs, where the investment’s success is directly linked to the property’s performance. In contrast, non-accredited investors are often limited to indirect investment options, such as publicly traded REITs, which offer increased liquidity but often lack the full range of available pass-through tax benefits that LLCs can provide.

Get Direct Access to Institutional Real Estate Opportunities

For many, the idea of investing in institutional-grade real estate opportunities feels out of reach. But as an accredited investor with Varuna, you gain access to opportunities that go beyond traditional investments. Varuna’s platform connects you with carefully selected real estate projects, offering a direct path to institutional-grade real estate opportunities. We focus on making the process straightforward—no unnecessary jargon or complicated steps—just a clear, transparent way to grow your portfolio with high-quality investments.

Curious to see how Varuna can fit into your investment plans? Explore your options at Varuna and join our waitlist.

Neither Varuna Technology, Inc. nor North Capital Private Securities Corporation, as institutions, advise on any personal income tax requirements or other investment concerns. Use of any information from this article is for general information only and does not represent investment or personal tax advice, either express or implied. Readers are encouraged to seek professional investment and tax advice for personal investment or income tax questions.

A Complete Guide to Becoming An Accredited Investor