Are You an Accredited Investor?

An individual generally qualifies as an accredited investor by earning more than two hundred thousand dollars in each of the last two years, or three hundred thousand dollars jointly with a spouse, with a reasonable expectation of the same in the current year. The alternative path is net worth: more than one million dollars excluding the value of a primary residence. Certain professional licenses, including specific securities licenses, also qualify someone regardless of income or net worth. A local CPA or the fund sponsor's compliance team typically verifies the qualification with documentation rather than a self-certification alone.

Private placements, including most DST offerings used in 1031 exchanges, aren't registered with the SEC the way a public stock or mutual fund is. The accredited investor standard is meant to limit these unregistered offerings to people presumed able to evaluate the risk and absorb a loss, since the usual public-market disclosure requirements don't apply. It's a blunt instrument, income and net worth don't perfectly predict investment sophistication, but it's the rule as written and sponsors are required to verify it before accepting an investment.

Someone who doesn't meet the accredited investor thresholds isn't excluded from real estate investing generally, they're excluded from a specific category of private, unregistered offerings. Publicly traded REITs remain open to any investor. For someone running a 1031 exchange who doesn't qualify as accredited, replacement property options generally stay limited to directly owned real estate rather than a DST interest, which changes how the identification and closing process gets planned.

Because DST sponsors have to document accredited status before accepting funds, an owner in the middle of a 1031 exchange should confirm qualification and gather the supporting paperwork, tax returns, a bank or brokerage statement, or a letter from a CPA or attorney, before the 45-day identification window closes, not after. Waiting until late in the process to find out an offering requires accreditation an investor doesn't have can eliminate what looked like the simplest replacement option.

A retired owner in Metairie who's held commercial property for decades and built substantial equity often clears the net worth threshold without realizing it, once a paid-off building and other investments are added together, even if current income no longer looks high on paper. Conversely, a younger owner in Uptown with strong income but little accumulated net worth can qualify on the earnings test even before real estate equity has built up. Neither path is obvious from the outside, which is why a straightforward net worth and income review with a CPA, done early rather than during the identification window, tends to save the most time later in the exchange process.