Recent proposed congressional changes to investor accreditation laws promise to leave a long-term mark on the commercial real estate landscape.
Previously, only achievable by having a net income of over $1 million or more than $200,000 in annual net earned income during the last two years, the new proposal from the House of Representatives will allow investors to achieve accreditation status by passing a test that proves their “financial savvy.”
The test, which would be administered by FINRA, would be provided free of charge and would assess the individual's competency and knowledge of the private market. It would also address topics like various securities both public and private, corporate governance and risks associated with private assets, like limited liquidity and different disclosure rules.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
At the heart of these changes is the aim to democratize investment opportunities to the mainstream by lowering barriers to entry for individuals to invest their capital, thereby potentially altering the dynamics of real estate funding. But what are the realities behind these alterations? Ultimately, this should positively influence the securities space so long as new investors are prudent as they assess real estate offerings if they become more mainstream.
Expanding the investor pool
Currently, accredited investors are qualified with more than $200,000 in earned income per year individually, $300,000 per couple or $1 million in net worth. This approach primarily limits real estate investment opportunities to institutional investors or high-net-worth individuals.
With the relaxation of these criteria, a broader spectrum of investors would be eligible to participate in various real estate ventures, significantly expanding the capital pool available for developers and real estate companies and, in turn, providing investors with an additional source of diversification for their assets.
Boosting crowdfunding platforms
The rise of real estate crowdfunding platforms has been remarkable in the past decade. However, their growth was somewhat stifled by stringent accreditation laws. With eased regulations, these platforms could witness an influx of investors. This would not only provide more investment opportunities but also support smaller, innovative real estate projects that might have been overlooked by larger institutional investors.
More investors means more development in the long term, because it means more capital is making its way into the real estate industry. This would offer investors more project diversification and opportunities to participate in the real estate space.
Enhanced project diversification
With more investors in the mix, developers and real estate entrepreneurs will have the flexibility to explore a variety of projects. They won't be pigeonholed into catering exclusively to the whims and risk appetites of a select few. This means the market and investors may see a broader range of projects, from affordable housing and green buildings to tech-integrated commercial spaces.
For example, at 1031 Crowdfunding, we offer a diverse group of projects in spaces like senior housing, multifamily and medical facilities that provide investors with real estate stratification of investments.
The potential relaxation of investor accreditation laws represents a pivotal moment for the real estate industry. By democratizing access, enhancing the robustness of the investment environment and encouraging a broader range of projects, these changes would herald a new era for real estate development and investment.
As with all reforms, careful oversight and ongoing evaluation will be necessary, but the initial indicators point toward a promising future for the industry.
If you’re interested in learning more about this and other potential legislation affecting real estate securities, check out our website.
Related Content
- Invest Like the Rich: Are Direct Investments Right for You?
- How to Get into Alternative Investing
- Five Downsides of Investing in Alternatives
- How to Invest in Companies Before They Go Public
-
3 Ways High-Income Earners Can Maximize Their Charitable Donations in 2025Tax Deductions New charitable giving tax rules will soon lower your deduction for donations to charity — here’s what you should do now.
-
Another State Quietly Bans Capital Gains Tax: Will Others Follow?Capital Gains A constitutional amendment blocking future taxes on realized and unrealized capital could raise interesting questions for other states.
-
How to Calm Your Retirement Nerves When It's Time to Shift from Savings Mode to Spending ModeTransitioning from saving to spending in retirement can be tricky, but devising a strategic plan can help ensure a smooth and worry-free retirement.
-
Why Wills and Trusts Aren't Enough in the Great Wealth Transfer, From an Attorney Who KnowsFamilies need to prepare heirs through communication and financial know-how, or all that money could end up causing confusion, conflict and costly mistakes.
-
Private Markets for Main Street: What Financial Advisers' Clients Need to KnowWith product innovation 'democratizing' private market access for everyday investors, advisers must step up their game to educate clients on the pros and cons.
-
Seven Practical Steps to Kick Off Your 2026 Financial PlanningIt's time to stop chasing net worth and start chasing real worth. Here's how to craft a plan that supports your well-being today and in the future.
-
A Retirement Plan Isn't Just a Number: Strategic Withdrawals Can Make a Huge DifferenceA major reason not to set your retirement plan on autopilot: sequence of returns risk. Here's how to help ensure a bad market won't sink your golden years.
-
Fish and Chips? More Like Fish and a Side of Customer Confusion and AngerYou expect chips — French fries, actually — to come with your order of fish and chips? Think again. This restaurant could be violating the truth-in-menu laws.
-
What the 2026 Tax Landscape Means for Advisers, From a Financial PlannerThe OBBB's impacts on 2026 are taking shape, amplifying the need for financial advisers' expertise in transforming stability into strategy for their clients.
-
From Vision to Value: A Blueprint for Helping to Build Your Advisory PracticeAs a financial professional, you can draw lessons from Advisors Excel's journey to find ideas, strategies and inspiration for growing your own advisory business.
