Real Estate Investments for Accredited Investors: 7 Options Compared
By Sierra Davis, Principal & Fund Manager, Essential Income Fund I, LLCPublished Last reviewed
Short answer
Accredited investors can access private real estate investments that are closed to most of the public, including syndications, private real estate debt funds, mortgage note funds, direct private loans and notes, development funds, and private equity real estate funds, in addition to public and non-traded REITs. The options differ mainly in whether the investor is an owner or a lender, where they sit in the capital stack, how liquid the investment is, and how much upside and risk they carry.
Becoming accredited opens a lot of doors. It also opens a lot of pitch decks. Every one of them shows a projected return, and almost none of them lead with the question I care about most: "Where am I sitting in this deal?"
This page lays out seven common ways accredited investors put money into real estate, side by side. Some make you an owner. Some make you the lender. None of them is right for everyone.
Who counts as an accredited investor?
Under SEC rules, an individual is generally an accredited investor if they meet at least one of these tests:
- Net worth over $1 million, alone or with a spouse or spousal equivalent, excluding the value of a primary residence.
- Income over $200,000 in each of the last two years ($300,000 jointly with a spouse or spousal equivalent), with a reasonable expectation of the same this year.
- Certain professional licenses in good standing: the Series 7, Series 65, or Series 82.
Entities such as trusts and companies have their own tests. If you're not sure where you stand, ask your attorney or CPA before you invest.
Rule 506(b) vs. Rule 506(c)
Most private real estate offerings rely on Regulation D, Rule 506. There are two versions, and they affect how you'll hear about a deal and what you'll be asked to show.
| Rule 506(b) | Rule 506(c) | |
|---|---|---|
| Public advertising | Not allowed; usually requires a pre-existing relationship | Allowed |
| Who can invest | Accredited investors, plus a limited number of non-accredited investors who meet sophistication requirements | Accredited investors only |
| Proof of accreditation | Investors typically self-certify | The issuer must take reasonable steps to verify, such as reviewing financial statements or a letter from a CPA, attorney, or adviser |
If you found a deal through a public website, a podcast, or an ad, it's almost certainly a 506(c) offering, and you should expect a verification step.
The 7 options at a glance
| Option | Income | Liquidity | Control | Capital stack position | Typical minimum | Upside | Tax reporting | Main risk |
|---|---|---|---|---|---|---|---|---|
| Real estate syndication | Property cash flow after debt service; discretionary | Low, often until sale | None; sponsor decides | Common equity, behind the bank loan | Often $25,000 to $100,000 | Shares in appreciation | Usually Schedule K-1 | Leverage, sponsor execution, market value |
| Private real estate debt fund | Borrower interest; fixed or pass-through | Low; set by fund terms | None; manager picks loans | Lender; first or junior lien depending on fund | Often $20,000 to $100,000+ | Usually capped | K-1 or 1099, depending on structure | Borrower default, manager judgment |
| Mortgage note fund | Payments on purchased notes | Low; set by fund terms | None; manager picks notes | Lender; depends on lien positions held | Often $25,000 to $100,000+ | Usually capped; discounts can add return | K-1 or 1099, depending on structure | Payer default, documentation, recovery time |
| Direct private lending / buying notes | Borrower payments, usually through a servicer | Low; sell the note by negotiation | Full; you choose each loan | Lender; the lien you buy or make | Often the full cost of one note or loan | Capped at loan terms | Interest income you report | Concentration, your own underwriting |
| Public REIT | Dividends | High; trades daily | None | Shareholder of a company that may use debt | Price of one share | Share price growth | Form 1099-DIV | Stock market volatility, interest rates |
| Non-traded REIT | Distributions; can be reduced | Limited redemption programs | None | Shareholder of a company that may use debt | Often a few thousand dollars | Some appreciation | Form 1099-DIV | Fees, redemption limits, valuation |
| Development / opportunistic fund | Little or none until projects sell | Very low | None | Equity, often behind construction loans | Often $50,000+ | Highest of the group | Usually Schedule K-1 | Construction, lease-up, market timing |
| Private equity real estate fund | Varies by strategy; often back-end weighted | Very low; multi-year lockups | None | Mostly equity, usually leveraged | Often $100,000+; institutional funds much higher | Shares in fund profits after fees | Usually Schedule K-1 | Leverage, fees, long lockup |
1. Real estate syndications
A sponsor buys a property, usually apartments or another commercial asset, with investor equity plus a large bank loan. You're an owner. You share in appreciation and often in depreciation, but you're paid after the bank, and distributions can be cut if the property struggles.
Syndications fit investors who want upside and tax benefits of ownership, can hold until sale, and have vetted the operator and the debt. See real estate debt vs. syndications for the full comparison.
2. Private real estate debt funds
A real estate debt fund pools capital to make or buy loans secured by property. You're on the lender's side: paid from borrower interest, ahead of the borrower's equity, with returns capped by the loan terms.
The details matter here. Ask what lien positions the fund holds, its loan-to-value, whether the fund itself borrows, and how the manager gets paid.
3. Mortgage note funds
A note fund is a type of debt fund that mainly buys existing mortgage notes instead of making new loans. Funds focused on performing mortgage notes buy loans where the payer is current; non-performing note funds buy defaulted loans at deep discounts and work them out. Those are very different risk profiles under the same label.
4. Direct private lending and buying notes
You can also be the lender yourself: fund a loan to a real estate investor, or buy a note on the secondary market. You get full control and you see every document. You also do the underwriting, oversee the servicer, and handle any default.
One note is one payer and one property, so concentration is the real risk early on. Mortgage note investing covers how it works step by step.
5. REITs, public and non-traded
A real estate investment trust is a company that owns property or mortgages. Public REITs trade on an exchange, so you can sell any day, but the price moves with the stock market. Non-traded REITs don't swing daily, but they often carry higher fees and limited redemption programs that can be paused.
If daily liquidity and a low minimum matter most to you, a public REIT may simply be the better fit. See real estate debt vs. REITs.
6. Development and opportunistic funds
These funds build, reposition, or rescue properties. They carry the most upside on this list and the most ways to go wrong: construction costs, permits, lease-up, and the market at the moment of sale. Income is usually minimal until projects are sold or refinanced. They suit investors with long horizons who want growth more than cash flow.
7. Private equity real estate funds
Private equity real estate funds pool capital across many properties under one manager, often with a multi-year commitment, management fees, and a profit share for the manager. They offer professional diversification and equity upside, in exchange for long lockups and a fee structure worth reading closely. For how this compares to lending, see private credit vs. private equity.
How to choose
- Owner or lender? Owners keep the upside and take the first loss. Lenders are paid first and give up the upside.
- Where am I in line? Know who is ahead of you and how much debt is on the property.
- When do I need the money back? Most private options lock up capital for years.
- How much do I want to do myself? Direct notes take work; funds trade control for time.
- How is the sponsor or manager paid? Fees shape incentives.
Many accredited investors hold several of these at once. The goal isn't to find the one right answer. It's to know what you own and what you're responsible for.
Where Essential Income Fund fits
Frequently asked questions
What real estate investments are only available to accredited investors?
Most private real estate offerings, including syndications, private debt and note funds, development funds, and private equity real estate funds, are limited to accredited investors because they are sold under Regulation D exemptions. Public REITs, and many non-traded REITs, are open to non-accredited investors.
How do I prove I am an accredited investor?
For a Rule 506(c) offering, the issuer must take reasonable steps to verify accreditation, commonly by reviewing tax returns, account statements, or a written confirmation from a CPA, attorney, or registered investment adviser. For a Rule 506(b) offering, investors typically self-certify on the subscription documents.
Does a primary home count toward the $1 million net worth test?
No. The value of a primary residence is excluded from the net worth calculation, and mortgage debt on it is generally excluded as well up to the home's value. Ask your CPA or attorney how the rules apply to your situation.
Is real estate debt or real estate equity better for accredited investors?
Neither is better in every case. Debt positions are paid first and offer more predictable income with capped upside, while equity positions take the first loss but share in appreciation and ownership tax benefits. Many investors hold both.
Which accredited investor real estate options are the most liquid?
Public REITs are the most liquid because their shares trade daily on an exchange. Non-traded REITs offer limited redemptions, and private funds, syndications, and notes generally lock up capital for years or require finding a buyer.
This article is for educational purposes only and is not investment, legal, or tax advice. It describes general characteristics of real estate debt investments; individual investments differ, and all involve risk, including the possible loss of principal. Essential Investment Group, LLC is not a registered investment advisor, broker-dealer, or bank. Any offer of securities in Essential Income Fund I, LLC is made only through its Private Placement Memorandum to verified accredited investors under Rule 506(c) of Regulation D.