Top Alternative Investments For Accredited Investors
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Alternative investing is any non-traditional form of investment that ranges from cryptocurrency to artwork to mineral rights. Your traditional investing includes putting money into bonds, stocks, cash, and equivalents, as well as the return from interest earnings, capital appreciation, and dividends.
Unconventional investing is typically shrouded with risk, but the margins for return can be quite large and worth your while.
How Do You Become An Accredited Investor
To become an accredited investor, you must meet one of the following standards:
Once you achieve these milestones, you have access to accredited investments through achieving accredited investor status. This allows you to invest in investment opportunities like:
- private placements
- real estate deals and certain real estate investments
- convertible investments
When considering alternative investments for accredited investors, it is essential to look at them through the lens of risk and return, which varies depending on your current financial situation. It would help if you also held other considerations like portfolio diversification and liquidity.
To help with this decision-making process, weve created the list of investment opportunities for accredited investors that might be right for you. Of note, traditional investments like stocks and bonds can still present great options for your financial portfolio.
Real Estate Investing Faqs
What is real estate crowdfunding and how does it work?
Real estate crowdfunding uses funds from a group of investors to help fund real estate investments. This could mean using funds to purchase properties in opportunity zones, develop existing properties into higher-value assets, or to provide loans for real estate development.
How do you make money from real estate crowdfunding?
Real estate crowdfunding is different than traditional real estate investing. There are four main ways to make money with real estate crowdfunding:Capital Appreciation: This occurs when you own shares in real estate and the property appreciates.Rental Income: Many real estate crowdfunding platforms invest in single-family rental properties or commercial real estate to generate rental income.Dividend Payments: Some crowdfunding sites pay annual or quarterly dividends to shareholders.Interest Payments: If you fund real estate loans, you earn interest as the borrower pays off their loan.
Which crowdfunding site is the best?
Picking the best real estate crowdfunding platform depends on your goals, starting capital, and risk tolerance. Yieldstreet is the best platform overall for investing for accredited investors. While companies like DiversyFund are best for long-term, equity-based investing. In contrast, you can try companies like Cadre for shorter-term investing, as the platform offers more liquidity.
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Pros And Cons Of Alternative Investing
This investing traditionally has a tax advantage. For instance, the investor may receive tax credits or tax carryforwards that can be applied to income.
The return is not associated with the stock market, which can be comforting. At the same time though, the markets are less efficient so opportunities may be more prevalent.
Alternative investing can be enriching if the subject matter is interesting or you are particularly knowledgeable about it.
Some cons of alternative investing include higher risks that can sometimes even be hidden.
There may be some tax consequences correlated with particular investments and these investments are generally more illiquid or speed that an asset can be bought or sold at a price reflecting its true value.
Accredited Investor Opportunities To Kick
From real estate investment funds to hedge funds, accredited investors have opportunities for investment that the average person does not. In order to reap the benefits of accredited investor opportunities, one must first qualify as an accredited investor.
In this guide, we’ll review some of the prime investment opportunities for accredited investors in 2022, including our personal favorite.
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First National Realty Partners
- Minimum Investment to Start: $50,000
- Type of Investor: Accredited Investors
First National Realty Partners is one of the fastest-growing vertically integrated CRE investment firms in the United States. Its also focused on a very particular niche: grocery-anchored commercial real estate.
FNRPs team leverages relationships with top-tier national-brand tenantsincluding Kroger, Walmart, and Whole Foodsto provide investors with access to institutional-quality CRE deals both on- and off-market. Unlike many of the other sites on this list, which are equity crowdfunding platforms, FNRP offers private placements that only an accredited investor can access.
Theyve helped thousands of investors increase their net worth and diversify their portfolios against market volatility through deals that yield steady cash flow.
FNRP also progresses from an entire investment lifecycle, from acquisition through disposition, 100% in-house. A large team of professionals filters through thousands of deals to choose a handful they believe will outperform their peers.
Unlike a traditional real estate investment trust or fund, you have the ability to pick the deals that best align with your investment needs, so you can use FNRPs various offerings to build your own portfolio.
This relative exclusivity does, however, come with a high minimum investment of $50,000. about the opportunity and determine whether it makes sense for your investment goals.
Crowdstreet: Best For Commercial Real Estate Investing
- Minimum Investment: $25,000 for most marketplace listings
- Fees: 0.50% to 2.5% for most investments
- Fund: Offers single properties or two types of funds
Out of all the commercial real estate investing options for accredited investors, CrowdStreet is one of the largest and most flexible.
On CrowdStreet, you can invest in individual deals on commercial real estate properties, and theres usually several properties on this online marketplace. Typically, single-property investments require at least $25,000 to invest.
Alternatively, you can invest in two funds: a single-sponsor fund thats run by one real estate firm or a CrowdStreet fund that invests in a variety of properties. If you want more diversification and someone handling real estate investing for you, this is better than investing in properties on your own.
Project fees typically range from 0.50% to 2.5%. Fund fees can also reach around 3% depending on your investments.
CrowdStreet also has a Private Managed Account service that builds a real estate investment portfolio to match your goals. The advisory service requires a $250,000 minimum balance, and fees vary depending on your investments.
Best For
CrowdStreet is an ideal choice for accredited investors who want less hands-on investing in commercial real estate. If you want a personally managed account, CrowdStreet is also for you.
Pros
- Fees can be low for certain projects.
- Plenty of marketplace listings at a given time.
Cons
- High minimum investment amount.
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Finding A Trusted Provider
When searching for a trusted provider, especially if youre looking into alternative investments, your focus should be on integrity, value, and fit.
Your provider should, first and foremost, have your interests at the forefront of their priorities instead of their own. Practices such as steering you toward unstable investments without making you aware of the risks involved do not exhibit integrity.
There is also the matter of fees. Some providers might promise impressive growth in your investments but fail to mention exorbitant fees that might offset your wealth accumulation. Before trusting your money with a provider, make sure they are transparent about their fee structure. Whether they have a percentage or flat fee subscription setup, you should never be surprised by hidden costs.
If you have established that a possible provider is trustworthy, their investment selections still need to be of a certain quality. If not, it will be far more difficult to reach your goals of retirement or wealth accumulation.
Also in line with investments offered, you should firstly ascertain whether or not your preferred asset classes are even available. For example, engaging with a highly recommended provider who does not offer precious metals as an asset class is useless if you are very interested in gold. Making sure your goals and intentions are compatible with services and options available goes a long way toward finding a good provider fit.
Who Can Buy Alternative Investments
Buying many types of alternative assets has historically been limited to financially sophisticated investors like institutions or high-net-worth individuals deemed accredited investors by the Securities and Exchange Commission . This is because most alternative investments are not traded on public markets, and theyâre typically unregulated by the SEC.
If you wish to purchase alternative investments as an accredited investor, you can qualify in a few different ways: by having an annual income of $200,000â$300,000 for a coupleâfor the past two years by maintaining a net worth of $1 million dollars or more or by demonstrating âdefined measures of professional knowledge, experience, or certificationsâ in the SECâs eyes.
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What Happens If You Lie About Being An Accredited Investor
If you lie about being an accredited investor, the blame usually falls on the fund or investment vehicle as it is their responsibility to determine your qualifications. In certain regions, non-accredited investors also have the right to rescission. What this means is that if an investor decides they want to pull out their money early, they can claim they were a non-accredited investor the whole time and receive their money back.
That being said, it’s never a good idea to provide falsified documents, such as fake tax returns or financial statements to an investment vehicle just to invest, and this could bring legal trouble for you down the line in many ways.
Private Equity Real Estate
Thinking of investing in private equity real estate as a way to make money in real estate? Then you are essentially considering investing in purchasing, financing and owning a piece of property by means of a pooled private or public investment fund. So to avoid confusion: REITs provide investors with access to publicly traded shares in real estate investments that primarily generate revenues via rental income. Private equity real estate instead refers to the practice of investing in professionally managed funds that might invest in varying speculative property offerings from undeveloped land to the development of new luxury high-rises.
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How To Invest With Streitwise
The $5,000 minimum is really $5,000 and change, since the price is based on the fluctuating value of 500 individual shares . You can move money over from your bank account or use Bitcoin or Ethereum to fund part or all of your investment.
Streitwise pays dividends each quarter, and youll earn longer-term returns as the property appreciates. After a mandatory yearlong waiting period, you can redeem your investment or join a redemption planearning up to 100% of your shares Net Asset Value after five years.
Once you have your account set up, you can download the mobile app to your iOS device and monitor your portfolio on the go. You can even add funds and enroll in dividend reinvestment through the app.
Learn more about Streitwise or read our full review.
How To Invest With Diversyfund
Heres how DiversyFund works: the platform buys multifamily properties across the country that are already generating cash flow but need a little renovation. After the upgrades, rent and property value increase, and the extra cash eventually gets passed on to investors as dividends.
Youll start by buying multiple $10 shares . You can opt to transfer money on your own timetable or automate future monthly deposits. Each share buys you an investment in several buildings at once, meaning youre still covered for potential dividends if one or more properties fail.
The funds are medium-term with a five-year growth cycle, and youll need some patience most returns come from property appreciation, which takes time, and DiversyFund doesnt allow early withdrawals. But they quote animpressive 17% average annual return for 2018 investors, so your five-year waiting period may reap major rewards, after which you can cash out or reinvest.
Learn more about DiversyFund or read our full review.
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Strategy For Alternative Investments
Alternative investments typically have a low correlation with those in standard asset classes. This low correlation means they often move counter to the stock and bond markets. This feature makes them a suitable tool for portfolio diversification. Investments in hard assets, such as gold, oil, and real property, also provide an effective hedge against inflation, which hurts the purchasing power of paper money.
Because of this, many large institutional funds such as pension funds and private endowments often allocate a small portion of their portfoliostypically less than 10%to alternative investments such as hedge funds.
The non-accredited retail investor also has access to alternative investments. Alternative mutual funds and exchange-traded fundsalso called alt funds or liquid altsare now available. These alt funds provide ample opportunity to invest in alternative asset categories, previously difficult and costly for the average individual to access. Because they are publicly traded, alt funds are SEC-registered and regulated, specifically by the Investment Company Act of 1940.
What Regulators Are Doing
The SEC on Feb. 9 proposed a multipronged rule to increase transparency, by requiring private-equity funds to issue quarterly statements detailing fees and performance, among other things.
It would also limit the preferential treatment some investors get, such as additional disclosures that may have a “material negative effect” on other investors, according to the SEC. It would also require an annual audit of private funds and prohibit funds from engaging in certain conflicts of interest.
Separately, the Labor Department published a notice on Dec. 21 designed to limit the scope of Trump administration guidance from June 2020.
The Trump-era labor agency laid out legal parameters for employers to consider if they’d like to offer employees a 401 plan fund with an allocation to private equity. But the Biden administration limited the memo’s application, though didn’t repeal it.
These well-heeled, well-represented investors are able to fend for themselves, and our resources are better spent on retail investor protection.Hester PeirceSEC commissioner
Specifically, the agency said employers already managing private equity for the company pension plan are likely best suited to analyze whether private equity makes sense for their 401 the department “cautions” other companies from doing so.
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What Is The Most Stable Investment
Again, high yield savings accounts, government bonds and real estate all are considered to be fairly stable investments. Of those, real estate tends to do the best at keeping up with inflation since the value of a property is determined by estimating what buyers would be willing to pay for it in the current market.
Startup And Small Business Investing
Why let venture capitalists have all the fun?
A new wave of platforms are carving out a name for themselves in the equity crowdfunding space, which allows you to back promising startups for a share in their future glory.
Be prepared to potentially wait a long time to see a return, since it usually takes a public stock offering or acquisition to cash out your shares.
For Non-Accredited Investors
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How Can Alternative Investments Be Useful To Investors
Some investors seek out alternative investments because they have a low correlation with the stock and bond markets, meaning that they maintain their values in a market downturn. Also, hard assets such as gold, oil, and real property are effective hedges against inflation. For these reasons, many large institutions such as pension funds and family offices seek to diversify some of their holdings in alternative investment vehicles.
Who Is This Series For
This series of articles is written for the average accredited investor.
An accredited investor is a legal term that refers to anyone whose net worth, either alone or with a spouse, exceeds $1 million or who has earned more than $200,000 for the past two years and reasonably expects to earn more than $200,000 in the current year.
What do we mean by the average accredited investor? We mean the vast majority of accredited investors who earn less than $5 million dollars a year and who are worth less than $25 million. These are not hard numbers by any means, but are rough guides. Our thinking is that if you meet these minimums, you are probably already aware of the things this series would otherwise tell you or that you are well advised by the right professionals.
In other words, this series is not for the ultra-affluent. If you are blessed to have a family office to manage your money if your family was once featured on Lifestyles of the Rich and Famous, if you have never flown commercial: this series is not for you.
Nor is this series for start-ups, the entrepreneurs behind them, or their advisors. There are plenty of resources for these groups- literally hundreds of accelerators, scores of podcasts, dozens of excellent magazines and websites.
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Acretrader: Diversifying Your Portfolio With Farmland
- Minimum Investment: $10,000
- Fees: 0.75%
- Fund: Invest in U.S. farmland
Most accredited investments let you invest in commercial real estate, rental properties, or debt. In contrast, AcreTrader lets accredited investors take advantage of U.S. farmland.
According to AcreTrader, farmland delivers an average annual return of 11.0% and has low volatility. Farmland investing also lets you generate returns in two ways: land appreciation and rental payments from farmers.
AcreTrader has an intense vetting process, so there arent always listings. But new farms appear every week, with the minimum investment amount usually ranging from $10,000 to $40,000.
Listings include the type of crop thats being grown, gross cash yield, and net annual return. According to AcreTrader, a yield of 3% to 5% is typical for lower-risk properties.
One downside of investing in farmland versus traditional real estate is that its even less liquid. They are diligently working on the secondary marketplace for investors so you can sell your shares, but it is not available to investors yet.
Best For
AcreTrader is best for accredited investors who want to diversify their portfolio with income-generating farmland.
Pros
- Earn through appreciation and rental payments
- AcreTrader has a thorough vetting process for listings
Cons
