Key Distinctions Between Accredited Investor and Qualified Purchaser

Investing is a common tactic that people deploy to grow their existing wealth. People can invest in a wide range of assets, including stocks, bonds, cryptocurrencies, businesses, and real estate. Different types of assets have varying risk levels, and investors should carefully vet any asset they are interested in before putting their money into it.

Despite the risk of investing, many people still engage in it because of the massive potential upside. It is a good practice to employ proper risk management when investing to mitigate losses. 

This is why a large number of investors for decades have preferred to invest in real estate. The relatively low risk in this sector makes it attractive even though real estate assets are expensive, and investing in this sector requires a lot of money and patience to get a reasonable return.

Amongst wealthy investors, there are two categories, accredited investors and qualified purchasers, that are widely regarded. While people in both categories frequently invest in similar assets, there are major differences between them.

Accredited investor vs Qualified purchaser

This section will briefly describe the main distinctions between an accredited investor and a qualified purchaser. For someone to become an accredited investor, they have to meet the following criteria:

• Have a net worth of $1 million, excluding equity in their primary residence. Alternatively, they can have an individual income of $200,000 or a joint income of $300,000.
• Hold a Series 7, Series 65, or Series 82 license and be in good standing.
• Be a knowledgeable employee of certain private funds.
• Be the general partner, director, or executive officer of a company selling securities.
• Be the family client of a qualifying family office.

An entity can also be an accredited investor, not just an individual. However, they must meet the following criteria:

• Be an insurance company, bank, broker, or investment company
• Have more than $5 million in assets.
• Be an entity where all equity owners are accredited investors.

On the other hand, to become a qualified purchaser, an individual or entity has to meet the following criteria:

• Be an individual with $5 million of investments in assets that exclude their primary residence.
• Be a family company with $5 million in investments owned by related family members.
• Be a trust where the trustee and contributors are qualified purchasers.
• Be a person or entity that owns or invests more than $25 million in assets on a discretionary basis. This could be for themselves or other qualified purchasers.
• Be a qualified institution buyer under Rule 144A.
• Be an entity where all beneficial owners are qualified purchasers.

To learn the difference between accredited investor and qualified purchaser in great detail, click the link to get more information.

Endnote

The major difference between an accredited investor and a qualified purchaser is their net worth. An accredited investor is required to have a net worth of $1 million or an income of $200,000 (as an individual) or $300,000 (as a couple). Meanwhile, a qualified purchaser is required to have $5 million in investments. Since a $5 million investment portfolio is worth more than $1 million, a qualified purchaser is also an accredited investor, but is able to invest in more assets.