There is a famous scene in “The Matrix” when Neo is asked if he wants to take the red pill or the blue pill. The blue pill will allow him to continue living his normal life even though he feels deep inside there is more out there to experience. The red pill will open an entire new world for Neo, a world that he never even knew existed.
I like to describe discovering the world of alternative investing as taking the red pill for the first time. I had no idea there was this world of private investing that allowed me to diversify my portfolio from Wall Street and invest alongside incredible experts and real estate professionals. It almost made me feel like I was living in the matrix because so many people didn’t know about these opportunities.
Since then, I have made it a goal to share this world to my network of friends and investors. I’ve started a weekly podcast to interview other real estate operators and I create daily content on LinkedIn and other platforms talking about passive investing in alternative investments, mainly multifamily real estate.
But I still see a huge problem for most investors… they still don’t know where to find great investment opportunities.
The fact is, if you are not an accredited investor, you can’t just Google investment opportunities. The reason is because the U.S. Securities and Exchange Commission (SEC), prohibits sponsors and operators from accepting non-accredited investors if they choose to broadly solicit deals.
This means that most of the non-publicly traded investment opportunities are only accessible to non-accredited investors if they have a prior relationship with the sponsor. If you are not already on their email list, it’s likely you are not seeing this matrix of deals.
What do you do if you are not yet an accredited investor but would like to invest passively in alternative investments like real estate?
Option 1: Become an accredited investor.
Unfortunately, this is not just something you can sign up for. The following definition is pulled from the SEC website:
The SEC determines an accredited investor as earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
The SEC has also recently included a few new exemptions including holders in good standing of the Series 7, Series 65, and Series 82 licenses as qualifying natural persons.
But most of the investors I talk with daily are unable to qualify under these restrictions.
Option 2: Network to find qualified operators
In my experience, the best way to find great investment opportunities is to network. This does take a bit more work since you can’t go to your financial advisor and ask to be shown these deals. If you are serious, however, and looking to maximize your returns, then the extra work can be worth it.
Here are 5 places I would recommend to network with qualified investment sponsors:
- AAPL – The American Association of Private Lenders is the first national organization representing the private real estate and peer-to-peer lending industry. Membership includes private money lenders, hard money lenders, mortgage fund managers, brokers and service providers who are viable alternatives for borrowing and investing.
- LinkedIn – If you are interested in multifamily investing for example, type in the search bar #multifamily and see the people who are creating the most content under this category. This will give you a great list of operators to begin reaching out to.
- Podcasts – Using multifamily again as an example, if you search for multifamily podcasts on iTunes or Spotify, tons of shows will pop up in your feed. This is a great way to not only build a list of potential sponsors, but it also gives you an opportunity to learn more about the person and if they are someone you’d be interested in investing with.
- Real Estate Conferences – If you prefer meeting people in person, then the best way to meet real estate sponsors is to go to conferences. As you would expect, typically the people speaking on stage are the ones with the most credibility and track record. However, I have met several incredible investors and operators that were simply in attendance.
- Real Estate Attorneys – If you are looking for local operators in your area, ask a local real estate attorney. They can potentially make introductions to their clients or point you in the direction of credible real estate operators and sponsors in your area.
Be sure to spend ample time doing your own due diligence on every sponsor you meet including running a background check and asking for multiple referrals.
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