Accredited investor is a securities law term, not a compliment, and it decides which private real estate offerings a person is legally allowed to buy into. Most syndications, private funds, and DST interests are restricted to accredited investors, which makes the qualification a gate an interested investor has to check before shopping the offering, not after.
The Income and Net Worth Tests
An individual typically qualifies as accredited by earning more than two hundred thousand dollars in each of the last two years, or three hundred thousand dollars combined with a spouse, with a reasonable expectation of the same in the current year. The alternative test is a net worth above one million dollars, excluding the value of a primary residence, whether reached alone or jointly with a spouse.
A person can also qualify through certain professional licenses, including Series 7, 65, or 82 holders, regardless of income or net worth, a route added to the definition specifically to recognize financial expertise as a substitute for the wealth thresholds.
Verification Is Stricter Than Self-Attestation
Older private placement rules allowed an investor to simply check a box attesting to accredited status. Offerings that solicit publicly now generally require third-party verification, a letter from a CPA, an attorney, a registered broker-dealer, or a bank statement review, before the investor can fund the deal. An investor should expect to provide documentation rather than a signature alone.
Why the Restriction Exists
Private placements are exempt from the disclosure requirements that apply to public securities, which means less standardized information and less regulatory oversight than a publicly traded REIT provides. The accredited investor threshold is meant to limit that reduced-disclosure market to investors presumed to have the financial sophistication, or professional resources, to evaluate the risk themselves.
Entities Can Qualify Too, Not Just Individuals
A trust, an LLC, or a corporation can also qualify as an accredited investor, generally by holding total assets above five million dollars and not having been formed for the specific purpose of acquiring the offered securities. A revocable trust's status usually flows from its grantor rather than the trust itself, while an irrevocable trust is evaluated on its own asset base, a distinction that matters for owners who hold investment property inside a trust structure.
Joint ownership between spouses allows the income and net worth tests to be combined, which brings some households within reach of accredited status even when neither spouse would individually qualify on their own income or net worth alone.
Why This Matters for a 1031 Exchange Into a DST
Delaware Statutory Trust interests used as 1031 replacement property are structured as private placements, which means the accredited investor requirement applies to a DST purchase the same as it applies to any other private real estate offering. An owner planning to exchange into a DST should confirm accredited status early, well before the 45-day identification clock starts, so the qualification step never becomes the reason a deadline gets missed.
An owner who does not qualify as accredited still has 1031 options, since directly owned replacement property, whether a single-tenant retail building, a small multifamily property, or an industrial building, carries no accreditation requirement at all. The accredited investor threshold is specific to DSTs and other private-placement replacement structures, not to the 1031 exchange itself.
Common Questions
What income qualifies someone as an accredited investor
Two hundred thousand dollars in individual income, or three hundred thousand combined with a spouse, in each of the last two years with a reasonable expectation of the same this year, satisfies the income test.
Can someone qualify as accredited without meeting the income test
Yes, through a net worth above one million dollars excluding a primary residence, or through holding certain professional licenses such as Series 7, 65, or 82.
Do offerings still accept a simple self-attestation of accredited status
Publicly solicited private placements generally require third-party verification through a CPA letter, attorney letter, broker-dealer confirmation, or financial statement review rather than a self-attestation alone.
Is accredited investor status required for every DST used in a 1031 exchange
Most DST offerings marketed as 1031 replacement property are structured as private placements restricted to accredited investors, so qualification should be confirmed before relying on a DST as the exchange plan.
When should accredited status be verified before a 1031 exchange
Before the sale of the relinquished property closes, since the 45-day identification window leaves little time to gather verification documents if the question has not already been answered.
