Accredited investor status is a legal threshold, not a marketing label, and it determines whether an individual is allowed to buy into private real estate offerings such as syndications and Delaware Statutory Trusts. Plenty of owners in metro Detroit who are financially comfortable assume they qualify without checking the actual SEC criteria, and plenty who do qualify have never looked into what that status opens up.
The Income and Net Worth Tests
An individual qualifies as an accredited investor by earning more than $200,000 in each of the last two years, or $300,000 jointly with a spouse, with a reasonable expectation of the same in the current year, or by having a net worth exceeding $1 million excluding the value of a primary residence. Either test is sufficient on its own; an applicant does not need to satisfy both.
Professional Licenses Also Qualify
Holders of certain FINRA licenses, including Series 7, Series 65, and Series 82, qualify as accredited investors regardless of income or net worth, since the SEC treats those licenses as evidence of sufficient financial sophistication. This route matters mainly for financial professionals themselves rather than the typical owner exchanging out of an investment property.
Why This Status Gates DSTs and Most Syndications
Delaware Statutory Trusts and most real estate syndications are sold as private placements under SEC exemptions that limit or restrict participation to accredited investors, which is why a self-certification form is a standard part of the DST or syndication onboarding process. This is not a formality the sponsor can waive; it is a legal requirement tied to how the offering itself is structured and registered.
What Happens if an Owner Does Not Qualify
An owner who does not meet the accredited investor thresholds is not shut out of a 1031 exchange, only out of the DST and syndication replacement options within it. Direct replacement property, another rental, a small multifamily, a retail building, remains fully available and requires no accreditation at all, so the exchange itself is not the limiting factor for most owners.
Verifying Status Before It Matters
An owner considering a DST as part of an upcoming exchange should confirm accreditation status well before the 45-day identification clock starts, since discovering a shortfall mid-exchange leaves little time to pivot to a direct replacement property search. A CPA or financial advisor can typically confirm eligibility against the income or net worth test in a single conversation.
Sponsor Verification Requirements Vary
Some DST sponsors accept a simple self-certification form on the assumption that the investor's representation is accurate, while others, particularly since a 2013 SEC rule change tightened verification for general-solicitation offerings, require documented proof such as a letter from a CPA, attorney, or licensed broker-dealer confirming the investor meets the threshold. An owner should ask a prospective sponsor which standard applies early, since gathering documentation can take longer than expected if a CPA needs time to review financial records.
Common 1031 Exchange Questions
What net worth qualifies someone as an accredited investor?
A net worth exceeding $1 million, excluding the value of a primary residence, satisfies the accredited investor threshold on its own, without needing to also meet the income test.
Do both spouses need to qualify individually for accredited investor status?
No. A married couple can qualify jointly using a combined income threshold of $300,000 over the last two years, or either spouse can qualify individually using the $200,000 individual income test or the net worth test.
Can I exchange into a DST if I am not an accredited investor?
Generally no, since most DST offerings are sold as private placements restricted to accredited investors. A non-accredited owner can still complete a 1031 exchange using directly owned replacement property instead.
How is accredited investor status verified for a DST purchase?
Most sponsors require a self-certification form and may request supporting documentation such as tax returns, a bank or brokerage statement, or a letter from a CPA or attorney confirming eligibility.
Does owning real estate count toward the net worth test?
Yes, equity in investment real estate counts toward net worth, but the value of a primary residence is specifically excluded from the calculation under SEC rules.
Can accredited investor status change from year to year?
Yes. Since the income test looks at the two most recent years plus a current-year expectation, an owner whose income drops can lose qualifying status under that test, even if they qualified previously, unless they still meet the net worth threshold.
