Understanding the difference between 506-c and 506-b offerings.
Who you know impacts what kinds of deals you can invest in.
Three regulations came out of the JOBS Act of 2012; Regulation CF, Regulation A+, and Regulation D, 506(c).
When Regulation D, 506(c) was created, real estate sponsors were finally allowed to publicly discuss their deals via advertising, press, social media, and more.
Regulation D, 506(b):
Rule 506(b) allows real estate firms to raise an unlimited amount of money from an unlimited number of accredited investors and up to 35 non-accredited and “sophisticated” investors. To invest in a 506(b) deal, you would need to self verify you are accredited, which could be as simple as checking a box on a form that says “Yes, I am accredited.” Essentially, 506(b) is the traditional way real estate firms have raised capital, with their friends and family network. With 506(b) deals, general solicitation is not allowed. No advertising is permitted. This means that we can only share that deal with investors we have a “substantive relationship” with and it won’t be visible to our entire investor base.
Regulation D, 506(c):
With Rule 506(c), the SEC lifted the ban on general solicitation. This means real estate firms can advertise their investment opportunity to the general public, and everyone in our investor network can see the deal on our Marketplace.
The big difference from 506(b) deals is that in a 506(c) deal, all the investors have to be accredited. And the sponsor must use a third-party verification provider to confirm the investor is accredited.
We ask that you verify your accredited investor status with a letter from your attorney or CPA, before you are allowed to submit an offer.