506B or 506C Syndication? Multifamily investor Rob Rowsell explains the differences between these two types of Regulation D investing plans.
Regulation D Investing Plans – What is the Difference?
Rob jumps in to explain the difference between Regulation D Investing Plans. Is a 506B or 506C syndication plan right for you? Read on.
506B Investment Plans
Real estate industry pros refer to the Reg D syndication deal 506B as the “Friends and Family” plan. If you seek out this deal, the main rule is that you must have a preexisting relationship with your investment partners. Before signing the PSA, you must provide proof that you know them. You also may not solicit investors publicly for these properties. This includes online advertising, print ads, and in person public appeals through your local chamber of commerce or other forum.
506C Investment Plans
Regulation D investing plans classified as 506C are for accredited investors only. This means you must have a net worth of at least one million dollars. That net worth excludes your personal residence. You can also qualify if you have earned over $200,000 in the previous year as a single, or $300,000 as a married couple. Financial institutions also need confidence that you will earn that same amount in the following year in order to approve your plan. If you are approved for a 506C investment plan, you are free to advertise your deal to other investors publicly.
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