506(b) vs 506(c): Marketing Rules for Real Estate Sponsors
General solicitation, verification after the SEC's March 2025 staff letter, and compliance-aware marketing that still fills the pipeline.
Read →Short answer
Under Rule 506(c) you must take reasonable steps to verify that every investor is accredited. Traditional methods include reviewing tax documents for the income test, statements plus a credit report for the net worth test, or a written confirmation from a CPA, attorney, registered broker-dealer or investment adviser. Since March 12, 2025, SEC staff have indicated that a minimum investment of at least $200,000 for individuals ($1 million for entities), with written representations and no knowledge of contrary facts, can also be reasonable. Build verification into the process early so it doesn't delay your close.
Key takeaways
- Verification is required for every 506(c) investor.
- High-minimum approach: $200K individuals / $1M entities, plus written representations.
- Start verification when interest is confirmed, not at funding.
- Keep records of how each investor was verified.
Verification methods
| Method | How it works | Best for |
|---|---|---|
| Income documents | IRS forms (W-2, 1099, returns) for two years plus a representation for this year | Income-qualified investors |
| Net worth documents | Bank/brokerage statements plus a credit report for liabilities | Asset-qualified investors |
| Third-party letter | Written confirmation from a CPA, attorney, registered broker-dealer or investment adviser | Investors who prefer privacy |
| Third-party verification service | A service reviews documents and issues a letter | Higher volume raises |
| High-minimum approach (Mar 2025 staff letter) | $200K+ minimum (individuals) or $1M+ (entities), written representations, no contrary knowledge | Higher-minimum offerings |
The workflow
- Ask accreditation (self-reported) on the lead form.
- On confirmed interest, explain verification and offer methods.
- Collect documents through a secure portal, not email.
- Record the method, date and reviewer for each investor.
- Accept funds only after verification is complete.
What it means for marketing
- You can advertise the offering publicly under 506(c), so you can run offering campaigns.
- Set expectations about verification on landing pages to reduce friction later.
- Higher minimums may let you use the simpler approach; weigh that against fewer eligible investors.
Plan your raise
Take the scorecard →Readiness score across 10 areas.
Frequently asked questions
Reviewing income or net worth documentation, obtaining written confirmation from a qualified third party, or (per March 2025 SEC staff guidance) a high minimum investment with written representations and no contrary knowledge.
Self-certification alone is generally not enough, except as part of the high-minimum approach described in the March 2025 staff letter, which also requires the minimum investment amount and written representations.
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Sources
This article is for educational purposes only and does not constitute legal, tax, securities or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Consult qualified securities counsel about your specific offering.
