SEC Announces New Accredited Investor Status

SEC Announces New Accredited Investor Status

In August 2020, the Securities and Exchange Commission (SEC) adjusted its definition of an “accredited investor” for the first time in decades. This ruling affects regular investors and self-directed IRA investors. Before this ruling, if you were an investor that did not meet income or net worth criteria, you may not have been allowed to invest in private, alternative assets regardless of your financial knowledge. These new amendments improve the definition of identifying individual investors with the knowledge and expertise to participate in those markets.

Accredited Investor Requirements

  • Annual income exceeding $200,000 (or $300,000 joint income) for the previous two years and the expectation to earn an equal or higher income in the current year
  • Net worth exceeding $1M (individually or jointly)
  • General partner, executive officer, or director for the company issuing unregistered securities
  • An entity qualifies if it is a private business development company or organization with $5M in assets or more
  • An entity qualifies if its owners are accredited investors – however, an organization cannot be formed with purchasing specific securities as its sole purpose

The amendments revise Rule 501(a), Rule 215, and Rule 144A of the Securities Act.

Accredited Investor Requirement Amendments

  • Natural individuals with professional certifications, designations, or credentials designated by the SEC Commission and issued by an accredited educational institution (professional certifications include individuals in good standing of the Series 7, Series 65, and Series 82 licenses)
  • Spousal equivalents, opening the option to pool assets to qualify as accredited investors
  • Natural persons who are knowledgeable employees of a private fund
  • Entities with at least $5M in assets with SEC and state-registered investment advisors, exempt reporting advisers, and rural business investment companies (RBICs)
  • Entities that own investments as defined in Rule 2a51-1(b) under the Investment Company Act with $5M or more in assets not formed for the sole purpose of investing in securities offered
  • Family offices that have at least $5M in assets under management and family clients (each term is defined under the Investment Advisers Act)

This rule directly applies to self-directed IRA investors. Many self-directed IRAs invest in private equity or private placements; the underlying IRA owner must qualify as an accredited investor. The new definition allows more investor’s eligibility to invest in these types of assets.

The modernization of the rules is a welcome improvement. This ruling will become effective on October 25, 2020.

Click here to read the official SEC Announcement.

For more information about the accredited investor requirements, or to open a self-directed IRA account, contact Midland at (239) 333-1032 or visit

Budgeting With the Goal to Save and Invest for Millennials

Budgeting With the Goal to Save and Invest for Millennials

Budgeting can be an essential tool for financial success. Many personal finance experts suggest creating a budget as the most important component for a successful financial plan. A budget gives you a roadmap of where you are in the moment and for planning for the future. Without a budget, it is much easier to get off track. Let’s take a look at some strategic ways to lower expenses, which allows for budgeting to save and invest.

Cut Back on Large Monthly Expenses

Addressing the largest expenses in your budget first can be an effective strategy to save money over time. Rent or mortgage payments, auto payments, and food tend to be the largest budget items. Below are a few ways to cut down on some of these large expenses:

Rent or Mortgage Expenses

Start by analyzing what you currently pay in rent or mortgage each month. Take that number and divide it by your gross monthly income. If that number exceeds 25% to 33% of your gross monthly income, the consensus is that you could be spending too much on housing. Here are some tips to lower your costs:

  • Rent spare bedrooms for extra income on sites such as Airbnb.
  • Refinance: You may be able to lower your mortgage if you are currently paying a high-interest rate. Speak with a lender and find out what your options are.
  • Consider moving to a smaller place or a more affordable area. Moving may take time if you are in a lease or must sell your house, but is a long-term option to lower your housing expense.

Auto Expenses

Auto expenses tend to be one of the costliest expenses in a budget. The average car payment in America is $550 for new, $393 for used, and $452 for leased vehicles. This payment does not include gas, insurance, or maintenance that the vehicle will need over its lifetime. Lowering this expense can lead to additional money for saving and investing. Below are a few ideas to lower transportation costs:

  • Sell your expensive new car for a more affordable, reliable used car.
  • Consider having only one vehicle if your situation permits.
  • Walk or bike to work, if possible, to save on gas and vehicle maintenance. Public transportation is also an option.
  • Buy a fuel-efficient or electric vehicle to save on the additional costs of operating a car.
  • Drive with Uber or Lyft to offset your vehicle’s cost or utilize apps such as Turo to rent out your car when you are not using it. These options are great for Millennials looking to earn additional income.

Food Costs

Food is a necessity. However, it is possible to lower your food costs by taking a few steps. Even if you have a family and the food costs add up quickly, here are a few tips to ensure you do not overspend at the grocery store:

  • Make a list and stick to it. Do not buy something that is not on your list just because it is on sale.
  • Buy in bulk for items that do not perish quickly or used frequently.
  • Shop lower-priced food stores.
  • Shop products that are in season, especially produce.
  • Utilize local farmer’s markets.
  • Make a fancy dinner at home instead of going out to an expensive restaurant.

Evaluate Your Insurance Options

Insurance is an essential component of a successful financial plan. If you have a family or are planning on starting a family in the future, this is especially true. Medical expenses can add up quickly, which is why insurance needs to be a key consideration for any age. Here are a few tips to make sure that you are getting the best value with your insurance:

  • Utilize a Health Savings Account (HSA) for healthcare costs. These plans can be a viable option for medical-related costs. HSAs offer a triple tax advantage. HSA advantages include tax-free contributions, tax-free growth, and tax-free withdrawals. It is important to note that a high deductible health insurance plan is needed to contribute to an HSA.
  • Shop around for insurance and get quotes from multiple insurance companies.
  • Consider bundling for more savings. Bundling home, auto, and life insurance could save quite a bit of money instead of getting individual policies with different companies.

Cut Back on Discretionary Spending

Discretionary spending can be characterized as extra expenses after meeting your basic needs. For example, this could include going out to the movies or a nice restaurant on the weekend. Whatever the case, cutting back on some of these expenses means more money to save and invest over time. Below are a few tips to cutting back on those discretionary expenses:

  • Instead of going to Starbucks or your favorite coffee shop, make coffee at home.
  • Make a nice meal at home instead of going to restaurants.
  • Find free events in your local area. Millennials have utilized social media platforms as an excellent way to connect with others and find events in their areas.
  • Wait 24 hours before purchasing something unnecessary. Then, if you decide that you want it, be sure that the purchase falls within your budget.

It is important to enjoy your free time and hobbies. However, cutting back on unnecessary costs can lead to more saving and investing over time. Budgeting allows you to spend money on the things that mean the most to you while ensuring your necessary expenses are covered.


Are you struggling with budgeting? Use an app such as Mint, Simplifi, or Dave Ramsey’s Every Dollar. These apps can consolidate your accounts and break down your expenses into categories, making things easier to view. They can also send you alerts when your balance is low, or you have upcoming bills.

If you have any questions regarding your investment options, please contact Midland Trust at (239) 333-1032 or visit We would be happy to discuss our services with you and how you could incorporate self-directed IRAs into your investment portfolio.

Read our other budgeting article “Budgeting Made Simple for Millennials” for additional tips.

MIDLAND TRUST IS NOT A FIDUCIARY: Midland’s role as the custodian of self-directed retirement accounts is non-discretionary and administrative in nature. The account holder or authorized representative must direct all investment transactions and choose the account’s investment(s). Midland has no responsibility or involvement in selecting or evaluating any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments.

Lend Money From an IRA or Other Retirement Account

Lend Money From Your Retirement Account

How to Lend Money from Your IRA

Yes, you can lend money from your retirement account. It’s called hard money lending, and it is trending. As someone who has done a few deals like this, I want to share what I have learned.

The Basics of Lending Money in Your IRA

Let me give you some of the basics. One of the reasons hard money or private lending is so popular is that it allows you, the lender, to set all the terms. That’s right; you set the amount to lend, the interest rate, the loan term, and almost anything you want. One of the other notable features is that these notes can be either secured or unsecured. Secured Notes are typically backed by collateral that will help avoid the loss of any principle. Secured Notes are always the preferred method when lending money. Unsecured Notes, while riskier, do appeal to a subset of investors with particular parameters and are allowed within your IRA.

What Do You Need to Know Before You Start Lending Money?

The first thing you need to know is that you will need to have a self-directed retirement account specializing in holding private notes. A self-directed IRA account is unique because it allows the IRA owner to hold private assets. Most brokerage houses do not allow this. Midland specializes in alternative investments, and notes are one of the most popular assets held.

Let me give you a typical example. Assume I have a traditional retirement account, and I have $100,000 in it. Now let’s say that I have found someone who would like to borrow $90,000 to purchase an investment property. The lendee puts $20,000 down, and I lend the difference. As I said above, I set the terms. I am going to charge them 10% for two years with two points. The property secures the note as collateral. All the interest payments go back to the IRA and are tax-free. These tax savings are a significant advantage of investing with a self-directed retirement account. (Please note your interest must not exceed state usury laws: do not be greedy!)

Let me change the deal a bit to benefit you, the lender. Instead of a flat interest rate, you could ask for a percentage of the profits when the deal closes. Instead of charging an interest rate of 10%, I would like 20% of the profits when you sell the property. This structure is relatively common. The other nice part of this deal is that the property is still put up as collateral to secure the money that you lent from your IRA.

There are multiple personal loan calculator tools. Here is a personal loan calculator tool that I find helpful.

What are the Benefits of Private Lending in your IRA?

As discussed above, one of the most significant benefits of private lending is that you set all of the terms. Included in these terms are the choice of the closing agent, surveyor, appraiser, and any other unique details about this investment. You are in complete control as the lender. Structures of these deals happen in different ways. It gives the investor flexibility based on the asset they are lending and the person they are lending to. The control given to the “lender” is a good reason that these deals are so popular.

So how do we wrap up this deal? Let’s assume that I loan the investor money to fix the property up, flip it, and sell it for $145,000. That would mean a $35,000 gain for them. When they sell the property, my note pays off with interest. All the money returns to my self-directed IRA at Midland. On to my next deal.

These deals require a lot of due diligence. However, because of the control you have as the lender, they can work smoothly as long as you clearly set the terms.

How to Find the Deals in Note Investing

The million-dollar question is, “how do I find the right deals, and whom do I lend to?” We are all looking for a great deal, and make profitable investments upfront by finding the right deal. It takes hard work. So while there is no one answer, I can offer you some sources which have worked for people who have done these types of deals.

4 Sources for Private Notes That I Have Found Over the Years

  1. Your fellow investors: Your investment circle is critical. Ask the people you work with or your neighbors if they know of any deals. They may also know about any properties that are being bought or sold.
  2. Mortgage Brokers: One of the best sources for finding private notes is talking to mortgage bankers or brokers. These professionals talk to individuals looking to borrow money all the time. And unfortunately, they cannot make every deal, so they know of individuals who either don’t qualify or don’t fit into the right pot to make a loan from their companies. These individuals can be great private lending clients. Typically they only need short-term money, and they are willing to pay a little extra in rate over the short term. Don’t be afraid to ask your favorite mortgage banker if he has turned anyone down recently.
  3. Builders: Builders are an excellent source for private lending deals. Typically small builders are looking to buy lots and build homes, and they need capital. They know that they can build a house in 6 to 12 months. These borrowers will pay a little extra in interest rates to borrow that money. Look at all the builders you know and start asking. Their needs might surprise you. Along these same lines, consider asking realtors. Realtors work with builders all the time, and sometimes they like putting a deal together because they ultimately get to sell the new house built.
  4. Investor Groups: There are many investor groups out there, and quite a few that only specialize in note investing. Search the internet, and I am sure you will find a note group not far from where you live. Just one of many places online to look is; they have hundreds of investing groups. The other great source is a local REIA group. These REIA groups consist of like-minded investors who have an ear to the ground and know about the deals.

What About Unsecured Loans?

One type of loan not discussed yet, Unsecured Loans. You can do Unsecured Loans with a self-directed IRA, and they are widespread. I want to put a word of caution out. When you loan unsecured money, there is no collateral. If the borrower decides not to repay the loan, there’s typically not much that you can do. I would make sure if you’re going to make an Unsecured Note that you have contacted your attorney and have the best documents that you can have to protect your investment.

Unsecured Notes are not uncommon. They are typically smaller loans than the secured deals I discussed above, and they are usually shorter-term loans.

If you would like additional information on how to set up a Midland account to begin private money lending within your retirement account, please feel free to call us anytime. We handle the administration of the private note, including receiving the payments. Private money lending can be extremely profitable if you know what you are doing and practice patience when looking for the right deal.

Before You Get Started

Before starting any investment deal, please talk to your tax or financial advisor to understand the impact of an investment on your financial situation. Midland is not a fiduciary and does not give specific investment advice. Please feel free to contact Midland Trust at 239-333-1032. Thank you and happy investing.

Author: Dave Owens, CPA, CES, is the President of Midland IRA and has been investing in real estate for over 20 years. His comments act as guidance to help investors understand how an investment deal works in the real world.