Two of the most popular exemptions real estate investors use to raise capital from investors are Rule 506(b) and Rule 506(c). Both of these rules fall under Regulation D of the Securities Act and are regulated by the Securities and Exchange Commission (SEC). The key differences are:
- 506(b) allows up to 35 non-accredited investors to invest in the fund. However, the 506(b) does not allow general solicitation of an investment. All investors must have an established relationship with the person / team managing the fund.
- 506(c) does not allow non-accredited investors to participate in this fund. A 506(c) fund does permit general solicitation and the issuer of the fund must verify the accredited status of each investor.