506c vs 506b Real Estate Investments

Navigating SEC Regulations: Which Deal is Right for You?

When investing in private real estate syndications, you will often hear terms like “506(b)” and “506(c).” These refer to specific exemptions under Regulation D of the Securities Act, which dictate how sponsors like Rasamallu Capital can raise capital.

Rule 506(b): The “Country Club” Deal

Historically the most common structure, Rule 506(b) allows sponsors to raise an unlimited amount of money from an unlimited number of Accredited Investors and up to 35 “Sophisticated” (non-accredited) investors. The Catch: We cannot advertise these deals. No social media posts, no public webinars, no billboards. We must have a “substantive, pre-existing relationship” with the investor before we can even show them the deal. Verification: Investors can “self-certify” their accreditation status, making the onboarding process simpler.

Rule 506(c): The Public Offering

Created by the JOBS Act, Rule 506(c) allows sponsors to generally solicit and advertise their offerings to the public. The Catch: The deal is open exclusively to Accredited Investors. No sophisticated investors are allowed. Verification: Self-certification is not enough. The sponsor must take reasonable steps to verify the investor’s accredited status. This usually involves a letter from a CPA, attorney, or a third-party verification service reviewing your financials.

Why It Matters

At Rasamallu Capital, we utilize both structures depending on the specific project and capital requirements. If you are an accredited investor, you have access to both, provided you complete the verification for 506(c) deals. If you are a sophisticated investor, your only path is to build a relationship with us now so you can be eligible for future 506(b) offerings.