The 506(c) Rule Change That Most GPs Missed

Another great post by Aleksey on LinkedIn

A major change happened within 506(b) vs 506(c) real estate raises earlier this year, and I meet GPs daily who are not aware of it. Wanted to walk everyone through this at a high level today.

First, the disclaimer: I am not an attorney and these are just my thoughts. If you need a referral to someone who handles legal or compliance work all day (at the best prices I’ve seen fwiw), just send me your email and I am happy to introduce you.

THE BASICS

506(b):

• You cannot market publicly and you must already know the investor

• You can accept non accredited investors

506(c):

• You can market publicly and reach anyone, this is required on GP-LP Match submissions, since we send deals to LPs who the GP does not have a pre-existing relationship with

• All investors must be accredited

Prior to March 2025, 506(c) was a headache because investors had to go through a verification process.

Imagine sending a $100mm net worth LP who is investing $1mm a questionnaire to prove they are accredited.

This is exactly why most firms stuck with 506(b) in the past.

WHAT CHANGED IN MARCH 2025:

• If an individual LP is investing $200,000 or more, they no longer need to go through that verification process.

This is a big deal that is not getting talked about enough.

If most of your LPs are (1) accredited and (2) already investing larger checks, then 506(c) has become nearly a no brainer.

As always, I hope this is helpful and look forward to your feedback!

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