The net-worth test: $1M excluding your home

Your house may be your biggest asset. For this calculation, it does not get to be your loudest witness.

For individuals, the common accredited investor net-worth path is more than $1 million, alone or with a spouse or partner, excluding the value of the primary residence. The details around mortgage debt matter. Do not do this one in your head while making coffee.

That is a legal measurement, not an insult to your kitchen renovation. The rule uses its own scale. Your personal definition of “doing well” is not printed on it.

Start with subtraction

Net worth means assets minus liabilities.

For this test, your primary residence is generally not counted as an asset. Debt secured by the primary residence is handled under specific rules, including treatment for debt above the home’s value and certain recent increases.

The sentence about the debt is not decorative trim. If mortgage facts affect the calculation, get the dates, balances, and applicable rule treatment right. A round number built from memory is still a guess wearing commas.

Give every number an address

Build a dated worksheet. Next to each amount, name the statement, valuation, debt record, or other source that supports it.

Potential entries include:

• Bank, brokerage, and retirement accounts.
• Investment real estate, private investments, business interests, and other property.
• Credit cards, student loans, car loans, personal loans, margin loans, and other obligations.
• Investment-property mortgages and business debt you personally owe.
• Primary-residence information needed for the rule’s separate treatment.

Do not count the primary residence like a normal investment asset. Do not forget a liability because it was inconveniently mailed by a different institution. If a number cannot find its document, it does not get a chair at the calculation.

The 400,000-dollar mirage

An investor has:

• $350,000 in brokerage accounts
• $300,000 in retirement accounts
• $250,000 of equity in a rental property
• $200,000 in cash
• $75,000 of non-home liabilities
• $400,000 of equity in a primary residence

The primary residence equity is not the magic key. Excluding the home, the rough assets are $1,100,000 before the $75,000 of liabilities. That leaves $1,025,000 before any other rule-specific adjustments.

That margin is $25,000, not a parade route. Current values, complete liabilities, ownership details, and any applicable treatment can matter when the calculation sits close to the threshold.

Verification is a date-stamped photograph

Use current statements, debt statements, property valuations, credit report information when required, and a dated worksheet. For 506(c) verification, some documents may need to be recent, and written representations may be part of the process.

If an issuer or verifier provides a secure portal or required form, follow that process. Sensitive financial records are proof, not party favors. Ask who receives them, how they are handled, and whether an approved third-party verification route is available.

What this number refuses to certify

Clearing the calculation does not mean a private offering is suitable. The test does not review your liquidity, concentration, investment experience, tolerance for loss, or need for cash. It certainly does not review the sponsor’s debt assumptions.

Build the worksheet, attach a source to every line, and circle the items doing most of the work. Then ask a qualified verifier, CPA, or counsel about any rule-specific treatment you do not understand.

Accreditation may be the result. Competence still has to show its work.