Regulation D Rule 506(b)
Rule 506(b) is a Regulation D exemption allowing unlimited capital from accredited investors plus up to 35 non-accredited ones, but bars general solicitation.
Definition
Rule 506(b) is the most common Regulation D exemption for private real estate offerings. It lets a sponsor raise an unlimited amount of money from an unlimited number of accredited investors, plus up to 35 non-accredited but financially sophisticated investors.
Its defining limitation is a ban on general solicitation: the sponsor cannot advertise the offering publicly and must have a pre-existing, substantive relationship with each investor. In exchange for that restriction, 506(b) lets sponsors accept accredited investors on a self-certification basis, without the formal income or net-worth verification that 506(c) requires.
Practically, most DSTs sold through advisors use 506(b): the advisor already has a relationship with the client, no public advertising is needed, and verification is lighter. If non-accredited investors participate, the sponsor must provide extensive additional disclosure, so many 506(b) deals still limit themselves to accredited investors in practice.
Key points
- Allows unlimited accredited plus up to 35 non-accredited investors
- Prohibits general solicitation or public advertising
- Requires a pre-existing relationship with investors
- Accredited status can be self-certified, not formally verified
Related terms
Jerry Baker founded Baker 1031 Investments to help exchange investors move from active property ownership into passive, institutional-quality real estate through DST, 721 exchange, mineral royalty, and Opportunity Zone strategies. He holds the FINRA Series 22 and Series 63 registrations and the Securities Industry Essentials (SIE) qualification. Read full bio →
Reviewed by the Aurora Securities, Inc. compliance team — Aurora Securities, Inc., member FINRA/SIPC. Last reviewed July 2026. Securities are offered through Aurora Securities, Inc.; Baker 1031 Investments, LLC is independent of Aurora Securities, Inc.
This glossary entry is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. Definitions are general and may not reflect your specific circumstances — consult your own CPA and attorney. Past performance does not guarantee future results.