Rule 506 explained

Rule 506 of Regulation D lets a company raise money without registering the offering with the SEC, as long as it follows the rule's limits on who may invest and how the offering is advertised.

Under 506(b), a sponsor may not advertise and may accept a limited number of non-accredited investors. Under 506(c), a sponsor may advertise, but every investor must be accredited and verified.

The SEC's own summary is on its site: Rule 506(b) overview.

Who counts as an accredited investor?

Broadly, a person with income over $200,000 a year, or net worth over $1 million excluding their home.

Can a 506(c) offering be advertised?

Yes, as long as every investor is verified as accredited.

How long does verification take?

Usually a few days, with a letter from a CPA or attorney.

Most private real estate funds rely on one of these two exemptions, and the choice shapes how the sponsor may find investors. A 506(b) offering is usually marketed only to people the sponsor already knows, while a 506(c) offering can be promoted openly, at the cost of verifying every investor.