As an accredited investor, you’re actively involved with your finances and may be approached from different fronts to provide your capital for the purposes of investing in a business, securities or the ever-present start up.

But you didn’t accumulate your retirement assets by being careless and evenaccredited investor though a few of your forays didn’t quite turn out as you would have liked, mostly you’ve played it right. Sometimes the opportunity isn’t all that clear and you seek out further information. A business may want you to finance a venture but you’re not exactly clear on the outcome. To overcome your hesitancy, the company may promise you greater rewards.

If you’re undecided on a particular opportunity the hope is the possibility of a bigger pot of gold will make up your mind. But the real decision-maker is not just the profit potential but more importantly the exit strategy. How will you get your returns and under what circumstances?

For example, a real estate developer approaches you and some other accredited investors to finance the acquisition of a 12-unit small apartment building. You take a few days to analyze the project and find that the project does in fact make sense based upon the report and your own independent due diligence. The apartment building will take $XX to build, $XX to rehabilitate and will sell for $XX leaving with you and your investors a nifty return. That’s the exit strategy. There is a clear path to the end and you know where your funds are being used as well as being able to track the progress of the project.

Without any clear exit strategy of any sort there is greater risk involved. You may be tempted to invest in a specific project because the promised returns are so much greater than anything you’ve seen in quite some time. The prudent accredited investor pays less attention to the promised return and more so on the likelihood of a successful project.