Real estate is a great place to invest your money and is often used by many people for this reason. When it comes to holding real estate it is important to do it in the smartest way. We see a lot of our clients holding real estate and there are always a few things we look at when advising how they should hold it.
What We Look At
Some of the things we look at are the type of real estate, whether it be residential or commercial, the amount of revenue it generates, and what other assets you are holding. These are all important factors because they can impact your liability as the holder of the property.
Taxation and legal protection are an important thing to consider when assessing how to hold your real estate. Real estate can carry some legal issues sometimes and it is important to be prepared for these situations. For reasons like this, it is important for real estate to be held in a separate entity. Certain entities might offer better tax benefits than others which is also important to be aware of.
When holding residential real estate often you can hold it individually. Once you start to acquire more it is important to explore other ways due to legal aspects and liability. One of the best ways to hold real estate, especially if it is commercial or multi-family residential, is with an LLC. With an LLC you can hold the property separate from your other assets but not be subject to double taxation like you would be with a C-Corp. When it comes to legal protection, an LLC is also a great entity to hold real estate. An LLC offers its owners protection from claims by creditors or the LLC members. An LLC also typically affords its owners personal liability and protection from lawsuits.
Since the type of entity, you are using can have such a large impact on your legal protection and tax implications it is important to use the right one. We will often advise our clients to use an LLC. If you would like personalized help, please reach out to us through our support page to get started.