There are a number of ways to hold your Real Estate Investment including personally, through a corporation, partnership, Trust, mutual fund trust, and more!
Real Estate Investors frequently ask us if they should setup a separate Real Estate Investment Corporation or simply hold the asset personally? We also frequently get the question if they should setup a Real Estate Investment Fund?
There are a number of major considerations that you need to decide for yourself that influences how you could hold your Real Estate Investment whether in a Real Estate Investment Corporation or another vehicle.
The major three considerations include:
- Active versus Passive Involvement – Clients we work with have varying personal objectives when it comes to real estate investment. The main question we ask our clients is how “hand on” they’d like to be in a project? Would they want to be making day-to-day decisions, reviewing rent collection, or even managing the development cost budget? Or are they simply looking for a passive real estate investment where they put up the capital and hire the relevant experts to manage the investment on their behalf. Major factors impacting this decision are age, stage of life, family situation, and whether you already have a full-time job or businesses that need to be managed.
- Size and Longevity of Portfolio – Are you holding one or two properties? Do you own raw land, land under development, or multiple investment funds? Do you have an existing business that isn’t real estate related? This could impact your current tax situation and warrants important consideration.
- Who will you invest with? – Historically, it was more common to individually put up the required capital and make real estate investments. With values going up and the ability to access capital we are seeing more and more clients syndicate investors or apply more efficient pooled forms of leverage. Once the investment involves multiple stakeholders it is important as the sponsor to review the pros and cons and ensure your project is investable which could be through a real estate investment corporation, a partnership, or even a real estate investment fund. A major part of this decision is not only the current state but how you see your future real estate investing taking place and your investment horizon.
Through our consultation with your existing team, Finalyze would be pleased to build a real estate investment plan tailored to your objectives in a tax-efficient manner. Reach out today at Info@FinalyzeCFO.com to book a complimentary consultation.