Investing in real estate can be a very profitable investment for the long term. There are many advantages from owning real estate, and some of the advantages include a predictable cash flow from your investment, inflation which lowers mortgage payments but takes rising rents into consideration, and the ability to scale real estate to many sizes.
Starting an Investment Real Estate Company
If you are planning to buy real estate but do not have sufficient capital to purchase real estate by yourself, it may be better for you to start a real estate investment capital. The first step to purchasing real estate is determining the amount of capital you need. You should ask yourself what is the size of the building and real estate you are planning to buy, as well as the capital you require in order to be able to buy it. If a building requires a small amount of capital and a small number of partners, then it is advisable to create a partnership or limited liability company. LLCs and partnerships are not taxable organizations and income is taxed at the shareholder level. In addition, LLCs and partnerships are not subject to the same restrictions and filing requirements like publicly real estate investment companies.
However, if you need a large amount of capital and are planning to resort to public methods in order to acquire financing, then the structure of your organization will either be a corporation or publicly traded real estate investment trust (REIT). A corporation is advantageous to some investors because dividends are taxed at lower interest rates for qualified dividends (15%). However, REIT organizations are more common for real estate investment companies, since REITs are not taxed on the corporate level similar to partnerships and LLCs.
Once the structure of the real estate investment company has been determined, you can now submit the documents required to register your company. The documents required depend on the state, but submitting documents to the tax authorities is usually required. After submitting the required documents you can now purchase the property and concentrate on acquiring financing. Be sure to check the required capital for real estate company financing, since banks required different down payment amounts for investment companies as opposed to individual owners.
Starting an investment real estate company may seem complicated at first due to the various procedures which should be followed. Research on the abovementionedprocedures is recommended, in order to be able to start your investment real estate company with the minimum of delay.