The different kinds of ownership in real estate come with unique advantages and disadvantages. As you explore commercial and multi-family properties in your area, keep the following options in mind. You could discover that a specific type of ownership makes it easier for you to generate a stronger return on your investment while protecting yourself from risk.
If you’re looking to buy real estate, you should also consider how different types of ownership in real estate could influence the buying process. Depending on the ownership type, you might need to coordinate with multiple owners. The good news is that ProspectNow makes it easier for you to find the actual owners of commercial real estate, even when companies own properties.
Sole ownership is the most straightforward option because one person holds the property title. If you want to buy real estate, you only need to deal with one owner.
Sole ownership has several benefits for real estate investors. As the sole owner of a property, you get to keep all the revenues generated through rental and leasing agreements. If you develop the property and sell it at a higher price, you keep the entire profit instead of splitting among other investors.
Sole ownership, however, is one of the riskiest types of ownership in real estate. As the sole owner, all of the financial responsibilities fall on you. Those responsibilities include paying for taxes, maintenance, and repairs.
A joint tenancy is also one of the most popular types of ownership in real estate because it lets two or more owners share the rewards and risks of their investment.
In a joint tenancy, everyone has an equal share in the property, which has its pros and cons. The advantage is that you can split the costs equally among the other owners. The disadvantage is that lenders will evaluate everyone before letting you access funds. If one person doesn’t meet the lender’s qualifications, the whole project can get stalled.
Everyone retains ownership in a joint tenancy until the property is sold. An individual owner cannot get out of the arrangement. If someone dies, their ownership gets passed to a family member or designated recipient.
Tenancy in Common
Tenancy in common offers more flexibility than joint tenancy. With these types of ownership in real estate, investors can control different percentages of the property. Investors can also buy into or sell their portions.
With a tenancy in common, Sarah can own 50% of a property while Bill owns 30% and Diane owns 20%. At any point, one of the owners can decide to sell any portion of their ownership. For example, Sarah might sell 10% to Diane or an investor outside their circle.
Tenants by the Entirety
Tenants by the entirety only applies to married couples that purchase the property as a single legal entity. As long as the individuals agree and remain married, these types of ownership in real estate function much like sole ownerships.
However, a disagreement or divorce can create complications since it’s impossible for one person to sell their share. At best, unsettled disputes lead to a quick sell that might not generate as much profit as expected.
Owning Partnerships (LLCs)
Owning partnerships occur when two or more people create a limited liability corporation (LLC) and use the legal entity to purchase real estate. Since the LLC gets listed as the property’s owner, realtors might find it challenging to learn who they should contact. Using an option like ProspectNow’s commercial database gives you an easier way to see who owns the property because it lists the actual owners as well as the LLC.
Owning corporations are very similar to owning partnerships. The difference is that investors can include people other than the LLC owners. These types of ownership in real estate can attract investors that contribute money to development projects and receive a share of the profits. The shareowners, however, are not legal owners of the corporations.
Real Estate Investment Trust (REIT)
Real estate investment trusts stand out as critical types of ownership in real estate because they diversify your investments to lower risk and increase returns. There are several forms of real estate trusts that you can consider, including:
- Retail REITs
- Healthcare REITs
- Office REITs
- Residential REITs
- Mortgage REITs
Retail REITs are very popular. In fact, about 24% of REIT investments focus on malls and other shopping centers.
A REIT might include dozens, hundreds, or even thousands of properties. When you invest, you buy a small share of the trust, which you can sell at any time. If you want a low-risk investment opportunity, this is one of your best options. Generally, though, you cannot expect high returns since the profits get split between so many investors. The more you invest, the higher the potential returns become.
Find Real Estate on ProspectNow
No matter what types of ownership in real estate you choose, you need a reliable, efficient way to determine who owns the property.
ProspectNow has been helping investors for over a decade (since 2008), helping real estate brokers and investors find opportunities for success. ProspectNow is an essential tool for their business success in real estate or real estate marketing. The data that users can get from ProspectNow is a lot more expensive on other competing platforms.
By using ProspectNow, you will close more deals make more money! Additionally, ProspectNow is trustworthy, easy to do business with, and a reliable data provider. With ProspectNow, you get to identify off-market commercial real estate opportunities, generate lead lists with accurate contact information, and manage all of your outreach efforts within a single platform.
Do you want to see how you can benefit from ProspectNow? Sign up for a free demo to experience the platform’s features.