5 Ways to Hold Title as a Real Estate Investor

Posted by Hannah Lapin on May 30, 2018 9:33:05 AM

2 people pointing at information on a paper at a desk

When it comes to purchasing an investment property, there are several ways to hold title, or the legal ownership rights to a home. There is no right or wrong way to hold title, so we always recommend consulting legal, accounting, or tax advisers for the method that best suits you and your investment strategies. Also, keep in mind that rules can vary by state. Here is a brief overview of some popular ways to hold title as a real estate investor:

  1. Sole Proprietorship 

    A business that has no separate legal existence from its human owner. In other words, holding title in your own name. A sole proprietorship is the simplest form of ownership and is a low-cost set up option. It also could be eligible for conforming loans. On the downside, there is no legal protection or barrier from yourself, and there are no substantial tax advantages to holding title this way.
  2. Joint Tenancy 

    When two or more people own a property together with equal rights and obligations until one owner dies (also called right of survivorship). To form a joint tenancy, there must be a unity of time, title and interest, meaning all joint tenants must take title and deed at the same time.
  3. Tenancy in Common (TIC)

    When several owners each own a stated portion or share of the entire property that they can sell. Unlike joint tenancy, in a TIC, each owner can own a different percentage, can take title at any time, and can sell their share at any time. Additionally, when one owner dies, his portion goes to his estate.
  4. Partnership 

    A formal arrangement in which two or more parties cooperate to manage and operate a business. Partnerships typically are general, meaning each partner has the right to fully participate in management and operations and each partner is generally liable, or limited, meaning some partners are restricted from management and their liability is limited to their partnership interest.
    • Limited Liability Company (LLC): a separate entity like a corporation that is structured like a partnership. LLCs are very popular because they carry liability protection for all their members, yet each member is taxed individually, rather than endure the burden of double taxation corporations get.
  5. Corporation 

    A separate legal entity owned by one or more shareholders. Corporations are available in two types: C Corporations, which are separately taxable entities, and S Corporations, which are pass-through tax entities, and therefore, not subject to corporate income tax.

For additional resources on title, visit our Investor Resources.

Download Ways to Hold Title

Related: How Landlords can Form LLCs and Reap Tax Benefits in 2018, 3 Common Contingencies in an Offer Contract

Topics: Title