Category: Educational
Should I hold my Real Estate in an Investment Corporation?
There are several 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 set up a separate Real Estate Investment Corporation or hold the asset personally. We are often questioned whether they should set up a Real Estate Investment Fund.
Several significant considerations influence how you hold your Real Estate Investment, whether in a Real Estate Investment Corporation or another vehicle.
The primary three considerations include:
- Active versus Passive Involvement – Your objectives shape your real estate investment strategy. We value your preferences and circumstances, so we ask our clients to consider how ‘hands-on’ they’d like to be in a project. Are you interested in making day-to-day decisions, reviewing rent collection, or managing the development cost budget? Or are you seeking a passive real estate investment where you provide the capital and hire experts to manage the investment? Your age, stage of life, family situation, and existing job or business commitments are significant factors in this decision.
- 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 careful consideration.
- Who will you invest with? – Historically, putting up the required capital individually and making real estate investments was more common. With values going up and scarce access to 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 critical 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 significant part of this decision is the current market state, how you see your future real estate investing and investment horizon.
Through our consultation with your existing team, Westcliff is ready to create a tax-efficient real estate investment plan that aligns with your objectives. We are here to support you every step of the way, ensuring you feel confident and secure in your investment journey. We invite you to reach out today at Info@westcliffam.com to book a complimentary consultation and start your journey toward a personalized investment strategy.
Understanding Real Estate Investment Terms: The Basics
Introduction
Navigating the real estate investment world can be exciting, rewarding, and daunting, especially when faced with various industry-specific terms and jargon. A solid grasp of these terms is beneficial and crucial for making informed decisions that align with your financial goals. This series of articles aims to demystify some basic but essential real estate investment terms, laying a foundation for novice and seasoned investors to build upon.
Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) own, operate, or finance income-generating real estate across various property sectors. These trusts are modelled after mutual funds, allowing individuals to invest in large-scale, diversified real estate portfolios without directly buying or managing the properties.
The appeal of REITs lies in their ability to offer investors regular income streams, potential for capital appreciation, and liquidity not typically associated with direct real estate investments. Moreover, REITs are required by law to distribute the majority of their taxable income (at least 90%) to shareholders as dividends, making them an attractive option for income-focused investors.
Return on Investment (ROI)
Return on Investment (ROI) is a straightforward yet powerful metric used to evaluate or compare the efficiencies of several different investments. In the context of real estate, ROI is calculated by dividing the net profit of the investment by its initial cost. The result is expressed as a percentage or a ratio, providing a clear picture of the investment’s profitability.
For real estate investors, understanding ROI is essential for assessing potential deals, making purchasing decisions, and strategizing exits. A high ROI indicates a profitable investment, while a low ROI might suggest that the investment dollars could be better utilized elsewhere.