What is a real estate holding company?
A real estate holding company is a legal entity formed for the purpose of holding and managing real estate. Many real estate holding companies take the form of limited liability companies (LLCs). Real estate holding companies can also serve estate planning purposes.
What are the benefits of placing real estate in a real estate holding company?
As an owner of real estate in your individual capacity, a plaintiff bringing a lawsuit will look to you and your personal assets to satisfy a judgment arising from liability associated with your property. Owning real estate under a real estate holding company, such as a Limited Liability Company (LLC), has the benefit of limiting personal liability for the members/owners of the real estate holding company. This means that creditors and plaintiffs will generally be unable to reach the personal assets of the members/owners (i.e. your home, personal bank accounts, stocks, etc).
Placing real estate in a real estate holding company has become common practice in North Carolina for owners of investment real estate property, such as rental property. This includes both residential and commercial property. Real estate investors often prefer LLCs because of the minimal formalities required and the flexibility of structuring ownership, equity, and management. Owning property as a real estate holding company can also offer estate planning benefits in certain contexts.
Can liability insurance be used in place of a real estate holding company?
Many real estate investors simply carry sufficient insurance to cover the risks associated with real estate ownership. This may be a good choice for those who do not wish to spend the additional time and money associated with the administration and expenses with forming a real estate holding company. It should be noted, however, that liability insurance is not bulletproof and will often contain carve-outs and limitations of coverage.
What steps are required for starting a real estate investment company?
For most real estate investment LLCs, there are at least three initial steps required:
- Filing articles of organization with the Secretary of State
- Executing an operating agreement that meets the individual needs of the member(s)/owner(s)
- Transferring real property to the LLC via a contribution deed
Other legal work or documents may be necessary depending on your individual situation. The LLC will also have to file annual reports with the Secretary of State. At Seay Law Firm, PLLC, we prefer to work alongside your CPA to make sure that you are properly advised as to the tax implications associated with real estate holding LLCs.
What are your legal fees helping create real estate investment companies?
Our legal fees will depend on the complexity of the situation and the individual needs of the real estate owner(s) and member(s).
In many cases, we can do all the required legal work on a flat fee basis. A flat fee permits you to know and budget for your legal expenses before we begin work. For more details, call us at (910) 763-2525 to discuss creating a real estate investment company.