What is the best way totitle and holdreinvestment property?

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What is the best way totitle and holdreinvestment property?

I am interested in purchasing a residential investment property, includingmy daughter’s name on the title – with right of survivorship. However, initially, I would incur and recognize all profits and losses. Could joint tenancy be used with some type operating agreement or would this need to be tenants in common?

Asked on July 14, 2011 under Real Estate Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You would probably be better off creating a limited liability company (LLC) or a sub-chapter S corporation (Inc.) which you and your daughter would own, and then have the company/corporation own the property.

1) First and foremost, it will provide for limitation of liability: you and your daughter will not be responsible for debts or causes of action against the property (e.g. suppose someone slips and falls; suppose you don't pay a contractor and he sues you; suppose you default on a mortgage or property taxes), except to the extent that you may have to personally guarantee some loans (like a mortgage, if you have to guarantee one to get it).

2) With an LLC, you can determine in the operating agreement which partner will incur losses or get profits; I'm not certain you could with a sub-S--there, it may be automatically apportioned according to relative ownership--so an LLC may be better of the two.

3) Both LLC and sub-S's are pass through entities for tax purposes, so you won't face corporate double taxation and can take profits/losses as if they were your own.

4) You can easily structure and set up succession planning, for what if one of you passes.


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