Forming a Real Estate Holding Company: The Pros and Cons

(STL.News) Unless you come from a wealthy family, it’s a safe bet that money is a concern for you, to some extent at least. People work hard to make money, and unfortunately, it gets spent much sooner than it’s earned.  This is why many turn to investments and put their money where it might be of use, providing some sense of financial security.  This begs the question, which investment option is your best choice?  Is it stocks?  Do you buy gold and precious metals and leave them for some time till they increase in value?  There are those who find the best investment option to be forming a real estate holding company, but would that work for you?

What’s a real estate holding company?

A real estate holding company is basically a firm that owns properties and runs the entire process.  The contract, financing, and management of properties are under the name of the company, not you as the investor.  This is why many people resort to real estate holding companies because it’s a way of minimizing liabilities and avoiding risks.  The investor has just invested their money in the holding company, and they get paid without having to worry about the troubles of running a property, from tenant complaints to fire hazards and health/safety inspections.

The pros

The most important angle about investing in a holding company is the fact that it minimizes the risk to an extent where it’s almost gone.  It also provides protection to your other assets, because an LLC is a separate entity from your other business endeavors. High Return Real Estate is one of those companies that do this kind of business, and it works because the investor’s money is safe.  Say one of the tenants decided to sue you, the owner of a property, because of an incident they had in your building.  Normally, they could go after your assets and sue for big money, but with an LLC, the only assets which are liable are those owned by the LCC, which makes it an excellent investment option.

There’s also the tax benefit of owning an LLC. Investors who buy properties through an LLC can avoid double taxation, which means paying taxes twice for the same income.  They basically pay taxes as individuals from the money they make on the property through the LLC, which is the perfect scenario of being protected from legal complications and still paying taxes just once as an individual.

The cons

Starting an LLC is not as ideal as it seems, because there’s a high capital involved.  You have to put in high sums of money to make any, and that is not always easy.  Many who tried venturing into this business endeavor reported facing difficulties getting a real estate investment loan, which means you might have to go through unconventional channels to get the initial amount needed for this type of investment.

Time to invest

Whether you think starting a holding company is your best business option or not is up to you, but you should know that people are out there doing this and making money out of it.  Maybe it’s time to invest that money you’ve been saving up, and start a company that actually might secure your children’s future.  At the end of the day, it’s about the money, and an LLC is one of the least troublesome ways of doing so.