Great Post George. Hits all of the key points.
The most important point being that an investor must have an accountant who`s focus is real estate. There are many generalists out there who don`t understand the many strategies (both tax and structure) that can be utilized for their business.
Thanks for the detail
QUOTE (George @ Sep 29 2007, 09:32 AM) Good morning Luciana,
I am an accountant who does invest plus my largest client segement is real estate investors and thus believe that I have some knowledge of this topic. That being said, my opinions are just that, opinions. While I have very detailed reasons for believing investments should be completed through one entity or another, others can have equally strong and valid opinions but with an opposite conclusion. My opinions are formed only after discussions with clients based on their particular situation. I appreciate that this is very frustrating and confusing as compared to having a relatively straight forward formula. I also appreciate that my advice is often the reverse of the majority of accountants. The reasons for this are relatively straight forward in my mind. First, my priorities are different (tax is actually my third priority) and secondly, it is my opinion that many accountants have a general practice (that is not meant to be negative and recognizes that they can be extremely capable advisors, stronger than myself in various areas - but perhaps not as strong as desirable in a focused area such as real estate) as compared to sufficient knowledge on real estate. The question then becomes - what are your priorities? Your current situation and future plans will play a critical role in this decision making process. Further, despite what may seem like many similarities, your situation is unique. As a result, do not blindly accept "a" solution. While I admittedly prefer using corporations in many cases once a certain investment level has been/strongly expected to be met, I have seen far too many instances where someone was told to set up a corporation(s) to buy real estate within, they set up the corporation, and learn after the fact that this was a complete waste of time/money and in some cases even cause significant tax/business problems. Unfortunately, I have also seen the same but opposite scenarios where another structure would have provided benefits but ...
I would highly recommend talking to your accounting and legal advisors and while doing so, ensure that you understand WHY they believe that in YOUR situation one particular structure over another is appropriate. They should be capable of explaining the pros and cons of the different alternatives and getting from you an idea of your priorities in order to make a recommendation. Additionally, having a rough idea of how your situation will evolve and what will trigger this evolution is important. Where you have heard/read contrary positions stated, ask the advisor to reconcile these positions to that which they are advocating. This will provide you with much more confidence in your ultimate decision plus help ensure all of the relevant issues are on the table for consideration. After your meetings, you will then have an opportunity to let some of the information percolate in your mind over some time and can then ask follow-up questions and make a decision.
In my mind it is important to go beyond considering just the tax and legal considerations in choosing your entity. Ensure that your advisor is addressing alternative considerations.
As you can probably tell, I could go on and on but will leave it at this for now.
Warm regards...
George