I`m very new to real-estate investing, more so the business aspect of it. About a month ago I was speaking to Scott from the hgtv show Income Property and he was very open about his success with real estate investing. He quickly mentioned to me that for business purposes they have 3 companies set up, 1) Purchases the properties, 2) Hold the properties, 3) Can`t exactly remember that his third item was. I was wondering is there anyone here who knows what he was talking about and how is it implimented.
3 Companies in 1
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QUOTE (zorant @ Aug 6 2010, 09:41 AM) I`m very new to real-estate investing, more so the business aspect of it. About a month ago I was speaking to Scott from the hgtv show Income Property and he was very open about his success with real estate investing. He quickly mentioned to me that for business purposes they have 3 companies set up, 1) Purchases the properties, 2) Hold the properties, 3) Can`t exactly remember that his third item was. I was wondering is there anyone here who knows what he was talking about and how is it implimented.
Not sure of his strategy but I am guessing his third is a construction company. If I have the right show in mind doesn`t he have a team that does construction?
Not sure of his strategy but I am guessing his third is a construction company. If I have the right show in mind doesn`t he have a team that does construction?
If he is talking of the strategy they teach at Russ Whitney his 3rd company is a Property Management Company.
Give George Dube a call this is a very specific thing you are talking about so a blanket answer is not a good one. George will be able to help you in your individual case to let you know your most tax efficient way of investing in RE
Give George Dube a call this is a very specific thing you are talking about so a blanket answer is not a good one. George will be able to help you in your individual case to let you know your most tax efficient way of investing in RE
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QUOTE (zorant @ Aug 6 2010, 10:41 AM)
I'm very new to real-estate investing, more so the business aspect of it. About a month ago I was speaking to Scott from the hgtv show Income Property and he was very open about his success with real estate investing. He quickly mentioned to me that for business purposes they have 3 companies set up, 1) Purchases the properties, 2) Hold the properties, 3) Can't exactly remember that his third item was. I was wondering is there anyone here who knows what he was talking about and how is it implimented.
the 3rd is probably a management firm.
We too have a firm for writing offers in. The buyer is this firm and/or nominee. We often don't know which firm will actually own the asset. On closing day we have one arranged. It also helps in asset protection in case s.th. goes wrong in the buy process.
This three-firm concept is more of a SENIOR step .. only required once you have substantial wealth and multiple properties !
Each firm costs $1000/year or so to administer .. and usually you do not pay taxes on a rental properties anyway until you sell as you usually depreciate the asset enough to not pay taxes on cash-flow.
Any management fees you take have to be taxed personally anyway !
So, a management firm is required only if you have 100's of thousand of fees every year, far exceeding our personal lifestyle/income requirements.
I do recommend though to have a separate firm for each JV partner or group of investors !
A management firm has "active income", for example management fees .. while a real estate hold company has passive income only, thus HIGHEST TAX RATE .. as rental properties are considered "passive income" by CRA !
Related discussions:
50/50 in a JV ` is this fair ?
http://myreinspace.com/public_forums1/Real_Estate_Discussion/62-2015-5050__is_this_fair_.html
Pro`s and Con`s of creating a company for real estate holding:
http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10292-54272-To_create_a_company_or_not.html#54272
Raising money/OPM options (JV vs. securities): http://myreinspace.com/search/public_forums/Real_Estate_Discussion/62-16913-85903-Raising_Money_for_your_venture_-_The_legal_way.html#85903
JV options: Pro`s and Con`s of LP vs. Corporation
http://myreinspace.com/search/public_forums/General_Discussion/61-10979-57096-JV_vs_Limited_Partnership.html#57096
I'm very new to real-estate investing, more so the business aspect of it. About a month ago I was speaking to Scott from the hgtv show Income Property and he was very open about his success with real estate investing. He quickly mentioned to me that for business purposes they have 3 companies set up, 1) Purchases the properties, 2) Hold the properties, 3) Can't exactly remember that his third item was. I was wondering is there anyone here who knows what he was talking about and how is it implimented.
the 3rd is probably a management firm.
We too have a firm for writing offers in. The buyer is this firm and/or nominee. We often don't know which firm will actually own the asset. On closing day we have one arranged. It also helps in asset protection in case s.th. goes wrong in the buy process.
This three-firm concept is more of a SENIOR step .. only required once you have substantial wealth and multiple properties !
Each firm costs $1000/year or so to administer .. and usually you do not pay taxes on a rental properties anyway until you sell as you usually depreciate the asset enough to not pay taxes on cash-flow.
Any management fees you take have to be taxed personally anyway !
So, a management firm is required only if you have 100's of thousand of fees every year, far exceeding our personal lifestyle/income requirements.
I do recommend though to have a separate firm for each JV partner or group of investors !
A management firm has "active income", for example management fees .. while a real estate hold company has passive income only, thus HIGHEST TAX RATE .. as rental properties are considered "passive income" by CRA !
Related discussions:
50/50 in a JV ` is this fair ?
http://myreinspace.com/public_forums1/Real_Estate_Discussion/62-2015-5050__is_this_fair_.html
Pro`s and Con`s of creating a company for real estate holding:
http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10292-54272-To_create_a_company_or_not.html#54272
Raising money/OPM options (JV vs. securities): http://myreinspace.com/search/public_forums/Real_Estate_Discussion/62-16913-85903-Raising_Money_for_your_venture_-_The_legal_way.html#85903
JV options: Pro`s and Con`s of LP vs. Corporation
http://myreinspace.com/search/public_forums/General_Discussion/61-10979-57096-JV_vs_Limited_Partnership.html#57096