Real estate investors love multiunit properties. These rental properties are in high demand, with renters scrambling to find duplexes, fourplexes, and of course, traditional apartment complexes in the parts of town close to work and play.
Multiunit investments are also surging in popularity in part because they are more resistant to inflation than traditional single-family homes.
While many of the same principles of business entities for real estate investors carry over to this topic, there are certainly special considerations that multi-unit investors must take into account. Below, we'll talk about the types of business structures that favor these investors, how they work, and what to keep in mind if you're considering adding a multi-unit to your real estate empire
Joint Ventures (JVs) are a popular choice for beginner investors, as well as those who prefer quick, one-and-done deals. They allow investors to pool money and equitably share risks and profits alike. Multi-unit residences and industrial properties make for a logical application of a JV agreement, as they easily divided for practical purposes.
JVs are a great option because they are clearly defined from the beginning. If your investment or partner(s) don't work out, you aren't locked in for life. But if you're successful, the JV leaves the door open for future collaboration.
Limited Partnerships are most useful for investors operating their property with one partner. The terms of LPs are flexible, so your partner can be a fellow investor, property manager, angel investor, or anyone you see fit.
LPs are agreements that offer investors a high level of control over their terms. If you're considering this option, ensure you share your needs with a qualified attorney. Strong contracts will ensure you're getting the deal you want and will beef up your asset protection system.
The Series LLC is among the strongest structures for any investor, and multi-unit real estate investors are no exception. This structure is extremely versatile. It's easy to form a multi-member Series LLC, but it works just as well if you're investing on your own.
Common reasons multi-unit investors love the Series LLC include the following:
We hope this has given you a starting point on the best business structures for multi-unit investments. Of course, everyone's situation is unique. Ideally, you want your structure in place before making any investment.
Interested in learning more? Check out our article, When It Comes to Taxes, Is Managing Rental Properties a Business or an Investment?
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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