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Real Estate You Need to Know: Forms of Ownership
In this brief article I explain forms of ownership, that is, how
you present to the world the fact that you own real property.
Forms of ownership have a direct impact on your tax burden, on
how you extract money from the deal, and how you protect
yourself against lawsuits. Again, this is real-life stuff that
you need to know if you want to get rich in real estate.
Forms of Ownership
With any real estate transaction, the new owner must determine
the form in which he will take title. The form of ownership is
an individual or business choice, depending on personal
circumstances. That choice will have tax consequences, and will
determine the rights of creditors, heirs and co-owners.
Ownership comes in four main flavors, as summarized in the chart
below:
The various forms of ownership are controlled by the state in
which the real estate is located, but within the constraints of
each state the choice among the available forms is entirely up
to the buyer. In most states, title could historically be held
in one of three basic categories, either alone by one owner (in
severalty, or sole ownership), together by two or more people
(co-ownership), or by a third party for the benefit of another
(in trust). Finally we have a more recent fourth category of
ownership in multi-unit buildings under the general heading of
community ownership. Under each of these major categories are
several variations, each discussed in detail in my book, each
explained in a way you can understand and remember.
As a real estate investor, you truly do care about these
different forms of ownership. Your goal is to make money when
you buy property, and the form of ownership will have a direct,
immediate impact on your bottom line. You need to know how these
different forms of ownership work to best create a structure
that takes maximum advantage of your personal circumstances -
taxes, other assets, marriage status, estate planning, and
virtually every aspect of your financial life.
For the purpose of this brief article, let's just look at one
form of ownership, sole ownership.
Sole Ownership
When title is held by one person (or one organization), that
person or organization is known legally as the sole owner, which
is both common sense but also a formal legal term. With
commercial property, this form of ownership is common, and
introduces few complications. The situation with a married
couple, however, is more difficult. While different in each
state, when one spouse owns property as a sole owner, states
generally require that the other spouse sign any documents
concerning the property. At first it seems odd that the
non-owning spouse must sign documents concerning real estate in
which he or she has no interest. But that requirement arises
because sole ownership is potentially counter to other laws
governing rights to title between married couples. For example,
depending on the state, the non-owning spouse would need to
release homestead rights to make sole ownership by the other
spouse compatible with state law. In spite of the marriage
issue, sole ownership is the least complicated form of
ownership; as soon as another party is introduced into the
equation, the degree of complexity rises quickly.
While all other forms of ownership (listed in the graph above)
are more complicated than sole ownership, I explain them all in
my book using simple, easy-to-understand language. Real estate
professionals try to keep this stuff complicated, but in fact it
is not. In my book, I walk you through these fundamental
concepts that will make you a true expert. You'll soon know more
than your broker. And that knowledge will enable you to find and
purchase property that others will never see. Next Steps
You might wonder where my series of short articles leave you. My
hope is that you are left with the clear sense that you can
learn everything you need to know about real estate in a
painless and easy way. And I have intentionally designed these
articles to entice you to buy my book. Shameless advertising?
Perhaps, but I also think I am performing a valuable service for
people serious about becoming wealthy.
My method of real estate investing is successful because it
relies on basic fundamental principles. I advocate buying
properties that have positive cash flow, with no money down.
Yes, that sounds simplistic, but it really works. That is, that
simple strategy works if you truly understand the basic
principles of real estate. The rate of return is huge, even
factoring in the costs of transaction, maintenance and
management of the property. The problem with the no-money-down
craze of the 1980s is that people bought the wrong properties,
leaving themselves with huge mortgages, and negative cash flows.
They also commonly overpaid for a property just because they
could buy with no money out of pocket. Of course that strategy
is doomed to fail. I show you how to buy properties that work
well with a no-money-down strategy, properties that not only
require no money out of pocket, but that actually yield an
immediate return with positive cash flow. The deals are out
there, but you need to find them. In order to find them, you
need to understand the fundamental principles of real estate.
I have no secret or magic formula. You can spend hundreds of
hours of lost time, and lose hundreds of thousands of dollars,
in trying to figure this out for yourself. Or, you can spend
less than $250 and have the path to success handed to you on a
silver platter.
If this intrigues you, and you buy my book, you have one full
year to implement the principles and follow the guidelines I
present in the book. But be clear: you have to put an offer on a
property using my methods before you are eligible for a refund
for the cost of the book. That is the only way I can know you
were serious about becoming wealthy. Frankly, I am only
interested in people who are committed to changing and improving
their lives. If you are one of those people, please join me on
this wonderful journey to great wealth.
If you want to learn more about Beyond No Money Down, go to:
www.realpropertymillionaire.com
About the author:
Dr. Schneider is a recognized expert in building personal
wealth, with his best selling books "Beyond No Money Down" and
"Trading Futures: Only One Way to Win". Practicing what he
preaches, he now lives in a beautiful waterfront home in central
Texas, owns and operates his own jet, and travels the world
first class giving lectures across the country and across the
globe.
Thomas Kinsey Schneider, Ph.D.
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