Action Steps for Chapter One

 

Talk with your tax advisor and attorney before deciding which type of business structure (see Real estate Corporations) is best for you. There is no “right” or “wrong” business structure. It all depends on your needs, priorities, and current investment level.

Never enter into a real estate partnership without first talking in detail with your prospective partner about differences that may surface later. Do you both want to acquire properties at about the same rate? Do you want to invest similar amounts in fixing up the properties you share? The more differences you can put “on the table” before entering into a partnership, the lower the chances that significant frictions will upset your partnership later.

Talk with your attorney and tax advisor before incorporating. It is not a decision to be made with incomplete information (see Minimizing Risk-Right Insurance).

Develop a strategy for how you will sell properties that have appreciated significantly in value. Of course, you want your properties to appreciate, but unless you structure your business appropriately, you will end up paying high taxes on properties you sell or end up holding onto properties you don’t want in order to avoid paying taxes. Be sure to speak with legal and financial advisors about how structure your company in the most advantageous way possible. 

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