Types of Ownership (S2U6) Flashcards
Townhome
1) Charges HOA dues
2) A homeowner’s association takes care of landscaping, roof repair/replacement, exterior & common area maintenance.
3) Can come with use of a common pool or clubhouse
Condos
1) The owner owns a unit within a structure but no land.
2) Single family dwelling, but landscaping and groundskeeping are taken care of.
3) No salespeople/political people, as buildings/areas are secure.
4) Some condos allow you to sublet your unit
5) Owners adhere to condo rules set forth in bylaws and covenants, conditions, and restrictions (CCRs), which may place restrictions on subletting, use of common areas, etc. It also states who’s responsible for repair and maintenance, and how ownership of the common areas is shared among unit owners
6) Because condos are real property transactions, ownership rights are fee simple, which is the biggest and broadest form of ownership available. It means the right to use and possess—and sometimes sublet
7) You can own any way you want - severalty, JT, TIC, or TBE.
Co-Op
1)Shareholders don’t own any real estate, just shares in the corporation
2)A non-profit owns the land, buildings, and all the rights/interest in the corporation.
3)Individual shareholders (unit owners/residents) don’t own real estate and don’t receive a deed for the unit.
They own corporate shares as personal property.
4)Residents have a proprietary lease ( a lease from a corporation) for the units they occupy.
5)Co-Op buildings may have amenities similar to condo buildings
6)Residents pay a monthly or annual maintenance fee to the board of directors that manages the cooperative.
7)Co-Op boards must follow established bylaws and articles of incorporation.
Timeshares
Ownership of the property allows the purchaser to use it for periods of time during the year.
Fee simple ownership.
Owners are guaranteed a certain length of time in their property.
Could be TIC or Interval Ownership
Can be sold or inheritied.
Interval Ownership
an estate for years in which the buyer has ownership of and title to the unit for the time selected and the number of years designated upon purchase
Timeshare Use
aka right to use timeshare: doesn’t convey ownership, but simply the right to occupy the property for one or two weeks a year, continuing for a specified number of years.
Planned Unit Development
Detached home and townhome owners own both the structure and the land and have responsibility for shared common area.
Mixed use development with residents and businesses
Sole Proprietorship
business of one. Must hold the title with their name, not just their business name
What are the two types of Partnership?
1) General Partnership
2) Limited Partnership
True or False: A partnership can be owned as a TIC or JT?
True
General Partnership
: conveys personal liability to partnership debts that exceed the partnership assets.
Partners are jointly and separately liable for these debts
If a partner absconds with all of the partnership funds, leaving behind creditors, you are liable to those creditors.
Limited Partnership
always has 1 or 2 general partners who assume liability. The other partners are limited in their liability in relation to the amount of money they have contributed.
Limited partners may choose to not participate in managing the partnership to protect their immunity to partnership debt.
Articles of Incorporation
a document that creates the corporation.
Syndicates
groups of investors pooling their money in pursuit of a single investment goal, such as buying an office building.
The syndicate is organized by a sponsor who does the investment legwork and property management and who asks many investors to join in the real estate investment, with everyone sharing in the profits.
The sponsor can be an individual or a business organization.
Syndicates sometimes meet the definition of “dealing in securities” and therefore must adhere to the rules and regulations of the Securities and Exchange Commission.
Joint Ventures
Not a business enterprise, per se, but a temporary organization formed by two or more parties to invest in real estate (or other investments).
Participants may be corporations, partnerships, LLCs, or other entities.
The parties may hold title as joint tenants or tenants in common.
Corporations
an intangible, taxable, recognized legal entity. Corporations can receive, hold, and transfer title to real property, and may give, or hold a mortgage to secure a debt owed to the corporation.
The corporation’s bylaws give authority to named individuals who may sign documents on its behalf.
True or False: Corporations have separate tax rates from individual tax rates
true
Subchapter S Corporations
permitted to function as a corporation but taxed as a partnership shareholders in a Subchapter S may deduct losses on their income taxes representing their share of the corporation’s losses.
C Corporation
Must pay corporate income tax to the IRS. The shareholders in a C corporation see double taxation: once at the corporate level and again at the shareholder level. Subchapter S corporations do not pay corporate income taxes, and so they avoid double taxation
Limited Liability Company & Limited Liability Partnership
Owners of the LLC or LLP (who are called members, not shareholders) are not personally liable for LLC/LLP obligations, are taxed as partnerships, and do not require a general partner.
A security
An investment of money
A group Enterprise
Intended to make a profit and that profit is solely derived from the management effort of others.
Real Estate Investment Trusts
companies that own and usually operate income producing real esatate
True or False: REIT’s generally own residential RE including multifamily and single family homes.
False: REIT’s generally own commercial RE including multifamily, warehouses, and retail.
REIT’s were first created in what year to take advantage of changes to tax laws that prevented double taxation on trust income.
1960
REIT’s were first created in 1960 to take advantage of changes to tax laws that prevented what?
double taxation on trust income
To avoid trust income tax, trust must distribute what percentage of ordinarily taxable income and to whom?
95% to trust beneficiaries
