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How to start a real estate investment company

If you’ve ever seriously looked into making your money work for you, you’ve probably already heard of the benefits of real estate investment. The combination of equity and income from properties looks attractive to most investors, especially those who are focused on building wealth over the long term. Many investors, however, focus only on acting individually and never learn how to start a real estate investment company. Little do they know, forming an investment company is one of the best ways to grow and prosper as a real estate investor.

Investor Jeff Sutton got his start by finding a property for a discount shoe store. He’s now worth more than $3 billion.

Though starting your own investment company may seem intimidating on the surface, the benefits are well worth it. With a real estate investment company, you can:

— Increase your profits.
— Draw on the cumulative power of a team of specialists.
— Expand as you go.

To see the power of forming a company, one need look no further than the example of New York property mogul, Jeff Sutton. A native of Brooklyn descended from immigrant grandparents, Sutton started off in real estate by finding a property for a discount shoe store. Through his company, Wharton Properties, Sutton now manages some of the highest-paying storefront rentals in New York and has accrued a personal worth of over $3 billion. Sutton is just one of many real estate investors who’ve achieved massive success by creating a real estate investment company.

Setting up your business structure

Whenever someone asks me how to start a real estate investment company, one of the very first things I tell them to do is choose a business structure and establish their business entity. This entity exists for two key reasons:

  1. To create a line of demarcation between you as an individual and your business. This protects your personal assets from liability.
  2. To allow you to hire employees.

A few of the more common options for business structuring are:

— Sole Proprietorship.
— LLC (Limited Liability Corporation).
— S-Corp.
— C-Corp (traditional corporation).

Because of the size of the potential liability with real estate deals, it’s generally a good idea to form an entity that will separate your personal assets from those of your company, which can be accomplished with an LLC, S-Corp or C-Corp. There’s also the option of forming an LLC and opting to have it taxed as an S-Corp. This offers the tax advantage of not having to pay self-employment tax under certain circumstances, potentially saving you a large personal income tax bill.

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