Create a Private REIT or a Private Fund, and Why?
Lets say you have $100m to invest in real estate. Would you create a private REIT or a private Fund, and why?
I know there's lots to consider. I think funds offer more flexibility, but why not take advantage of the tax benefits of a REIT structure?
A REIT structure? Not for me, I wouldn't want to be forced to distribute 90% of taxable income to shareholders.
Private fund? Nah, I don't want to answer to SEC or other investors if I have $100m. I'm starting a family office.
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Broker CA (#BRE01855039)
- Real Estate Group 360
#1 All Forums Contributor
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- Virginia
Quote from @Matt White:
Lets say you have $100m to invest in real estate. Would you create a private REIT or a private Fund, and why?
I know there's lots to consider. I think funds offer more flexibility, but why not take advantage of the tax benefits of a REIT structure?
Are you asking if YOU personally have $100M? If one person has $100M then why would they setup a reit where they are the only investor? Or are you saying that you get $100M from investors?
There are tax benefits to a REIT vs. a LLC but the REIT has to be completely passive. Depending on your business model it will depend on how you want to incorporate your business. Realize a REIT also will cost a lot more for tax returns and potential reporting.
Quote from @Ellis San Jose:What wouuld a family office do? Just start an LLC or LP, and then buy properties as individual LLC?
A REIT structure? Not for me, I wouldn't want to be forced to distribute 90% of taxable income to shareholders.
Private fund? Nah, I don't want to answer to SEC or other investors if I have $100m. I'm starting a family office.
Quote from @Matt White:
Quote from @Ellis San Jose:What wouuld a family office do? Just start an LLC or LP, and then buy properties as individual LLC?
A REIT structure? Not for me, I wouldn't want to be forced to distribute 90% of taxable income to shareholders.
Private fund? Nah, I don't want to answer to SEC or other investors if I have $100m. I'm starting a family office.
With that level of capital you could acquire & manage the assets & tax issues without the restrictions of the REIT structure. LLC or LLP or combination could be a much better fit.
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Broker CA (#BRE01855039)
- Real Estate Group 360
#1 All Forums Contributor
- Investor
- Virginia
Quote from @Matt White:
Quote from @Ellis San Jose:What wouuld a family office do? Just start an LLC or LP, and then buy properties as individual LLC?
A REIT structure? Not for me, I wouldn't want to be forced to distribute 90% of taxable income to shareholders.
Private fund? Nah, I don't want to answer to SEC or other investors if I have $100m. I'm starting a family office.
A family office has an in house CFO, controller and tax advisor who will figure out what the best structure for the family is. Working for one in the past, they mostly had LLC's for their different types of investments. One of the brothers was a tax attorney and was crazy smart at all the things they could do to defer taxes and make investments more beneficial. You will not find the type of answer you are looking for here on BP.