How to Split Ownership of Property

Question

What are ways to split ownership of property? As in, the actual logistical steps. Who to talk to, what to bring, what to arrange, costs and fees, issues, timeline, etc.

Types of ways to split property? LLC? S Corp? Trust? What are typical ways people use? Why that way?

How many ways are there to split property ownership?

Is there a limit to how many people can go in on a property? 2 vs 1000 differences?

Olia Fogel · Answer

I would recommend an LLC + Agent Trust. With this setup you would be able to split the ownership on the trust level while keeping the information on the trustees and beneficiaries (managers and members) anonymous.

Matt Devincenzo · Answer

It also depends on what you mean by 'split' it with someone. There could be a reason to take ownership as 'Tenants in Common' (TIC) which basically means that you're both on the deed, but the deed specifies a specific ownership percentage. The SF bay area these are actually a somewhat common method of selling individual units similar to a condo, but not requiring a subdivision like a true condo ownership. You could do the same on any property. Not necessarily to sell individual units, but to allow for a clear ownership % in the deed. The biggest reason for this that I've seen is the ability for each owner to separately complete a 1031 exchange following sale.

Deal size also matters...this could be a syndicated General Partnership and Limited Partnership structure. Or as mentioned above LLC. Joint Venture agreement, a loan with the return based upon the total profit...

Richard Bechtol · Answer

I would have to agree with Olia on this.

Nate Sanow · Answer

Multiple member llc.

Dave Foster · Answer

@Kyle West,  Boiled down there are only two ways for multiple people to own property.

1 Tenants in Common - Each person owns a % of the actual property.  Done by deed through quit claim or by a title company registering the deeds.  This could be individuals or individual entities.

2. Entity ownership of real estate as the single tenant - The individuals do not own real estate they own a membership interest in the entity that owns real estate.  Any entity that can have multiple members can do this - corporations, trusts, LLCs, etc etc etc.  Ownership of the real estate is handled the same was as above - There is a deed in the name of the entity registered with the state.Ownership of the entity is handled through whatever legal authority is managing the entity - The secretary of state or the SEC, or the individual managers of the entity etc.

There are literally hundreds of variations within these two.  But the reason it is easy to break it out this way is that a tax paying entity will own real estate.  They are the tenant.  If multiple tenants own the real estate then they are tenants in common.  If it is one tenant but that tenant has the ability to have multiple members of the tenant then that is scenario 2.

Where I live with this is that any tax paying entity can do a 1031 exchange.  But a 1031 exchange must be started with the sale of actual real estate and the exchanger must purchase actual real estate.  In scenario one the exchanger is the tenant or tenant in common and can do a 1031.  In scenario 2 the entity is the tenant and can do the 1031 exchange.  Not the members/owners of the entity.

Gere W. · Answer

I'm not necessarily looking to split for my first few (although currently I don't have the capital to put down), just curious what the ways are that people do so.

Nicholas L. · Answer

@Kyle West

too complicated to answer in a short post.  here's a simple answer - are you a new investor?  if so, don't split ownership with anyone.  get a few yourself first as you research.  then look at more complicated arrangements.  David Greene just said the same thing on a recent podcast.

How to Split Ownership of Property

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