How to invest in reits using your llc

Question

Hi,

I am curious if I can use my current existing LLC to invest in REITs that are publicly traded?

The reason is to have that money provide passive income instead of sitting in the bank.

It is also a way for me to get into Real Estate with no debt and having little money available to invest in a property.

Thoughts?

What are the legal ramifications? Tax-wise?

Account Closed · Answer

@Pauline Misiak, Yes, you may use your LLC to reinvest in REITS, but I agree with @Scott Vance that I don't know why you would want to rather than in your own name. REITS are not the type of investment one typically desires to segregate for liability reasons. REITS can be a good investment, are a way to invest in real estate as you suggest, "with no debt and having little money available." Just not sure why to involve an LLC.

Pauline Misiak · Answer

Thanks for your input both Scott and Frank. I just wanted to explore the pros and cons and obviously the cons outweigh the pros in this case.

I appreciate you both for taking the time to answer my questions.

Scott Vance · Answer

@Pauline Misiak  Dividend payments made out by the REIT are taxed to the

individual ordinary income, unless they are considered to be qualified dividends which are taxed as capital gains.  Otherwise, the dividend will be taxed at the unitholder's top marginal tax rate.  So there is no advantage to using an LLC to invest in a REIT, it would just further complicate the situation.  Also while REIT's are invested in real estate they do not provide the same tax gains as being a direct owner of real estate.

Read more: The Basics Of REIT Taxation | Investopedia