Property Management Company: when and why open it?
Open a real estate management company to generate income from real estate through leasing. When to open this type of company and the advantages you can get.
Holding real estate (residential or business) in a personal capacity may not be an optimal choice. Real estate investment, like all investments, is subject to certain risks. But the investor could also risk losing his invested assets (perhaps in the event of insolvency in the presence of mortgage loans. Personal creditors, etc.). For the need to protect the assets from personal attacks by third parties and to convey the proceeds deriving from the income generation of real estate. The option of setting up a real estate management company can be evaluated. This is an opportunity that must be carefully evaluated by every investor in order to balance. The advantages linked to the establishment of this corporate form with the aspects linked to management costs. The real estate management company, depending on the case, can be established in the form of a partnership
When Is It Convenient To Set Up A Property Management Company?
Once all these aspects have been analyzed, it is advisable to try to provide some useful information to understand. When it is convenient to operate through companies for your real estate investments. The establishment of a property management company is to be taken into consideration when one mainly seeks to protect one’s assets from attacks by third parties. And when one wishes to facilitate the future generational transfer of one’s personal assets. In these cases, the establishment of a company certainly facilitates, and it is important to identify the correct type of company to open.
The simple company lends itself to situations where there is no significant rental income received and where there is or will be more than one owner of the property. This corporate form is certainly very flexible and lends itself very well to acting as a family holding company and also for holding company shares.
Example of Valuation of a Real Estate Investment Company
To get into the merits of the matter, let’s start with a concrete case of a person who contacted us to evaluate his situation. The starting situation is the following: The Assessments to Be Made for the Establishment of a Real Estate Investment Company. In order to identify whether there is a convenience in taxing income with a company, rather than as a natural person, an assessment must be made. Basically, a simulation of the taxation required in both cases must be prepared: that of the private individual and that of the company. These are two different types of taxation, with different rules and considerations to be made. The aspect that can be important to underline is the variables in play that can shift the convenience of one choice rather than the other. In particular, these are the following
Analysis regarding the possibility of selling the properties in a future perspective, also thinking of a future generational change;
- Evaluation concerning the subject’s personal income without considering the rental income;
- Analysis concerning the indirect costs linked to the contribution of properties to companies;
- Assessment of the income obtainable from the lease, also in the light of the regulations on shell companies.
Real Estate Investment Analysis
The evaluations that must be carried out always concern a long-term perspective. The investor is called to identify whether the real estate investments he intends to make are long-term investments or whether they are mere speculation, with the resale of the property in the short term.
A long-term investment usually involves assessments to be made also in terms of generational handover. In fact, if you intend to invest in a property in the short term, investing as a natural person is certainly the most convenient solution. In this way, it will be possible to take advantage of a particular tax regime. That provides for the exemption from capital gains in the event of the sale of a property held for more than five years. This same discipline concerns simple companies but does not concern other partnerships and joint stock companies. In the case of companies. Any capital gain determined by the difference between the values conferred and the sale consideration will be subject to taxation by the company.
Evaluation of the Perceivable Rental Income
Another aspect to be evaluated in relation to the possibility of setting up a property management company concerns the number of rents that can be obtained from the investment. Essentially, it is a matter of assessing whether the profitability offered by the properties allows you to work with a company. A partnership or capital company has management costs that impact the final profitability of the investment. On the one hand, it is necessary to evaluate the income that the private individual receives outside the leases, and therefore the marginal rate at which this person would go to tax this income. Furthermore, it is a question of identifying which lease contracts is.
What Are The Benefits Of Setting Up A Property Management Company?
An assessment related to the possibility of setting up a property management company is certainly complex and varies from person to person in relation to the many variables involved. In the variables we have just seen, the corporate management of real estate presents many problems to overcome. For this reason, I’m sure you will have become discouraged by this possibility. However, before you make a first decision, I intend to clearly analyze what are the main advantages of the corporate management of real estate. These advantages concern two cases
With corporate management there is certainly greater protection of the investor’s assets. Protection resulting from the separation from a real estate whose ownership becomes mediated by the participation in the company. For example, it will not be possible to suffer a real estate foreclosure but a movable foreclosure of the shares in the real estate company. The advantage in terms of asset protection is not particularly significant and better results could be achieved with the establishment of a patrimonial fund or a trust;
Possibility of transferring part of the properties through the figurative share to the single transfer of the properties. Possibility of avoiding gift or inheritance tax for descendants in direct line or spouse. In compliance with the conditions of the law. Control of the company – with a shareholding of more than 50% – for a period and continuation of the business activity in the corporate form.
Al Hayyat Group of Companies
Asia is a key component of future-proof real estate portfolios. Exposure to Asia is now seen less as a portfolio risk and more as an element of diversification. And a source of attractive returns. Asian economies are more resilient than in the past and five-year growth prospects are strong. Averaging 3.5% per year, with growing infrastructure investment and strong local consumption boosting growth. Asian property markets have large cash reserves and have benefited from favorable monetary conditions. And a significant capital weight dedicated to the asset class. Al Hayyat Group of Companies, a multifaceted group of Real estate development. Construction, marketing, sales, and investment portfolio Management Company, Real Estate and Marketing Company Pakistan is the best example of the property management company in Asia.