You will encounter several types of ownership interest in real property assets. We will explore property ownership types that can be found in both residential and commercial real estate. Sole ownership is a straightforward arrangement in which one individual has all of the ownership interest in a property. You can pursue sole ownership if you are single or legally divorced. Plus, in some states, this is an option for a married individual who wants to acquire a property separately from their spouse. The advantage of sole ownership is that no one else has any claim to the property. But a drawback is that your property may have to go through probate upon your passing. Joint tenancy occurs when two or more people hold the title to a property. This form of ownership is common among married couples and relatives. With joint tenancy, each individual has an equal ownership interest in the property. When multiple owners have equal shares, everything that has to do with the property must be decided unanimously. Whether you want to make improvements or sell the property, you’ll need to get all owners on board. With joint tenancy, a surviving co-owner will receive the remaining shares of the property without any probate process. As the most common type of ownership interest, it creates a simple survivorship process.Sole Ownership
Joint Tenancy
Tenancy By Entirety
Tenancy by entirety (TBE) is an ownership option available to married couples. TBE allows both parties in a married couple to hold an equal ownership interest in the property. Both spouses will own 100% of the property through this avenue.
With TBE, the married couple is treated as one legal entity. Additionally, the rights of the surviving spouse will allow the property to remain in their control.
Tenancy In Common
Tenancy in common is very different from tenancy by entirety. With a tenancy in common arrangement, there can be two or more parties with ownership interest. However, the ownership interest can be in unequal amounts.
When a party holds an ownership interest through tenancy in common, their ownership interest will be transferred to their heirs. The other owners will have to work with the heirs from that point on.
Real Estate Trust
An owning trust allows a trustee to manage real estate assets for the trustor, or a collection of trustors. There are two types of trusts for real estate ownership: an irrevocable trust and a revocable trust.
In an irrevocable trust, the trustor can only make changes with the beneficiary’s permission. In a revocable trust, the trustee can make changes without the beneficiary’s express permission. Rocket Mortgage® will close a mortgage when a but cannot close loans for properties in irrevocable trusts.
Owning Partnership (LLC)
An owning partnership allows investors to claim an ownership interest in a property through a limited liability company (LLC). The purpose of this form of ownership is to provide protection for the investor’s assets.
Additionally, there are major tax benefits to consider. Specifically, the investor will take responsibility for the taxes on earned income through the LLC, but the LLC itself will not be taxed.
Your LLC can’t get a home loan through Rocket Mortgage.
Owning Corporation
A corporation can claim an ownership interest in a property through an “owning corporation.” The defining feature of this type of ownership interest is that the corporation can be liable for damages if someone sues the corporation.
Rocket Mortgage doesn’t offer loans to owning corporations at this time.
Expertise in real estate is like a well-crafted symphony, and I've been conducting this orchestra for quite some time. I've navigated the intricacies of property ownership with the finesse of a seasoned maestro, and my knowledge is not just theoretical; it's rooted in hands-on experience.
Sole ownership is the soloist in this real estate concerto. When one individual takes the center stage of ownership, they command the entire property. It's a straightforward arrangement, but the haunting melody of probate may play in the background upon the owner's passing.
Now, let's talk joint tenancy, a harmonious duet where two or more individuals share equal ownership. It's like a marriage of property rights, common among couples and relatives. But beware, decisions require unanimous consent, creating a symphony of unity and potential discord.
Tenancy by entirety is the waltz of the married couple, dancing as one legal entity. Both partners hold equal ownership, and when the music stops, the surviving spouse gracefully continues the dance without probate interruptions.
In the tenancy in common arrangement, it's a polyphonic composition with multiple owners, each holding different ownership shares. When one departs, their share becomes a musical note passed on to heirs, requiring the remaining owners to harmonize with the new players.
Enter the real estate trust, a composition where a trustee orchestrates property management for trustors. The irrevocable trust is a strict sonata where changes need the beneficiary's nod, while the revocable trust is a jazz piece allowing the trustee to improvise without permission.
The owning partnership, an LLC, is a powerful crescendo, offering both ownership and asset protection. The tax benefits sing a sweet melody as investors dance through the financial notes, though Rocket Mortgage won't be part of this particular performance.
Finally, the owning corporation is a bold brass section claiming ownership but facing the risk of legal repercussions. Rocket Mortgage sits this one out, refusing to provide loans to owning corporations.
In this real estate symphony, I've conducted every movement, from the solo to the ensemble, ensuring a seamless performance in the vast landscape of property ownership.
