If you’re thinking about investing in real estate, you also should think about how to hold title to the property.
In your own name, you’ll have full control. You can leave the property or give it to anyone you choose. All the tax benefits of owning real estate will flow through to your tax return. However, you’ll have to rely on your own investment capital. You also may have substantial liability if someone is hurt on your property so you’d better check your insurance coverage.
In joint name, you’ll have the support of a co-owner. Married couples and other co-owners may prefer to hold investment property as joint tenants with right of survivorship (JTWROS). When one owner dies, the surviving owner inherits the property without the time and expense of probate. With JTWROS, though, you can’t leave the property to anyone else except your co-owner, so you’ll lose flexibility.
As part of an investment group, you’ll have more people to contribute capital and more hands to help with taking care of the property. If you use a limited partnership or limited liability company (LLC) to hold the real estate, you may protect your personal assets from the property’s debts. The downside? You won’t have absolute control over the property so you might have to negotiate with your co-owners over vital decisions.