Real estate agents help their clients make competitive offers on properties. They know how to identify warning signs of property issues and manage much of the home search process on behalf of their clients.
They also frequently need to answer relatively complex questions brought by aspiring buyers. For example, maybe those looking to acquire real property may not want to own it directly. Instead of becoming the direct owner of the property, they may want to start a limited liability company (LLC) to own the property or create a trust for that purpose.
What are some of the scenarios in which buyers may want a degree of separation from their real property holdings?
1. When they intend to act as landlords
Many people acquire real estate holdings for future income. The goal is to find tenants who pay market-rate rent every month.
Individuals can potentially convert liquid capital or a decent credit history into a stream of relatively passive income. Using a trust or business entity to own rental property is common practice.
2. When they want to flip properties
Property flippers buy homes in poor condition or in need of major updates. They do the work themselves or hire companies that they trust to improve the home before listing it for sale.
Frequently, those dabbling in real estate investments may choose to use a business to hold that property. Doing so can help protect the investors and their other resources.
3. When buyers have complex circumstances
Perhaps the buyer already runs a business and worries that they might eventually face a lawsuit. Maybe they are a retiree who anticipates their children fighting over their inheritances in the future.
There are countless scenarios in which people may want a degree of separation between themselves and their assets because they expect conflict with loved ones or with outside parties. In such scenarios, a real estate trust can be a smart option, even if the owner intends to occupy the space as their primary residence.
Connecting clients with reasonable guidance or with a professional who can help them lower the risk of their residential real estate transaction can help an agent fulfill their professional obligations. If clients may benefit from creating a real estate trust or LLC, an agent may need to find a lawyer to help them.