If I do purchase investment property what is the best way to hold title?

For-years real estate investors used what is known as a “nominee trust” to hold title. The trustee would hold title under the terms of a trust but the real owner would be set forth on a schedule of beneficiaries filed with the trustee. The purpose of that was try to try to keep the identity of the actual owner private. However after the last downturn there was a lot of litigation about the liability of the beneficiary and the trustee on an agent -principal theory that made that particular method of doing business unattractive. At that time you could basically only own real estate in a corporation, a limited partnership, or a trust, either a nominee trust or in Massachusetts business trust. The corporation and corporate entities were not as attractive in terms of management and in terms of how you are treated on a federal tax level. We now have limited liability partnerships and limited liability companies which can be treated either as an individual or general partnership entity or as a corporate entity, so they provide a lot of flexibility and good liability protection. The downside is that you must pay $500 per year to file an annual report. However, in an ideal world, you would form an LLC for every building you bought and thereby insulate each property against the liabilities of other properties you might own.  

If you have questions about this or any other real estate matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.