- A real estate holding company is a business (LLC, S-Corp. or other) that owns real estate that it either holds and leases or sells to make a profit. Some business owners form real estate holding companies to avoid paying taxes on real estate their business entity owns. This is done by selling commercial buildings to the holding company. The business, in turn, simply leases the real estate from the holding company. Some companies, often referred to as "investment companies," exist solely to make profits from leasing and selling real estate.
- Most real estate holding companies start by incorporating. This is usually done with the help of an attorney or CPA. Because they can have a variety of functions, holding companies must choose a corporation that will provide them the best benefit. A LLC, S-Corp., C-Corp., limited partnership each have different characteristics, such as providing tax and personal asset shelters and corporate buying power.
- Real estate holding companies obtain capital from many different sources. Some obtain bank financing, solicit investors or use stock dividends to buy buildings. Holding companies will also sell properties to raise capital for other pieces of real estate. Usually one individual or a team scouts for equitable properties and makes offers in the name of the company. Properties are maintained by company employees or third-party management companies.
