Real estate company: Founding a company

Do you want to buy and rent out your first property? You have inherited a property and now want to work in real estate management, property management and other related areas yourself, or even more, you want to become a real estate investor yourself? Then the big question is, which company is the right one? What is the first step?

Basically, you have many different possibilities and options as to how you can set up your business for the future. To give you an initial overview, we have written this guide to the different types of companies for you. Here you will learn about the different options you have as a founder in the USA. Definitions, start-up tips, advantages, disadvantages and taxes. Everything you need to make a good decision.

Legal forms USA – Overview

• LLC (cf. GmbH)
• Limited partnership (cf. limited partnership)
• General partnership (cf. general partnership)
• Real Estate Limited Partnership (cf. Immobilien-KG)
• C Corporation (cf. stock corporation)
• S Corporation (cf. small stock corporation)
• Real Estate Holding (cf. Real Estate Holding)
• REIT/ Real Estate Investment Trusts (cf. real estate investment company)

Combine legal forms:

• Multiple Entities

For the sake of completeness:

• Sole Proprietorship (cf. sole proprietorship)
• Owning private real estate in the USA (cf. private real estate ownership in Germany)
• Tenancy in Common (TIC) (cf. fractional community)

Limited Liability Company (LLC)

An LLC (Limited Liability Company) is a flexible and popular legal form in the USA. It offers its owners the advantage of limited liability, similar to a corporation, but combines the tax advantages of a partnership. Profits and losses are attributed directly to the shareholders, which avoids double taxation. In addition, an LLC offers a simple structure and flexibility in administration, which makes it particularly attractive for small companies.

• LLC

LLC: My recommendation for the first 10 properties

For the first two to ten properties, an LLC (see GmbH in Germany) is best suited to minimize liability risks and at the same time take advantage of tax benefits. The LLC limits the personal liability of the owners, while profits and losses are attributed directly to the shareholders, which avoids double taxation. In comparison, a Limited Partnership (see KG) offers more flexibility in terms of passive participation, but the general partner bears full liability. A general partnership (see OHG) involves higher risks due to unlimited liability.

• More about the LLC

Limited Partnership

A limited partnership consists of at least one general partner and one limited partner. The general partner bears full liability for the company’s debts, while the limited partner is only liable to the extent of their contribution. This structure is often used in equity investment or real estate projects, as it enables a clear separation between active and passive participation. From a tax perspective, a limited partnership benefits from the fact that profits are only taxed at partner level.

• Limited Partnership

General Partnership

A general partnership is a partnership in which all partners have unlimited liability. This legal form offers flexibility and simple formation without major formalities. Profits and losses are attributed to the partners and are taxed personally by them. However, the partners’ full liability for the company’s debts entails a higher risk, which is why this form may be less suitable for certain business models.

• General Partnership

Real Estate Limited Partnership (RELP)

A real estate limited partnership (RELP) is a special form of limited partnership that is used for real estate projects. In this structure, passive investors invest as limited partners, while the general partner takes over the operational business and has unlimited liability. RELPs offer the advantage of tax transparency and are particularly suitable for large real estate investments where the parties involved want clear liability and profit relationships.

• Real Estate Limited Partnership

C Corporation

A C corporation is an independent legal entity that is separate from its owners. It offers a comprehensive limitation of liability for its shareholders. Profits are taxed at the corporate level and distributions to shareholders are subject to personal income tax, which can lead to double taxation. Nevertheless, this legal form offers advantages such as access to capital markets and the possibility of having an unlimited number of shareholders.

• C Corporation

S Corporation

The S Corporation is similar to the C Corporation, but with the difference that profits and losses are passed on directly to the shareholders, thus avoiding double taxation. However, there are restrictions on the number and type of shareholders. This legal form is often chosen by smaller companies that want to benefit from tax transparency but at the same time need the limited liability of a corporation.

• S Corporation

Real Estate Holding

A real estate holding company is a type of company that is used specifically for the ownership of real estate. This structure provides legal and tax separation between the owners and the property owners. It is ideal for investors who own and manage several properties without holding them directly in their own name. This allows liability risks to be reduced and tax advantages to be exploited.

• Real Estate Holding

REIT (Real Estate Investment Trust)

A real estate investment trust (REIT) is a special type of company that invests in real estate and is traded on the stock exchange. Investors can acquire shares and thus invest indirectly in real estate without owning real estate directly. REITs are tax-privileged, but must distribute a large part of their profits to shareholders as dividends. They are a popular option for investors looking for a liquid and diversified investment opportunity in the real estate sector.

• REIT

Multiple Entities

The combination of several company forms offers entrepreneurs the opportunity to spread risks and maximize tax advantages. For example, an LLC can be used in conjunction with a corporation to separate operational and administrative functions. This is particularly useful in the real estate industry or for more complex business models where different business areas need to be legally and fiscally separated.

• Multiple Entities

Sole Proprietorship

Sole Proprietorship, also known as a sole proprietorship, is the simplest legal form in the USA. The owner bears sole responsibility for the business, but also has unlimited liability for its debts. This form is suitable for smaller companies or freelancers who do not require a complex structure. As there is no separation between the company and the owner, taxation is levied directly on the owner’s income.

• Sole Proprietorship

Owning private real estate in the USA

Direct ownership of real estate in the USA as a private individual offers both opportunities and risks. Owners benefit from the increase in value of the property and the rental income, but must also observe the tax and legal obligations. In addition, personal ownership of real estate can lead to liability risks, which can be minimized by using a suitable legal form such as a real estate holding company or an LLC.

• Owning private real estate in the USA

Owned land or leased land: difference

Some weekend homes are located in popular holiday regions. Others are considered more of an insider tip and are hidden away on the edge of the mountains, near the Main River or in the middle of nature. If you want to buy a weekend house, you can choose whether you prefer nature, water or mountains. Decide on a location that you individually prefer. Weekend homes are not designed for residential purposes. They are for recreational purposes. For this reason, it is important that you feel comfortable in the area. If you are planning a rental, you should find out which locations are particularly popular. We will be happy to assist you in this and offer you weekend houses that exactly meet your individual requirements.

Reading tip: Buy a farm

The decision to buy a farm is made by families as well as couples or singles in middle or older age, who want to change and appreciate the individual way of living in the middle of nature. We offer farms in attractive rural locations. Read more here: Buy a farm.

Cottage with garden plot:

Country house and idyll in one:

The perfect getaway on vacation (+ potential for rental):

Residential purpose and purchase agreement

When buying a weekend home, the demands of buyers differ from those who want to purchase a property for residential purposes. Weekend homes are often smaller and more simply furnished than residential properties. The land on which a weekend home is located does not necessarily have to be the subject of the purchase contract. Many weekend homes are on leasehold land. This is particularly the case within garden colonies where weekend homes are often managed on leasehold land.

Lease land

If you lease the land, it does not become your property. The advantage is that the purchase of the weekend house is significantly cheaper than if you also purchase the land. The disadvantage, however, is that you sometimes cannot use the leased land as you would like. Especially in garden plots there are specifications. For example, you must plant part of the garden with fruit or vegetables and use it accordingly. Find out in advance about the possible uses and the requirements in relation to the leased land. It is also important to find out what will happen to the leased land in the future. Sometimes the owner has plans for a different use. We will be happy to assist you in obtaining this information.

Owned land makes for higher purchase price

If the weekend home you have shortlisted is on freehold land, you will have to pay a higher purchase price. In return, you acquire ownership that enables you to use the weekend house and land as you like. There are no covenants, unless you are buying in a privatised garden allotment and the owners have collectively decided on certain covenants at the meeting. You can find this out in advance. Otherwise, you can use the garden land as you wish and create an oasis for relaxation and recreation.

Dreamlike at the North Sea:

Perfect for families: close to the beach.

Apartment or house? Tips for the purchase

Owning instead of renting. Most people prefer to spend their holidays in the same place, over and over again. So why pay rent when you can be the owner?

Even better, the condominium or weekend house can be easily rented out with management. In this way, the weekend apartment or house also generates a return.

Buy an apartment: Condominium instead of rent

If you want to buy an apartment, you have a choice of different properties. You can invest in an expensive apartment in an advantageous city centre location to rent out on the open housing market or move in yourself and live in an attractive and popular residential location. Alternatively, opt for an apartment that is located on the outskirts of a city or that is in the countryside. There are apartment buildings there as well, where apartments are sometimes offered at very reasonable prices. If you are looking for a housing option that is cheap in terms of monthly costs and if you cannot invest a high purchase price, this option is a very good choice for you.

• Buying an apartment: Tips

Buying a house: Tips for the second home

The dream of owning your own home, living independently within your own four walls instead of in a rented holiday apartment, being able to design everything yourself and furnish it according to your individual wishes. Buying instead of renting means: building up knowledge. What is buying a house all about?

With wishful thinking around the “dream house” for the holidays it is far from done. Because there is much more to buying a house. The goal of being able to sit back, relax in your own garden and enjoy life at the weekend is a long way off. To make this as easy as possible, here are the best tips & tricks, what you should pay attention to when buying a house, and what pitfalls you can avoid.

• Buying a house: Tips

Buying a weekend house: Important criteria

Once you have obtained all the information relevant to the purchase of the property, you should also consider the criteria that are relevant to the purchase of a weekend home.

Old building: Check building fabric to water supply

Pay particular attention to the fabric of older houses and those that are not of solid construction. Wooden houses, for example, need very good maintenance, ideally done inside and out. Include the condition of the roof in your research and find out if and how the weekend home can be heated. Especially in remote regions along the Main or in the Taunus, heating or connection to the central water supply are not a matter of course. Mountain huts, which are sold also gladly as weekend houses, have sometimes only a fire-place and a well, from which clear water can be won. But it is precisely this equipment that makes a very special attraction for many buyers of weekend houses.

Condition: Windows, doors & Co.

The condition of the windows and doors is also an important purchase criterion. Find out whether renovation work is due in the near future and how high the investment is likely to be. The more information you gather, the more certain your purchase will be.

Dream property in the Alps: Kitzbühel

Valley view with classic wooden elements

Building permit and extract from the land register

A little caution is advised with weekend houses, which are offered at very low prices. Pay particular attention to the building fabric of these properties and enquire about any conditions, such as those imposed by the authorities responsible for the preservation of historical monuments. It is also important that you always ask to see the planning permission and, if the property is owned, the extract from the land register. There are weekend houses that have been built without permission. If you come to the attention of the authorities, in the worst case scenario you will have to demolish the weekend house and will not be able to claim any compensation.

Buy a farm: Country house in the green

Buying a farm – The decision to buy a farm is made by families as well as couples or singles in middle or older age, who want to change and appreciate the individual form of living in the midst of nature. We offer you farms in attractive rural locations.

Buying your own farm as a permanent residence or as a weekend home. You need to decide if you want to buy a property in need of renovation. These farms can often be purchased at a very reasonable price. Alternatively, there are properties that have already been refurbished by their previous owner and are in a modern and very good condition. These farms are usually ready for immediate occupation. However, you will have to expect a higher purchase price. This is especially true if the farm is in a very central location with a good infrastructure.

• Buy farm

Buy a holiday home: Live and rent

Holiday home & holiday apartment – The dream of a holiday home exists for many city dwellers. Whether it’s a house by the sea, in the warm south or simply a retreat in the countryside. However, there is a lot to consider when making such a big decision and you should plan well before you decide to take the big step.

Prices of €200,000 to €300,000 are quite common for smaller properties of 40 to 50 square metres of living space.

Modern property in the countryside or in holiday areas are often on offer. The perfect properties for those who want a quiet retreat. However, such an investment is by no means cheap and finding the right property is not easy. In addition, you should consider a few things before you decide to buy.

• Buy a holiday home

This is where we like to buy weekend houses

Which places are particularly popular? We have evaluated the current search queries of the Germans and evaluated the following top list of the most popular places in Germany, for weekend homes.

Sauerland: Weekend house in NRW

In fact, one of the most popular places in Germany is Sauerland. Located in North Rhine-Westphalia, the Sauerland is a real hotspot for holiday homes and weekend cottages for 17.93 million people who live in NRW alone.

North Sea: sea air and beach

Fresh sea air and quiet beaches. Along with NRW, the North Sea is another hotspot in Germany for the holiday domicile. Well deserved, because here you can find everything from culinary delicacies to entertainment, away from the tranquility of the beaches.

Eifel: Nature and National Park

Not much far from the Sauerland you find the Eifel. Rhine, Moselle, absolute nature. From the National Park and its tourism, to hiking through kilometers of trekking trails, the Eifel attracts especially the buyers who are also looking for outdoor activities.

Lower Saxony: North Sea, Netherlands …

Anyone who wants to travel from North Rhine-Westphalia to the North Sea and who is at the North Sea is in Lower Saxony. Thus, the state has gradually become the absolute region when it comes to retreat from the stressful everyday life.

Hesse: Retreat

Hesse is located in the middle of the most populous state NRW and the wealthy Baden-Württemberg, also sharing the northern Bavaria. This makes the state so popular and that is why it is also number 5 in the ranking.

Baltic Sea: Holiday apartments

Already the North Sea was very popular to buy a weekend house and of course it is also the Baltic Sea. If you want to rent a holiday home, you will find over 20,000 offers. Those who are looking for their own home, bet on their own weekend house.

Foreign property: Denmark, Switzerland and the Netherlands

Denmark, Switzerland and the Netherlands – many buy their weekend home in a nearby country. Mountains, sea air, sun, beach and sea: only a few hours from Germany are many dream destinations for holidaymakers and buyers.

Italy is not only one of the most popular destinations in Europe, because many decide to emigrate to this beautiful country. But not everyone can decide to take such a step, because in Germany lives the family and many memories are firmly connected with this country. If you are lucky enough to be able to afford another property abroad, then this would be the ideal alternative for you.

France: mountains, coasts and life

Every holiday you treat yourself to, you always spend in France? France almost feels like your second home? Have you ever considered buying a property abroad in France? Of course, such a decision needs sufficient consideration and must be weighed. We will help you with the decision and show you in this article online portals where you can find the most beautiful properties abroad in France and show you the most beautiful residential areas.

• Foreign property France

Spain / Majorca: Fincas

Spain is one of the most popular holiday destinations for Germans. No wonder, because here there is besides sun and beach also wonderful landscapes. Besides Mallorca, there are many other beautiful holiday destinations in Spain. However, if you are already sure that your foreign property should be in Mallorca, you can read our article that specializes specifically in Mallorca.

• Property Spain
• Property Mallorca

Italy: Tyrol, Milan, Lake Garda

Lake Garda is one of the most popular destinations in Italy. Not entirely improbable is the thought for holidaymakers who visit the same holiday destination in Italy every year to buy their own small holiday home here. They save not only the search for a suitable accommodation and have to worry whether this is then also available at the planned time, they also save a lot of money. Nevertheless, you should consider that a foreign property requires a certain care. At this point you should weigh up whether the purchase is worthwhile for you.

• Property Italy

Buying real estate: Tips from the investor (external)

Buying real estate but also investing in real estate requires a lot of knowledge and expertise. The best way to learn is to draw from the experience of professionals. Therefore, in conclusion, a recommendation for real estate beginners.

Newcomer Tips + Germany Comparison: Buying Real Estate

External guide (link opens in new tab):

• First property purchase
• Buying real estate: What to look out for?
• Buying mistakes
• Save taxes with real estate

Comparison of cities: Purchase prices in Germany (external)

In these individual guides to the major German cities are the important districts for real estate buyers, information on the infrastructure, as well as prerequisites for the purchase such as income, creditworthiness (credit rating), banks and equity. But much more important: mistakes, risks, rental yields and more. What is decisive for the purchase price and the valuation? Everything about location, building fabric, renovations, equipment and all that, free of charge.

External guides (link opens in new tab)

City / Purchase Price Current:

• Munich ~ 8,993 Euro / m²
• Frankfurt ~ 6,701 Euro / m²
• Stuttgart ~ 6,324 Euro / m²
• Berlin ~ 5,578 Euro / m²
• Hamburg ~ 5,507 Euro / m²
• Düsseldorf / Cologne ~ 5,470 Euro / m²

The testator is free to decide how much he wants to bequeath to whom

The testator is completely free to decide what should happen to his assets after his death. However, in order for a will to be truly valid, it is important that the testator is familiar with the specifics of drafting a will. Small mistakes in the wording can already lead to parts of the will not being interpreted correctly or not being valid in the first place. For this reason, it is of absolute necessity that the will is legally unambiguous.

Facts about the compulsory part

Close relatives cannot be completely excluded from the testator’s inheritance. Even in the event of disinheritance, which was agreed in the will, the relative can sue for the statutory compulsory portion. Incidentally, disinheritance can be effected without giving reasons.

Therefore, it does not make sense for the testator to disinherit a person who is entitled to the compulsory portion. This only leads to disputes. Inherited is nevertheless.

The compulsory portion is half of the statutory share of the inheritance. The compulsory portion is not automatically awarded to the heir by the probate court. The compulsory portion is also not noted in the certificate of inheritance. This means that the compulsory portion must first be claimed by the beneficiary of the compulsory portion from the other heirs.

However, there are special circumstances in which the testator is entitled to disinherit the child in such a way that the child cannot inherit the compulsory portion. This is the case if the child has been sentenced to a prison term of at least one year without probation for a criminal offence.

If a child is also to be deprived of the compulsory portion, the testator must record the motives in the will. Another legally valid reason is when the beneficiary of the compulsory portion seeks the life of the testator or another close person. If the beneficiary of the compulsory portion is guilty of a crime such as theft or bodily harm against the testator, he or she may also be deprived of the right to the compulsory portion.

Entitled to a compulsory share?

But which persons count as next of kin and are therefore entitled to a compulsory portion? This includes children. It does not matter whether they are biological or adopted children. If the testator was married at the time of death, spouses also count as close relatives. The same applies to a registered civil partnership. If the deceased has no children, the parents count as close relatives. Siblings of the deceased, on the other hand, are not entitled to a compulsory share.

The heir’s compulsory portion may be increased if the testator made gifts to other relatives up to ten years before his or her death. This is a claim to a supplement to the compulsory portion. This is the case, for example, if the testator gave away a property five years before his death. The beneficiary of the compulsory portion can demand that the compulsory portion is now calculated as it would have been if the gift had not been made. His or her compulsory portion increases as a result.

It should be noted that the beneficiary of the compulsory portion is not the owner of the estate. He therefore has no say whatsoever in what is to be done with the estate.

The legal succession must also be observed in the will if it is not to lose its validity. If the succession was not observed by the testator, the person concerned can enforce his or her claims in court.

If the claim to the compulsory portion is not asserted within 3 years after the death of the testator, the claim loses its validity. In addition, the claim to the compulsory portion only becomes valid when the testator has died. The compulsory portion cannot be claimed during the lifetime of the testator.

Inheritance and bequests: Compulsory portion

Calculate compulsory part – instructions

Legal succession in the case of inheritance

Legal succession always applies if the testator has not made a will. If there are no relatives, the inheritance passes to the state. However, this is hardly ever the case in Germany.

In the law of succession, kinship is divided into different degrees of order.

If heirs of order I exist, heirs of order II are completely excluded.

The children of the deceased as well as the grandchildren belong to the degree of order I. The children inherit in equal shares. If one of the children is already deceased, his or her children inherit.

Second cousin

If a deceased dies leaving neither children nor grandchildren, the second-degree relatives inherit. These include the parents of the deceased and the siblings. If a sibling has already died, the inheritance passes to their children, the nieces and nephews. If there are no second-degree relatives, the third-degree relatives are the grandparents and their children. These are then the aunts and uncles and the cousins.

Spouse

If no marriage contract has been agreed and the principle of community of accrued gains applies, the spouse of the deceased receives half of the inheritance alongside the children. In addition to the parents and siblings, the spouse even receives three quarters of the inheritance.

This can become dangerous if, for example, a property is inherited. In this case, the spouse has no sole claim to the property. In order to avoid this problem, many spouses opt for the Berlin will.

Berlin will

In a Berlin will, the longer-living spouse inherits everything. The children are excluded as heirs. Only after the death of the second spouse does the inheritance pass to the children. In this way, the property passes to the spouse without an inheritance dispute. However, even in this case, children can override the testator’s last will and claim the compulsory portion.

To prevent this from happening, the will can be amended to include a penalty clause in the event that the compulsory portion is claimed. However, this usually does not have the desired effect of the testator. Children can nevertheless claim their compulsory portion after the death of one parent. However, this becomes economically less attractive, as the inheritance is higher after the death of the second parent.

Parents are not obliged to treat their children equally in their wills

Parents are not obliged to treat their children equally in the will, even if this could avoid disputes after death. However, it is not possible to bequeath certain items of the estate only to certain children. For example, that the first child should inherit only the real estate, while the second child should become heir to the securities. Instead, it is only possible to determine with which quota the individual child receives how much of the total inheritance.

Will and custody

For the testator’s will to be valid, it must be handwritten and, of course, signed. It is absolutely fatal to type the will on the computer for the sake of better legibility. Even if it is signed, it is not valid.

Most testators choose to keep their wills at home. However, this carries the risk that it will be lost, cannot be found after death or that one of the heirs will make it disappear if it falls into their hands and disadvantages them.

It is therefore more advisable to place the will in the care of the probate court. This ensures that the will will be used in any case after the death of the testator. Anyone who decides against this form of safekeeping would do well to inform a trustworthy person about the existence and location of the will.