Deal Structure

Every investor and partner has their own interests and knowledge to bring to the table; therefore, real estate development deals can be structured in various ways. In addition, investors and partners may belong to varying tax brackets; therefore, it is worth exploring how different legal entities have varying tax implications. Residential lot development deals commonly utilize two different ownership structures: retail lot ownership structures and builder/partner ownership structures (see below). Such ownership structures commonly utilize Limited Liability Companies (LLCs) and Limited Partnerships (LPs). By participating in retail lot ownership structures, builders agree to purchase finished lots from land developers, who in turn, expose themselves to higher risk-returns. Whereas in builder/partner ownership structures, builders are the investors, and they typically assume majority ownership. Joint Venture Agreements (JVs) can also be used to structure deals, especially in commercial real estate. In this case, partnership and operating agreements are used to state each party's role in the ownership structure.

Below, there are three examples of how single-family residential lot developments can utilize different entity structures:

Every investor and partner has their own interests and knowledge to bring to the table; therefore, real estate development deals can be structured in various ways. In addition, investors and partners may belong to varying tax brackets; therefore, it is worth exploring how different legal entities have varying tax implications. Residential lot development deals commonly utilize two different ownership structures: retail lot ownership structures and builder/partner ownership structures (see below). Such ownership structures commonly utilize Limited Liability Companies (LLCs) and Limited Partnerships (LPs). By participating in retail lot ownership structures, builders agree to purchase finished lots from land developers, who in turn, expose themselves to higher risk-returns. Whereas in builder/partner ownership structures, builders are the investors, and they typically assume majority ownership. Joint Venture Agreements (JVs) can also be used to structure deals, especially in commercial real estate. In this case, partnership and operating agreements are used to state each party's role in the ownership structure.

Below, there are three examples of how single-family residential lot developments can utilize different entity structures: