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But wouldn't there be an additional tax advantage: Suppose that we have a company buying houses and an individual buying a house using his salary. In order to

But wouldn't there be an additional tax advantage: Suppose that we have a company buying houses and an individual buying a house using his salary. In order to move money from a company to an individual income tax must be paid and if a company instead invests its money, I assume that no tax is paid immediately. Consequently if companies start bidding for houses, they will have much more money available than individuals, ensuring that houses will in the long run hardly ever be owned by individuals. The result would thus be large company-owned estates, filled with renters.

prepend 4y ago
The individual would just form an llc or even c-Corp and use that to purchase the real estate. I think most real estate rented out is technically owned by a corporation because of the liability issues. So we’re already there. But I think there’s a difference between a solely owned Corp and a huge Corp. But for tax purposes, they seem the same.
- impossiblefork 4y ago
  Yes, but ordinary people earn their income from wages, which are always taxed before they can be put into any LLC. Thus they will end up severely disadvantaged in competition with actual companies for ownership of housing and land.
  - prepend 4y ago
    No, not really. Individuals can deduct the depreciation of rental properties and reduce their taxable income. I think the advantage of corporations over individuals is their ability to more easily raise capital. If an individual is making high levels of income, it’s likely they are already deferring and rerouting income into tax advantaged mechanisms. Kind of like a partner in a high value partnership. But I don’t imagine an individual directly funding a billion dollars through their income. The issue with individuals is that they just aren’t likely to use earned income as the source for these investments. If it were me and I wanted to say invest $1M in rental properties. I would form an LLC and take out a bit loan in the LLC’s name backed by my personal assets as collateral. Then I’d buy property using the loan and collect all income into the LLC to pay the loan and invest in new properties over time. The taxes on my personal income don’t really factor into it.

prepend 4y ago

The individual would just form an llc or even c-Corp and use that to purchase the real estate. I think most real estate rented out is technically owned by a corporation because of the liability issues. So we’re already there. But I think there’s a difference between a solely owned Corp and a huge Corp. But for tax purposes, they seem the same.

impossiblefork 4y ago
Yes, but ordinary people earn their income from wages, which are always taxed before they can be put into any LLC. Thus they will end up severely disadvantaged in competition with actual companies for ownership of housing and land.
- prepend 4y ago
  No, not really. Individuals can deduct the depreciation of rental properties and reduce their taxable income. I think the advantage of corporations over individuals is their ability to more easily raise capital. If an individual is making high levels of income, it’s likely they are already deferring and rerouting income into tax advantaged mechanisms. Kind of like a partner in a high value partnership. But I don’t imagine an individual directly funding a billion dollars through their income. The issue with individuals is that they just aren’t likely to use earned income as the source for these investments. If it were me and I wanted to say invest $1M in rental properties. I would form an LLC and take out a bit loan in the LLC’s name backed by my personal assets as collateral. Then I’d buy property using the loan and collect all income into the LLC to pay the loan and invest in new properties over time. The taxes on my personal income don’t really factor into it.