Real Estate Limited Partnership - RELP

  

Categories: Real Estate

Well, it's more or less just like any other limited partnership. If something goes horribly wrong, the partnership goes bust, bankrupt, kaploowee...but personally, you...don't. That is, the bill collectors can't kick you out of your own home, sell it, and then use those proceeds to pay off your debts.

So what's different? Uhhhh yeah: the building. Or land. Or apartment complex. The intent of this limited partnership is real estate, and there's a key element that makes it look and feel financially different: most of the profits are not taxed at the LLC level, but rather are passed through to the partners, who then pay (usually) ordinary income tax rates on those profits.

So, yes, the rates are higher in Ordinary v. Long-Term investment gains, but at least they're taxed "only" once and not twice, as they would be in most corporations that pay dividends. So that's something.

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Finance: What is REIT?8 Views

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finance a la shmoop what is a REIT all right people let's start with the basics

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the letters reet real estate investment trusts it's basically a mini mutual fund [REIT written on chalkboard]

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for real estate investments think a chain of old age homes which might carry

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a market value of a million bucks each but which throw off 80 grand a year in

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net cash profits that is the entire chain of old-age homes throws off 80 [People with homes for heads appear]

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grand a year in cash profits all right in melding together a whole bunch of old

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age homes at least in theory the volatility of anyone home dying that's [Heart rate monitor appears]

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the risk of it and then affecting the creditworthiness of the entire portfolio

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of real estate holdings is lowered with scale a REIT can then borrow money more

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liquidly or easily let the transaction cost $4 or a lot less and it can [Coins falling]

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leverage its legal obligations and its meds buying process with scale because

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it's a lot cheaper per pill to buy four million aspirin a month in just four

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hundred along with volume deals on diapers and dentures that you know [Piles of diapers and dentures appear]

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across a much bigger swath of buyers well REITs have been around for a while

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ironically they came into existence as an extension of the cigar excise tax in [Man smoking]

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1960 and extend as far in ownership as warehouses commercial office buildings

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shopping malls where piercings happen in strange places and apartment complexes

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of all shapes and sizes well to qualify as a read a company must invest at least [An apartment complex]

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75% of its assets in real estate re there that they re NRB holding cash or

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US Treasury bonds with the intent of investing in real estate it has to

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receive at least 75% of its gross profits from real estate rentals it has

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to pay out at least 90% of its taxable profits as dividends to its shareholders

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annually and basically the government is saying well if you're gonna act like a [Man talking in congress]

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REIT you actually have to be one you can't have 75 percent of your gross

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profits in like oil dividends or dividends from tech companies if those

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even exist well a REIT has to have at least a hundred shareholders and have

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its ownership diversified such that at least half of its ownership shares are

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held by five or more individuals like it has to actually look like a fund it

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can't just be a shell corporation put up by one guy to uh you know take advantage [Man stood outside of Shell co.]

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of the system well REITs are publicly available for

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Joe Schmo to invest in they tend to pay a very high dividend and they grow asset

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values at a modest premium to inflation like a few percent a year that is they

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don't grow much but they pay a lot of cash dividend out and that's nice for [Cash falling]

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old people so most of their payback to investors is

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quote bond-like unquote and that's a REIT now keep an eye out for those bulk

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diaper deals for grandpa and good luck dealing with the bulky diapers [Diaper throw into trash and woman appears]

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