Ownership of Real Estate by Organizations
November 9, 2020
Many times, ownership of real estate can be done by organizations. One type is called a corporation. If a corporation purchases real estate, the corporation takes title in severalty. The word severalty means one only; it comes from the root word sever, which, in real estate terms, means to cut everybody else off and buy all by yourself.
Another way to purchase property with an organization is through a partnership. Let’s contrast a general partnership versus a limited partnership. A general partnership is where two parties get together and decide to invest in real estate. As general partners, they have unlimited liability. They also will make the decisions on how to invest and how the partnership is to be run.
Sometimes they might bring on what is called limited partners who would invest say $5,000 a piece in the general partnership. The limited partners who invest 5,000 have limited liability, which means all they could lose will be $5,000. The general partners, keep in mind, have unlimited liability.
Another way an organization can own property is through a real estate investment trust or a REIT. This is basically a huge mutual fund for investing in real estate. People who sell mortgage securities, stocks and bonds and mutual funds must have a securities license just like real estate licensees need to have a real estate license. The Securities and Exchange Commission, or the SEC, is a government organization that supervises the sale of securities every day in our country.
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