LLCs a Favored Entity for Purchasing Real Estate

February 24,2015 | By Robert Moses

 As technology within the residential real estate sector has evolved, an interesting irony has emerged in which the transparency of information as well as secrecy regarding ownership have both increased. The expansion in secrecy regarding ownership can likely be attributed to an increase in the amount of money being invested in real estate. At the same time, investors have become increasingly concerned about privacy and security. This has proven to be particularly true among top-level investors. One of the most common methods by which many investors are now opting to invest in real estate while maintaining their privacy is through the use of limited liability corporations (LLCs). With this option, investors are able to ensure that certain types of transactions can be conducted without being privy to public view. Unfortunately, LLCs have also gained a reputation for making it possible for those withill intentions to cover up assets that are less than legitimate. 

Recently, “Towers of Secrecy: Stream of Foreign Wealth Flows to Elite New York Real Estate,” penned by Louise Story and Stephanie Saul, explored the connection between privacy and high-end real estate. 

While the use of LLCs for the purchase of high-end real estate investments has often been attributed to foreign buyers, “Towers of Secrecy” takes care not to stereotype such transactions as being limited to buyers from overseas. For instance, foreign investors do not form the majority of high-end real estate purchases in Manhattan. Within that market,however, foreign buyers do comprise a significant percentage in the transactions conducted near the Midtown central business district, which is frequently referred to as Billionaires Row. By comparison, domestic investors have a preference for purchases located both north and south of Midtown. 

 

Foreign Investors Attracted to US Real Estate 

In the last few years, foreign buyers have become increasingly active in the residential real estate market in the United States. This has been largely because compared to many other countries around the world, U.S. real estate offers only lower prices. As the economic recovery in the United States has continued, foreign buyers have found that U.S. real estate remains a solid investment. 

The New York Times reported that a majority of the owners of properties at the Time Warner Center have registered their properties in limited liability companies, trusts, and other entities for shielding their identities. While many of the property owners are American and run the gamut from chief executives to Wall Street traders to tech entrepreneurs, the Times reported that a growing percentage of owners are also wealthy foreigners. Furthermore, more than a dozen of those owners have actually been the focus of government inquiries. 

Uncovering the identities of the owners of those properties was far from easy. In fact, it took The New York Times over a year to trace the ownership of those properties by conducting intensive searches of court and business records in nearly two dozen countries. 

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