Methods of sharing ownership of investment land with other co-owners
Most investors might think that investing in vacant land is too expensive and risky as it brings in zero income during the investment period unlike usual commercial and residential properties. However, if acquired the right land at the right time, the return on investment would be far greater than usual residential and commercial investments. Co-owning a land can be a great solution for individual investors who wants to own a land but couldn't afford it by themselves. Co-ownership refers to where two or more individuals own the property simultaneously and it can be done in 3 different methods:
1. Share ownership of investment land through co-ownership
Co-proprietorship means the holdings or ownership of investment land by registering two or more people (or bodies) in the title deed. This method of sharing ownership is preferred in cases where there are less than 5 people sharing ownership of the property.
2. Share ownership of investment land through the formation of separate legal entity to hold the investment land
A separate legal entity is incorporated e.g. a Private Limited company or Limited Liability Partnership, the ownership of the investment land is registered in the name of the separate legal entity and share ownership of the investment is done through holding ownership of the shares of the separate legal entity, this method of sharing ownership of investment land is preferred in cases where the number of people sharing ownership exceed 5 but not more than 50.
3. Share ownership of investment land through holding of profit participating bonds issued by the corporation holding the ownership of the investment land
A corporation holding ownership of a piece of investment land could issue profit participating bonds to finance the purchase of the investment land. The bond besides being entitled to interest in additional distributions on a percentage of the gain obtained from the sale of the investment land. A mortgage bond secured by the investment land enable the holders to have a claim on the investment land put up as its collateral. The corporation might sell the bond to investors, who then collect interest payment until the mortgage is paid off. If the mortgage owner defaults, the bond holders get the investment land. This method of investment is suitable for numerous small investors sharing the investment of land.