There are seven main types of property ownership: sole ownership, joint tenancy, tenancy in common, tenancy by the entirety, property-owning partnership (LLC), property-owning corporation, and property-owning trust. Each type of ownership has its own pros and cons, so it’s important to weigh all the benefits and drawbacks before choosing the one that will best fit your needs.
Property ownership comes in many forms, each with its own advantages and disadvantages. For example, sole ownership gives an owner complete control over a property, but also sole responsibility for mortgages, taxes, and repairs. On the other hand, joint tenancy allows owners to share the financial burden of a property, but all owners must constantly agree on major decisions, which can delay any return on investment. Basically, whatever type of property ownership you choose will have a significant impact on your financial and legal responsibilities and rights.
Let’s take a look at the seven main types of real estate ownership and explore the benefits and drawbacks of each.
The 7 main types of property ownership
Choosing the right type of property ownership can be a challenge. The following table summarizes the main characteristics of each model and the ideal scenarios in which they may apply:
| Type of property ownership | Definition | Ideal scenario |
|---|---|---|
| Sole ownership | One person owns the property outright. The owner has complete control over the property but is also solely responsible for mortgages, taxes, and repairs. | Single individuals who want complete control over a property and have the means to handle the financial responsibilities |
| Joint tenancy | Two or more people own the property together, allowing them to share the financial burden. However, all owners must agree on major decisions regarding the property. | Couples, families, or business partners who are well-equipped to share the property and its responsibilities |
| Tenancy in common | Similar to joint tenancy, but each owner has a distinct share of the property, allowing them to sell or transfer their share without the consent of other owners. | Groups of unrelated individuals who want to own property together while maintaining some level of independence |
| Tenancy by the entirety | A type of real estate ownership specifically for married couples that provides security and protection for both spouses. Only recognized by about half of all U.S. states. | Married couples who want to own property together with added protection and security |
| Owning partnership (LLC) | A group of individuals forms a partnership to jointly own and manage the property. | Groups who want to invest in property together with added liability protection |
| Owning corporation | A corporation owns the property and shareholders each have an ownership stake in the property. | Groups of individuals or businesses interested in jointly investing in a property with added liability protection |
| Owning trust | A trust owns the property and gives an ownership stake to each of the beneficiaries. | Individuals or groups who want to transfer property ownership to a trust for estate planning, tax benefits, and asset protection |
Now that we’ve covered the basic definitions, let’s dive a little deeper into the pros and cons of each type of property ownership.
Sole ownership
Sole ownership means that one person owns a property outright. This is the most basic form of property ownership. The biggest advantage of sole ownership is that the owner has complete control over the property, so they can basically do whatever they like with it. The downside is that the owner is also solely responsible for managing the property, including covering any mortgages, taxes, and repairs.
Joint tenancy
Joint tenancy means that two or more people own a property together, which can be an ideal option for couples, families, or business partners. A major advantage of joint tenancy is that the owners can share the financial burden of the property, including mortgages and taxes. However, all owners must make decisions related to the property together, which can lead to disagreements and subsequently delay development, as well as any return on investment.
Tenancy in common
Tenancy in common is similar to joint tenancy, but with one key difference: each owner has a share of the property. This means that each owner can sell or transfer their share of the property without the consent of the other owners. This can be a great option for unrelated owners who want to maintain some level of independence. The disadvantage is that all owners must still agree on how to manage the property as a whole, which can create challenges.
Tenancy by the entirety
Tenancy by the entirety is a special type of joint property ownership for married couples. In this model, both spouses own a property together and have equal rights to it. If one owner dies, the surviving owner automatically becomes the sole owner of the property. This can be a great joint ownership option for married couples, as it provides a level of security and protection for both spouses.
Property-owning partnership (LLC)
A limited liability company, or LLC, is a type of partnership that allows for multiple owners to share in the ownership of a property. In an owning partnership model, each owner has a percentage of ownership and is protected from personal liability in case of any legal or financial issues. This option is ideally suited for investors or business partners looking to own property together.
Property-owning corporation
Rather than being owned by an individual or a group of people, property can be owned by corporations. These are known as real estate holding companies, and they are often used by investors or businesses looking to own property for commercial or investment purposes. The main upside of owning property through a corporation is protection from personal liability, as the shareholders are not personally responsible for the corporation’s debts or liabilities.
Property-owning trust
When a property is owned through a trust, that means it is held by a trustee on behalf of the trust’s beneficiaries. This is a popular option among property owners looking to protect their assets or pass them on to future generations. Owning property through a trust offers the advantages of protection from creditors and the ability to control how the property is used and managed.
FAQ
What is the most common form of real estate ownership?
The most common form of ownership in real estate is sole ownership, which is when a single person owns an entire property outright.
What is the simplest form of ownership in real estate?
The simplest form of ownership in real estate is sole ownership, as it does not involve sharing ownership responsibilities or setting up complex legal structures.
What are the two types of property?
The two types of property in real estate are residential property and commercial property. Residential property includes houses, apartments, and other types of homes. Commercial property includes office buildings, retail spaces, and similar non-residential buildings.
What is the most popular type of property ownership?
Property ownership varies based on location and the needs of each individual or group, but the most popular types of ownership tend to be sole ownership and joint tenancy, as they are the easiest to set up and manage.
What is community property in real estate?
Community property is a type of property ownership recognized in certain states in the United States, including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. This law applies to property owned by married couples and registered domestic partners.
Under community property laws, any real estate asset acquired by either spouse during the marriage is considered to be jointly owned by both spouses, regardless of whose name is on the title or deed. This means that both spouses have an equal ownership interest in the property and responsibility for any debts it may incur. When a couple gets divorced, the community property is usually divided equally between them. Some states also have laws for the separation of property before marriage, during marriage, or after marriage.
Key Takeaways
- The seven main types of property ownership are sole ownership, joint tenancy, tenancy in common, tenancy by the entirety, property-owning partnership (LLC), property-owning corporation, and property-owning trust.
- Sole ownership is when a single owner has complete control and responsibility over a property and gains all of its profits.
- Joint tenancy is when a property is co-owned by two or more persons, allowing them to share the financial burden and management decisions over the property.
- Tenancy in common is similar to joint tenancy, but each owner has a percentage share of the property that they’re free to sell or transfer, thus offering all owners more independence.
- Tenancy by the entirety is specifically for married couples and provides security and protection for both spouses.
- Property can also be owned by business partners, shareholders, or beneficiaries through an LLC (partnership), a corporation, or a trust managed by a trustee.
View Article Sources
- SI 01110.510 Sole vs. Shared Ownership – Social Security
- Property Ownership and Deed Recording – California State Board of Equalization
- Article 5. Tenancy by the Entirety – North Carolina General Assembly
- Real Estate Holding Company – U.S. Office of Government Ethics
- Real Estate Investment Trusts (REITs) – Investor.gov
- Is an Asset Protection Trust Right for You? – Trust & Will
- Investing In Real Estate Pros and Cons: 2023 Update – SuperMoney
- What is Fractional Ownership? Pros And Cons Of Fractional Home Ownership – SuperMoney
- Two Names on Deed, One Person Dies, What Then? – SuperMoney
- How to Invest in Real Estate: An Expert Guide for Beginners – SuperMoney
