Investing in real estate can be one of the best investments you can make, whether you’re buying your own home or planning to buy property to rent to long-term tenants or vacationers. However, as LGBT people, we are more likely to face discrimination and inequality when applying for mortgages, making investing in property harder.
Investing in real estate can also be more expensive for LGBT people, as we tend to live in cities which are higher demand areas. Buying property with a partner when you aren’t married is also tougher. All this adds more difficulty, alongside standard expenses like renovations, business meth drug testing, and other costs.
Keep Things In Your Name If It’s Your Money
Most LGBT people aren’t married. If you’re one of these people, it’s wise to keep any property you buy, whether commercial or domestic, is kept in your name if you are the one putting in the money.
This is for three reasons:
- Gift taxes. Unless you want to trigger large gift taxes if you decide to sell the property, you should keep assets in your name if you are the one contributing the equity.
- Clarity of ownership. If you and your partner don’t share assets, then there’s also no reason for you to share liabilities either. Having a shared mortgage could mean financial disaster for the partner who is the lower earner if something happens to the other.
- Possibility of separation. In some places, LGBT couples are more likely to separate than straight couples. If you’re the one putting money into a property, keeping it in your name will keep the ownership clear in the case of your relationship ending.
If Jointly Owned, Have A Written Agreement
If you and your partner do decide to own real estate together, there are several ownership structures that you can consider.
- Joint tenancy with right of survivorship. All tenants have an equal right to the account’s assets in the event of one partner dying. If your partner dies, the asset is transferred directly to you.
- Tenants in common. Ownership gets divided among two or more people, but there is no right of survivorship. Your assets will be passed to whoever you name in your will.
- Tenants in common with unequal ownership. For couples who put in unequal amounts to a real estate investment, they might also want to hold unequal amounts of equity. For example, if your partner puts in ⅔ of the down payment, and you pay a ⅓, your partner might own ⅔ of the property, instead of the more standard 50/50 split.
- Married couple. You can transfer properly between married couples tax-free. Ownership of the underlying property will depend on the law in your state. In community-property states, courts usually grant 50% ownership of the property to each spouse. Equitable distribution states that seek to divide things fairly, but not necessarily 50/50.
Whichever option you choose to take, you must have the agreement in writing. A lawyer or an investment professional can help. Even if nothing happens to your relationship, a written agreement in place before you invest will make your life much simpler if you ever decide to sell the property.