So, you, the real estate investor, are trying to secure financing for your real estate investment, and the lender has requested that you create a new Single Purpose Entity for the transaction. You begin to think of all the hassle you will have to endure to open a new SPE (the process is hassle free.), the unnecessary cost (creating a new company is inexpensive), and lost time (you can create a new company online in less than 30 minutes (insert link here), right? Do not worry, this is very common request for real estate transactions when involving private lenders. Let’s review the benefits of using a new single purpose entity for your real estate deal, but first, what is an SPE:
A Single Purpose Entity is a legal entity created to satisfy an investor’s specific investment purpose. In the context of real estate transactions, an SPE is created to own and operate a particular piece of property. The two most commonly used corporate structures for SPEs are either a Limited Liability Company or(LLC) and Corporation. The main characteristic of an SPE is that it holds the title to the real estate and operates no other assets.
Getting back to our original scenario: you are a real estate investor trying to finance a new acquisition. To apply for the loan, the lender required that you create a new SPE. As the experienced and sophisticated investor that you are, you decide to create an SPE for this real estate transaction. This will protect your assets as each will have separate SPEs. Additionally, this way you compartmentalize each property from each other. In other words, in the event of a lawsuit or liability claim against any of your properties, your other properties would be exempt.
It is imperative that creating the SPE does not intimidate you as the process is simple, fast, and inexpensive. As your preferred lender, Vaster Capital requires the use of SPE for any real estate loan. We like to keep it simple and beneficial for you. Please browse our loan programs for your next real estate investment.
If you are looking to invest and don’t know how to start, contact us.