American West Homes Realty

American West Homes Realty

 Real Estate Investment, Brokerage, and Property Development

Real Estate Investments in Jackson Hole

Real Estate Investments in Jackson Hole are some of the most lucrative investment opportunities in the Western Rocky Mountain Region. There are typically five types of investments that people are involved with in the valley area. The Resort business is different than the businesses found in most cities. It is a seasonal community and an entrepreneur must understand how to cash flow the business during slow (off-season) months to survive and make a profit, and these types of investments fall into a few different categories;

Business Investments

The purchase of an existing business is usually the easiest type of business investment. Location, rent, inventory, accounts, or contracts of the company come into play when buying a typical Jackson Hole business. A business that has real property included with it tends to drive the price very high but the real estate asset has to be considered and may prove to be very valuable depending on the location of the business. Buyers need to be very savvy when looking at all the numbers and must be able to read financial statements well. It is a good idea to conduct a formal real estate appraisal on the entire business asset and get a bank involved. Bankers usually know how to read numbers and project cash flow of a business that has proper financial statements. It is also hard to find commercial appraisers in Jackson that have the experience to conduct a business appraisal properly. There are larger appraisal services in Salt Lake City that are qualified to come to the area to conduct the appraisal. Some buyers that have existing knowledge of a similar business can buy an existing business and understand how to grow the business and make the proper adjustments needed to make up for an appraisal that may fall short of the purchase price.

New Business Start-ups

Many people engage in the start-up of a new business venture in Jackson Hole. The most popular type of investment seems to be restaurant endeavors for some reason. These types of businesses seem to also be the most risky. Nobody goes into the restaurant business thinking it may not do well or fail but the reality is they often do. In most cases the start-up costs and overhead are very high with high rent, kitchen equipment, food and payroll to name just a few items. Many of the more popular business start-ups are contactor related. As the building boom stays fairly steady, a contractor seems to be able to start and operate from a pick-up truck and a cell phone. In recent years however the license requirements are starting to get tougher and the contractor needs specific job skills and intellect to keep going under the new regulations. As they grow larger they will usually get a shop and hire as needed. Other popular new business ventures include lodging, real estate, banks, and specialty stores in and around Jackson Hole. In recent years many sports related specialty stores have sprung up and seem to survive.

Real Estate Development

This is probably the largest dollar volume business that exists in Jackson Hole. It usually takes substantial dollars and backing to be successful in Jackson Hole Developments. More often than not, the local that owns the land is usually in the best position to make this work. The planning process is long and difficult as many residents are resistant to change in the valley. Some of the larger developments of recent years have been in Teton Village with the advent of the Teton Club, Teton Mountain Lodge and the new Four Seasons Resort Hotel.

Condominium Rentals

One of the easiest real estate investment entries can be an investment in a condo rental property. This is the most common investment vehicle choice as it is easy and the owner can use the investment as a second home in Jackson Hole. There is a plentiful supply of this type of property and prices range from $300,000 to 3 million dollars. Rental statistics are usually the best on the older fixed up properties that have 3 or more bedrooms in Teton Village. The Aspens at the Racquet Club Resort are the most moderate in pricing. An investor needs to carefully consider the mortgage amount, property management fees and overall expenses including utilities and home owner fees.

Home Rentals & Investments

These types of investments are also a popular business investment in the area. The typical price for homes is the deterrent for most buyers seeking this type of vehicle as it usually can throw off a negative cash flow. A New trend seems to be in the form of partnerships and Exclusive Clubs that are formed to invest in multiple properties in many vacation areas in the World and also provide transportation for the club member. Most of the short term home rentals are found on the west bank region in Teton Village or the Racquet Club Resort and are priced between $800,000 and 7 million dollars.

Limited Liability Entities for Real Estate Investments

After searching the market for the perfect piece of Jackson Hole real estate, you have found property that will satisfy your needs and give you future real estate investment opportunities. It is now time to be concerned about protecting yourself from the risks involved in property ownership with Wyoming Real Estate.

One way to reduce such risks is to hold Jackson Hole property through a limited liability entity. By choosing the entity best suited to your specific situation, you will ensure that you have the flexibility and control that you need.

Although other limited liability entities are available, for the following reasons, the preferred entities for Jackson Hole real estate investments are the limited liability company (LLC) and the limited partnership (LP).

Limited Liability

As in any business transaction, one of your primary concerns in Jackson Hole real estate investments should be your vulnerability. Owning property in Jackson Hole Wyoming as an individual or in a general partnership creates unlimited liability. Tenants, guest, and, in some cases, trespassers may sue you for real or imagined grievances.

If they prevail, they may seek to use your bank account, home, and personal possessions to satisfy the court’s judgments. By using a Wyoming LLC or LP for a Wyoming real estate investment, you may be able to avoid personal liability for accidents that occur on the property.

Liability will be limited to the extent of the LLCs or LPs assets. If anything goes wrong on the property, you will appreciate the protection limited liability provides.

Beneficial Management Structure

Depending upon your specific situation, either a Wyoming LLC or a LP may provide the management structure you need. A LLC provides a flexible structure that allows members to manage the entity or to elect a manager or a group of managers. All members of a Wyoming LLC are provided limited liability. Additionally, Wyoming LLC laws allow one person to form a LLC.

LPs, however, require at least one general partner and one limited partner. The general partner is personally liable, but that may be handled by forming a corporation or LLC to serve as general partner, thus encapsulating any liability in a protected entity. When you use a Wyoming LLC or LP for Jackson Hole real estate investments, you may also benefit from estate planning and gifting opportunities available.

Reduced Taxation on Appreciated Property

Although the structure of a corporation may be familiar, corporations are undesirable for real estate investments. If you hold Wyoming real estate in a LLC or LP and later decide to sell the property to some third party, the tax benefits or using a Wyoming LLC or LP will become apparent.

Unlike a corporation, LLCs, LPs, and Subchapter S corporations allow flow-through tax treatment. Profits are only taxed once, while they are taxed twice in a corporation. Appreciation on the property will result in less tax in an LLC, LP, or Subchapter S corporation than in a regular C corporation.

In addition, a LLC or LP will provide benefits if you transfer the property to your personal use or the personal use of one of your LP partners or LLC members. Unlike either a C corporation or a Subchapter S corporation, such a transfer to personal use would not result in tax consequences in a LLC or LP.

Although other entities may provide limited liability, the tax consequences of using other entities make an LLC or LP preferable.

Article courtesy of: Garrett SuttonSutton Law Center /