How U.S. Real Estate Investing Actually Works: Structure, Vehicles, and What Investors Need to Understand
In the first article in this series, I walked through why most serious passive capital eventually gravitates toward real estate. Real estate offers income, inflation protection, tax efficiency, and a longer track record than any other asset class.
What that article didn’t cover was how U.S. real estate investing actually works structurally. The legal vehicles, banking infrastructure, tax considerations, and the differences between how U.S. and international investors deploy capital. This is the article that does that.
A note before we start. Real estate investing involves legal, tax, and regulatory considerations that vary by investor, by jurisdiction, and by deal. The discussion below is structural and educational, not specific legal or tax advice. Anyone deploying capital seriously should work with qualified attorneys, tax advisors, and accountants on the specifics of their situation. The point of this article is to give you the framework to ask the right questions and understand the answers when you get them.
Why Structure Matters
A real estate investment is rarely just an investment. It’s an investment held inside a legal structure that determines how income flows to investors, how taxes get paid, how liability gets contained, and how the investment passes to heirs if something happens. The same property held two different ways can produce dramatically different outcomes for the investor, even when the underlying real estate performs identically.
For passive investors in real estate syndications, the structure is mostly set by the sponsor. The sponsor creates the legal entity, defines the terms, and brings investors into the structure. The investor’s job is to understand what they’re being asked to participate in and whether it’s appropriate for their situation.
For investors taking a more active role, including direct ownership of rental properties or partnership positions in larger deals, the structure is something the investor has to actively design. That’s where it gets more complex.
The Workhorse Vehicle: The Limited Liability Company
Most serious real estate investing in the U.S. happens through limited liability companies, called LLCs. An LLC is a legal entity that owns property in its own name, can sign contracts, can be sued, and can hold a bank account. The investors who own the LLC are called members. Members of an LLC are generally not personally liable for the LLC’s debts or obligations, which is the central advantage of using one. If something goes wrong at the property level, the investor’s exposure is limited to what’s inside the LLC.
LLCs use a structure called pass-through taxation, which means the LLC itself doesn’t pay federal income tax. Instead, the income, losses, deductions, and credits pass through to the members, who report them on their individual tax returns. This is more efficient than corporate taxation in most cases because it avoids the double taxation that happens when a corporation pays tax on its earnings and then shareholders pay tax again on dividends.
The internal rules of an LLC are governed by a document called an operating agreement. The operating agreement defines who the members are, what each member contributed, how income and distributions are split, who has authority to make decisions, what happens if a member wants to exit, and what happens if a member dies. For real estate syndications, the operating agreement is the central document the investor needs to understand before committing capital.
Why Most Investors End Up With Multiple Entities
A serious real estate investor rarely holds everything in a single LLC. The structure usually gets more layered, for three reasons.
Liability isolation. If two properties are held in the same LLC and a lawsuit hits one of them, the other property is also at risk. Holding each property in a separate LLC keeps the risk contained to that specific property.
Tax planning. Different types of real estate income can be treated differently, and certain investor situations benefit from structures that combine multiple entities in specific ways.
Estate and succession planning. Real estate held in the right structure can pass to heirs with significantly better tax treatment than property held directly by the investor.
The result is that experienced real estate investors often end up with several entities, each with a specific purpose. Holding companies that own LLCs that own properties, management entities that operate properties owned by other LLCs, and trusts that own holding companies. The structures get sophisticated quickly.
This is a deliberate trade-off. The structural complexity has real costs. Legal fees to set up entities. Ongoing accounting costs to maintain them. Annual filings, state franchise taxes in some jurisdictions, and the administrative burden of running multiple entities. For an investor deploying a few hundred thousand dollars, a simpler structure usually makes more sense. For an investor deploying meaningful capital across multiple properties, the cost of complexity is more than justified by the protection and efficiency it provides.
A concrete example from my own work. In 2025, I led an acquisition that brought four assets into the business at once: two healthcare operating companies and two real estate assets, one residential and one commercial. Each of those four pieces went into its own LLC. The two operating healthcare companies needed protection from each other, so that a problem at one wouldn’t expose the other. The residential real estate sat in a separate LLC, partly for the same liability reason and partly because residential and commercial real estate have different tax and financing considerations. The commercial real estate had its own LLC because it was a different kind of asset with a different risk profile and different financing options. Four LLCs at the start, with carefully structured ownership and operating agreements connecting them, gave us protection at every layer. The cost was real, in terms of legal fees, ongoing accounting, and administrative work. The protection and the flexibility were worth it. The complexity was the result of thinking carefully about what could go wrong and how to contain it.
Banking Infrastructure
Banking infrastructure is one of the most underestimated friction points in U.S. real estate investing. The reason is that opening U.S. bank accounts for investment entities has gotten significantly harder in the past fifteen years.
After the 2008 financial crisis and subsequent regulatory tightening, U.S. banks substantially raised their identity verification and anti-money-laundering standards. Know Your Customer requirements (Know Your Customer, often abbreviated KYC, is the regulatory process of verifying a customer’s identity before opening an account) became stricter. Beneficial ownership documentation (beneficial ownership refers to the actual individuals who ultimately own or control an entity, even when the entity is held through other entities) became mandatory. For domestic investors with established U.S. banking relationships, this is a paperwork issue. For new entities and especially for entities involving foreign ownership, it can become a real obstacle.
The practical impact is that an investor can have the right legal structure, the right capital, and the right deal lined up, and still get delayed for weeks or months because the banking side of the structure isn’t moving. International investors face this more acutely than domestic ones, but it’s a consideration for any new investment structure.
Title insurance, escrow accounts, and 1031 exchange intermediaries (a 1031 exchange is a tax provision that allows a real estate investor to defer paying capital gains tax on the sale of a property if they reinvest the proceeds in another similar property within a specified time frame) are additional pieces of the banking and financial infrastructure that every real estate investor encounters. None of these are optional and all require time to set up properly.
Tax Considerations for U.S. Investors
U.S. real estate offers several tax advantages that have made it one of the most tax-efficient asset classes available to U.S. taxpayers.
The most important is depreciation. Depreciation is an accounting concept that allows the owner of a building to deduct a portion of the building’s cost from taxable income each year over many years, even when the building’s actual value is increasing. The deduction reflects the theoretical wear and tear of the building over time. In practice, depreciation can significantly reduce or eliminate the taxable income from a rental property, even when the property is producing positive cash flow.
When the property is eventually sold, the depreciation that was deducted gets recaptured (meaning the IRS effectively reverses the benefit and taxes it as income at the time of sale). But the timing difference between deducting and recapturing produces real value.
Beyond depreciation, U.S. real estate investors benefit from the 1031 exchange mentioned above, from the ability to use mortgage interest deductions, from favorable capital gains treatment on long-held property, and from various provisions related to qualified opportunity zones and other targeted programs. The specifics depend on the investor’s situation and require professional guidance.
Tax Considerations for International Investors
International investors deploying capital into U.S. real estate face a different and more complex tax picture. Two issues matter most.
First is FIRPTA, the Foreign Investment in Real Property Tax Act. FIRPTA withholds taxes when foreign investors sell U.S. real property, and it does so by requiring the buyer to withhold a portion of the gross sale price (not just the gain) and remit it to the IRS. The withholding is creditable against the actual tax liability when the foreign investor files a U.S. tax return, but the cash flow consequence of having a significant portion of the sale proceeds withheld until the tax return is processed can be substantial. The specific percentages and exemptions are situation-dependent and warrant proper advisory work.
Second is U.S. estate tax. The U.S. estate tax exemption for foreign investors is dramatically lower than the exemption available to U.S. citizens and residents. If a foreign investor dies holding U.S. real property directly, the estate can face a substantial tax bill before the property can pass to heirs. This is the single largest reason that most foreign investors in U.S. real estate use multi-entity structures, often placing foreign corporations or trusts between the investor and the U.S. property. The structures are designed to address the estate tax exposure while still capturing the operating benefits of U.S. real estate investment.
The specifics of how these structures work depend on the investor’s country of residence, the existence of any tax treaties between that country and the U.S., the investor’s overall financial picture, and the size of the investment. There’s no single right structure. There are common structures that work in common situations, and tailored structures that work in less common ones. This is exactly the kind of work where the structural complexity matters, and where the difference between getting it right and getting it wrong can be a significant percentage of the investor’s eventual return.
Cross-Border Capital Movement
Beyond the legal and tax considerations, international investors face one additional layer that domestic investors don’t: the actual movement of capital across borders.
Many countries require central bank approval to convert local currency into U.S. dollars at the scales needed for serious investment. The approval processes can take weeks or months, depending on the country and the size of the transaction. I’m currently helping a client move half a million dollars from Cameroon to the U.S. for a real estate investment, and the process has taken months even with full documentation. Cameroon, like other countries in the Central African Economic and Monetary Community, operates under the Bank of Central African States, known as BEAC, which has to approve the conversion of local CFA francs into U.S. dollars at this scale. The challenge isn’t just approval but also the limited availability of U.S. dollars through the official channel. My client has been waiting for an allocation, sometimes for weeks at a time, as BEAC works through its dollar reserves. The investment thesis on the U.S. side is sound but execution is gated by the speed at which the central bank can release dollars.
Currency exchange rates can move significantly during that wait. Some countries impose limits on the size of approved transfers. Others require detailed documentation of the destination investment before approving the conversion.
For investors in markets with active currency controls, capital movement timelines can dominate the rest of the investment process. The structure formation in the U.S. takes weeks. The deal close happens on a defined timeline. The capital movement out of the source country can take longer than both combined. International investors need to plan accordingly, which usually means starting the capital movement process well before the deal close they’re trying to fund.
The Sponsor’s Side of the Structure
Everything above describes the investor’s side of the structure. The sponsor running the deal has their own structural considerations.
Sponsors typically operate through multiple entities themselves: a sponsor company that runs the operations, an asset management entity that handles the property, and a general partner entity that takes a share of the profits from each specific deal in exchange for organizing and operating it. The investors form a group that owns the property through one or more LLCs designed for that specific deal.
For passive investors, what matters is not the full detail of the sponsor’s structure but a few specific questions. Is the sponsor’s own capital invested alongside the investors? Are the fee structures reasonable and clearly disclosed? Is the order of payouts (called the waterfall, which describes the order in which different parties receive distributions from the deal) structured in a way that aligns the sponsor’s incentives with the investors? Do the legal documents protect the investors against the sponsor’s potential conflicts of interest?
A well-structured deal has clean answers to all of these. A poorly structured deal often doesn’t, and the investor finds out only when something goes wrong.
What This Means in Practice
The structural side of real estate investing is the part most investors think about least and that most determines whether their capital actually produces the returns the investment was designed to produce.
For a U.S. investor deploying capital into a single syndication, the structural work has mostly been done by the sponsor, and the investor’s job is to evaluate what the sponsor has set up. For a U.S. investor deploying capital across multiple deals over time, the investor’s own structural choices start to matter more, and proper holding structures and estate planning become important.
For an international or diaspora investor, the structural work is significantly more complex and the cost of getting it wrong is significantly higher. This is the kind of work that benefits most from proper advisory support. It’s also the kind of work that, once done correctly, sets up the rest of the investment activity to function smoothly for years.
What’s Next
This article covered the structural side of U.S. real estate investing. The third and final article in this series goes into asset classes, strategies, and markets, including the recent multifamily market reset that disciplined investors should understand before deploying capital today.
If you’re thinking seriously about how to structure capital deployment into U.S. real estate, especially across borders, the next step is a direct conversation. NYIS works selectively with investors and partners on disciplined cross-border capital deployment, and the bar is having one substantive conversation with the right investor rather than ten surface-level ones.
Wilson Ningamai Nyah is the Founder and CEO of Nyanu Investment Services, a Washington, D.C.-based investment and advisory platform focused on disciplined capital deployment across U.S. and African markets. He previously led digital product at Navy Federal Investment Services and helped build a digital investing platform serving over 100,000 users and managing over $200 million in invested assets. He and his spouse run a healthcare business they built from scratch, and in 2025 he led the acquisition of two healthcare operating companies and two real estate assets, doubling the size and revenue of their business. Wilson holds an MS in Finance from Johns Hopkins University and holds FINRA Series 7 and Series 24 licenses.
This material is provided for informational and strategic discussion purposes only. The asset classes, strategies, markets, and considerations described are illustrative and depend on individual circumstances and current market conditions. Past performance is not indicative of future results. Nyanu Investment Services does not provide legal, tax, or accounting advice, does not take custody of client funds, and does not operate as a broker-dealer. Prospective investors should consult their legal, tax, and financial advisors before making investment decisions.