Operating Company/Property Company Deal (Opco/Propco) Explained

What is Opco/Propco?

Opco/Propco, short for Operating Company/Property Company, is a common structure used in real estate investing. It involves separating the operations of a business (Opco) from the ownership of the property (Propco).

Benefits of Opco/Propco Structure

There are several benefits to using the Opco/Propco structure in real estate investing:

  1. Asset Protection: By separating the operations of the business from the ownership of the property, investors can protect their assets. If the business faces legal issues or financial difficulties, the property owned by the Propco is shielded from potential liabilities.
  2. Tax Efficiency: The Opco/Propco structure can provide tax advantages. The Opco can deduct expenses related to the operations of the business, such as maintenance and repairs, while the Propco can benefit from tax deductions related to property ownership, such as depreciation.
  3. Flexibility: This structure allows investors to have flexibility in managing their real estate investments. They can focus on the operations of the business without being burdened by property ownership responsibilities, or they can choose to outsource the management of the Opco to a third party.

Overall, the Opco/Propco structure is a strategic approach to real estate investing that offers asset protection, tax efficiency, and flexibility. It is important for investors to carefully consider their goals and consult with professionals before implementing this structure in their investment portfolio.

Definition and Explanation

In the world of real estate investing, the term Opco/Propco refers to a common structure used in commercial property ownership and management. Opco stands for Operating Company, while Propco stands for Property Company.

Opco/Propco is a two-entity structure where the operating company (Opco) is responsible for managing and operating the property, while the property company (Propco) owns the physical property itself. This structure is often used in situations where a property owner wants to separate the operational aspects of the property from the ownership and investment aspects.

The Opco/Propco structure allows for greater flexibility and efficiency in managing and financing commercial properties. The operating company (Opco) is responsible for day-to-day operations, such as leasing, maintenance, and tenant management. The property company (Propco), on the other hand, owns the property and is responsible for long-term investment and financing decisions.

One of the main advantages of the Opco/Propco structure is the ability to attract different types of investors. The property company (Propco) can raise capital by selling shares or issuing debt, while the operating company (Opco) can focus on generating income and maximizing the value of the property.

Additionally, the Opco/Propco structure can provide tax benefits. By separating the operational and ownership aspects, the structure allows for more efficient tax planning and potentially lower tax liabilities.