What is the difference between real estate holding company and real estate development company?

In the US, there is a HUGE DIFFERENCE between a real estate holding company and a real estate development company. Here's why. Property which is "held for investment or the production of income" (e.g. rental real property like apartment houses) when sold are subject to special tax treatment, called "capital gains" tax, instead of ordinary income tax. Capital gains tax is much lower than ordinary income tax. When a person holds such properties, they are best held by a "real estate holding company" -- an LLC that holds various investment properties. An "investor" is a person who invests in real estate "on the side" and whose principal occupation is usually some other activity. Thus, an "investor" seeks to make a profit which is taxed at the lower capital gains rates. In contrast, a "developer" is a person whose principal occupation _is_ real estate development (purchasing, building and selling real property). A developer is taxed at ordinary income tax rates on the profits. Most ...  more