Posted by Frank Chin on April 20, 2005 at 05:11:05:
Craig:
You should be able to buy one for yourself. Be careful if you say you live there, and you actually don’t, because they sometimes verify it.
As to buying another one, you can refi or get a HELOC on a home to pull a full dollars out tax free.
Frank Chin
Best way to operate your business - Posted by Craig
Posted by Craig on April 18, 2005 at 14:57:38:
When starting out in the REI world, is it best to start out on your own or is it best to incorporate to protect assets once you’re started?
I’m starting along with my family and we weren’t sure the best way to start. I heard if you’re incorporated the bank will demand a higher down payment and charge you at a higher interest rate for they know it’s an investment situation and the bank assumes that corporations have more money than the average person.
Has anybody run into this situation? For our first deal would we be better off to just sign it as if one of us were going to live there and then rent it out?
Thanks for any help!
Re: Best way to operate your business - Posted by Frank Chin
Posted by Frank Chin on April 19, 2005 at 07:23:26:
Craig:
This is a complex issue, and there’s been quite a dicussion of it on this and other boards.
If it was me, I’d buy it personally, or as a partnership with family, and deed the property to an LLC at a later stage, if you need to.
Lending these days are geared toward individuals though I read there are some lenders willing to do it to an LLC. More than likley, they’ll require a personal guarantee.
As to Corps, you’ll have tax issues. “C Corps” suffer double taxation, plus unfavporable tax treatments. You run into issues of employment tax with “S Corps”
As a middle group, you can use an LLC or C Corp as a management company. I have a “C Corp” management company.
The key thing is to be on top of problems, and treat tenants with respect, and screen well to begin with. This, with good insurance will avoid 99% of the problems.
Frank Chin
Re: Best way to operate your business - Posted by Craig
Posted by Craig on April 19, 2005 at 13:05:41:
First off, thanks for your feedback!
I wouldn’t mind going the personal route at all because of what you mentioned about screening and insurance, but we were talking to a real estate agent and they said the biggest issue we would face is if we bought a house in the name of one of the family members that already owns a house.
She said that most lenders would raise questions as to why we were buying another house. I don’t personally own a home yet, so for the first deal it’d be easy to put me on as the owner and being a first time buyer I shouldn’t have any problems getting financing.
But what about after that? If I wanted to hang on to the property and then see about purchasing another one, how would I go about that?
Re: Best way to operate your business - Posted by Natalie-VA
Posted by Natalie-VA on April 21, 2005 at 17:19:02:
It’s not a problem to get financing in your personal name for an investment property. Don’t misrepresent what you are doing by pretending you will live there. It might be considered loan fraud.