I have a corp, how to leverage - Posted by CM

Posted by JT-IN on July 28, 2008 at 13:17:05:


You state you have an S-Corp… Each dollar an S-Corp makes each year is taxed whether you leave it in the co or take it as a distribution. S-Corps have what is called “pass-thru” which means all funds pass thru to you whether they are taken or reinvested… so no advantage to use corp dollars from a tax standpoint.

You will likely have to use corp funds anyway just to get the deal done. Plus these type of loans are getting ever so hard to get right now. Many of these type of deals involve some form of owner financing, like a 2nd mtg, which reduces exposure to the institutional 1st mtg holder. So a deal might look like this: 60% 1st mtg, 20% 2nd mtg and 20% dp. That would be rather conventional actually for larger multi fams today… Some of these deals still have assumable loans, so be sure to check that out too.

You may find some lenders to accept more risk than above, just know that the mkt is tight and things that would have easily happened a year or two ago, aren’t happening today. Make you offer accordinly, meaning tight money dictates lower prices or better terms. Before you get locked into price, know what is truly available in the way of funding.

You should run your other corp tax questions past your acct. Way too detailed to rely on anything written on a bd like this…


I have a corp, how to leverage - Posted by CM

Posted by CM on July 28, 2008 at 12:13:26:

I’m looking to buy an investment property of 50-100 units for $2-3M.

I already own an S-corp that has been around for 3 years and had about $170K in revenue last year and will probably go to about 225K in rev this year (conservative estimate). Last year my income was about 75K.

Here’s my question. I assume this kind of deal falls under commercial property, so I will have to get a commercial loan. Correct? What if I did the venture using my company money, would that enable me to use tax free revenue, rather than pay myself out, get taxed, and then invest. What if the S-corp was not initially created for the purpose of real estate holding? Do I need to re-file some paperwork for this company? Or do I need to create a new one (that would suck)? Can I use my corp as collateral for that large loan? I assume I might need extra perks to loan officers since this is my first deal and I’m looking to go pretty big right off the bat.

Any other ideas for leveraging my corp?