I am a beginner in real estate and have not purchased a property.
I own an S-Corp that has recently become profitable.
I am interested in buying a property in North Carolina through my S-Corp that I would like to rent out (to my girl friend and her class mates). Eventually I would like to move into this property and live in it.
Is it possible for this to happen? My friend told me that Corporations are not allowed to purchase residential real estate and I would for sure not be able to live in it? Is this true?
A corporation can buy residential rental property. As an individual, however, you get better financing. A corporation will have to put 20% down and get an interest rate around 10%. Right now an individual can get 100% financing at a rate around 6%.
As a rule I don’t do business with anybody I can’t sue. I am not saying that I sue everybody that I do business with but I need to know that if the unexpected happens and I have to sue them I can still go home for Christmas, or the next family reunion or my next pool party. If my girlfriend wanted to move into a house I owned, I would just let her move in for free because she is going to miss a payment and you are going to be letting her live there free anyway.
Just like my brother asked me to loan him some money a while back, what I did was give him the money. That way I don’t get mad at him when he doesn’t pay and he doesn’t avoid me when we are at our parents’ house.
Would I also be able to live in the house if my corporation buys it?
Yes you can live in a house that your corporation bought. The prohibition is that when you buy a house and state that it is your residence to get a better rate and use it for investment instead that is fraud, but to live in a house bought by your corporation is not a problem. I don’t know why you would do that because if you just bought it you could live there a lot cheaper.
My reason is that I have a full time job and have started a company on the side. The money I have made in the company has not yet been taxed. If I pay myself the 20 - 40k for the down payment, it would be taxed at a high rate. If my company puts down the down payment, that money would be spent tax free.
The only down side would be the higher rate I would receive as a result of not buying it on my own.
How is the money in the Corp tax free? The down payment for property isnt a right off. Please explain
How old is your S-Corp. Does it have any credit??? your corp will need to be at least 2yrs old. Also I think in todays market, you will need to go full doc with the corp… But if there is no credit forget it.
Do you have a paydex score as well?
You need to start calling some mortgage brokers and see what they say about buying in your S-Corp and quailfy your corp for the purchase.
Also if you are using your corp, get a quailfied CPA for your taxes as there are many deductions avail. You will not be allowed to deduct mortgage interest on your personal taxs.