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Does incorporation make sense for an independent real estate investor?

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james | 16 Jan 2015, 03:32 AM Agree 0
I’ve owned a limited personal services company for many years as a way to reduce tax liability on my consulting revenue. It’s been well worth the financial costs and extra paperwork. During this time I also owned a profitable triplex, but accounted for its revenue as personal income.

I plan on adding several new properties to my portfolio to increase my rental income and am a little concerned about the tax consequences. Putting that money into a corporation would likely help. Do any of you have experience with this and know if it’s worthwhile from a tax perspective?

More importantly, how would it effect my ability to get mortgage financing? I’m looking at picking up some fourplexs or perhaps triplexes with an attached storefront but I’m worried that if the corporation owns them, banks will require a higher down payment, which I’m trying to avoid so I can leverage my deposit money as much as possible. One work around I’ve considered is for me to buy and own the properties personally, but run the rental income through a corporation that is contracted to manage them. Any thoughts?

Thanks in advance your sharing your knowledge and perspectives.
  • dcw | 17 Jan 2015, 11:54 AM Agree 0
    instead of several triplexes why not purchase a bigger building and do so through the corporation to limit liabilty? In multi plex situations the banks look at the numbers. cmhc financing rates are excellent. my 2 cents
  • More_Money | 06 Feb 2015, 05:21 PM Agree 0
    Hello James

    I've done something similar. I incorporated a company in which I was doing consulting work through. Additionally I have purchased two rent homes over the past year within the corporation with No problems. When getting the mortgage through the Bank I did have to do a 20% down payment for both. But as a director of the company, I could also be the guarantor to the bank against both mortgages (Personally), however, the corporation and all documentation pertaining to the properties is under the corporations name (therefore the corporation and it's assets are separate from my personal assets thereby providing me protection against any litigation brought against the properties. The one key item was when purchase and sale agreements (offers) were made for properties my "wife's name and/or assignee" were on the purchaser's name. Therefore once the offer was accepted then the "and/or Assignee" was changed to the Corporation. Thereby giving more potential flexibility in the negotiations. I'm NOT a Lawyer so I provide NO Warranty or Guarantee to the above.
  • | 15 Mar 2015, 02:07 PM Agree 0
    Thanks so much for the valuable feedback. I thinking of several triplexes mostly because I thought they would be easier to finance. But I see from the feedback above that may not be the case.
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