I have one rental home that I rent to university students. There is no mortgage on this property. My goal is to keep my current rental property and purchase one or two more in order to compensate my pension income when I retire. Should any new properties be held personally, or should they be held within a corporation? What are the benefits of incorporating rather than owning privately?
You have to balance additional costs of filing and accounting associated with a corporation with the only major benefit, namely dividending money to other shareholders, say a spouse or children.
Generally speaking for a few properties it makes no sense to incorporate due to cost and somewhat higher difficulty getting a mortgage.
Why is there no ( modest ) mortgage ? You prefer (taxable) cash flow over higher ROI ? http://myreinspace.com/threads/what-is-better-cash-flow-or-higher-roi.26596/
Generally speaking for a few properties it makes no sense to incorporate due to cost and somewhat higher difficulty getting a mortgage.
Why is there no ( modest ) mortgage ? You prefer (taxable) cash flow over higher ROI ? http://myreinspace.com/threads/what-is-better-cash-flow-or-higher-roi.26596/
Here is a great Blog written by George Dube from BDO.
http://georgeedube.com/2010/07/23/t...nership-strategies-for-real-estate-investors/
http://georgeedube.com/2010/07/23/t...nership-strategies-for-real-estate-investors/
Hi,
Your accountant will be able to give you the tax advantages and disadvantages. Your Lawyer will be able to give you the legal benefits.
But, potentially one of the BIG disadvantages of being incorporated is accessing mortgage financing which gets more difficult. To best answer incorporate or personal one would need to understand your goals. How many properties do you want to invest in? What type of properties are you planning to purchase?
I highly recommend first coming up with a financing plan for your goals. Then you can properly assess if you should be incorporating or close under your personal. Not for nothing, I’ve seen a few investors dissolve the corporations because they can’t access mortgages at reasonable rate. Doing that is costly!!!!
If you wish further advise or additional information, please contact us via email: [email protected] or contact at 1.844.411.Vine.
Best regards,
Your accountant will be able to give you the tax advantages and disadvantages. Your Lawyer will be able to give you the legal benefits.
But, potentially one of the BIG disadvantages of being incorporated is accessing mortgage financing which gets more difficult. To best answer incorporate or personal one would need to understand your goals. How many properties do you want to invest in? What type of properties are you planning to purchase?
I highly recommend first coming up with a financing plan for your goals. Then you can properly assess if you should be incorporating or close under your personal. Not for nothing, I’ve seen a few investors dissolve the corporations because they can’t access mortgages at reasonable rate. Doing that is costly!!!!
If you wish further advise or additional information, please contact us via email: [email protected] or contact at 1.844.411.Vine.
Best regards,
Obviously it all depends as always I heard, what about under this assumption, incorporating or not?
15-20 SFHs and condos, portfolio $10-15m, with intent to go for multifamily assets within 3 years size TBD. If the answer is to incorporate, when is good? After first 5 or 10 or after all the acquisitions under personal?
Thomas your practical comments will be appreciated
15-20 SFHs and condos, portfolio $10-15m, with intent to go for multifamily assets within 3 years size TBD. If the answer is to incorporate, when is good? After first 5 or 10 or after all the acquisitions under personal?
Thomas your practical comments will be appreciated
Commercial assets are almost always held in a corporation, and in many instances one per. As to multiple SFH or THs that is a question of preference or personal circumstances, and no clear right or wrong answer. Corporations allow far more elegant dividending to JV partners, spouse or kids but cost more to setup and usually complicate mortgage applications for small non-commercial assets.
As a rule of thumb, if you do not see a reason to incorporate why should you ?
As a rule of thumb, if you do not see a reason to incorporate why should you ?
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Rickson9
George Dube, Real Estate Accountant, Tax Advisor, Author, Speaker posted in his blog on this exact situation.
http://georgeedube.com/2010/07/23/t...nership-strategies-for-real-estate-investors/
Hope this helps.
http://georgeedube.com/2010/07/23/t...nership-strategies-for-real-estate-investors/
Hope this helps.
Thomas, thanks for the insightful comment here.
Re LTT and tax consequence, under the beneficial ownership agreement with the hold co. and the owner who currently owns on behalf of the hold co, there will not be LTT consequences if the properties are transferred to the hold co? Key conditions to my knowledge are 1. The hold co existed at the time of the purchases, 2. There was beneficiary ownerships in place at time of purchase. The individual owners simply acted to purchase, finance and hold on behalf of the hold co. And all proper the records such as revenue/costs under the personal ownerships should be kept in case.. Thats what I was told by accountants and lawyers. True? As always great to see your practical comments. Thx
Re LTT and tax consequence, under the beneficial ownership agreement with the hold co. and the owner who currently owns on behalf of the hold co, there will not be LTT consequences if the properties are transferred to the hold co? Key conditions to my knowledge are 1. The hold co existed at the time of the purchases, 2. There was beneficiary ownerships in place at time of purchase. The individual owners simply acted to purchase, finance and hold on behalf of the hold co. And all proper the records such as revenue/costs under the personal ownerships should be kept in case.. Thats what I was told by accountants and lawyers. True? As always great to see your practical comments. Thx
Hi guys,
I'm new to the forum and this article came up when I searched for the topic. My wife and I currently own 4 rental and we're in the process of buying 5th one. I start thinking to incorporate since we plan to expand. However, when I talked to an accountant, he said that rentals income will be passive, therefore it will be taxed as the highest rate unless the company has more than 5 full-time employees to count as active income. I looked up on CRA website and it seems to be in-line with what he said.
Is there another way to make rentals income become active income to benefit from the CCPC and defer the income since we're both already in the highest tax bracket for our personal?
Thanks,
I'm new to the forum and this article came up when I searched for the topic. My wife and I currently own 4 rental and we're in the process of buying 5th one. I start thinking to incorporate since we plan to expand. However, when I talked to an accountant, he said that rentals income will be passive, therefore it will be taxed as the highest rate unless the company has more than 5 full-time employees to count as active income. I looked up on CRA website and it seems to be in-line with what he said.
Is there another way to make rentals income become active income to benefit from the CCPC and defer the income since we're both already in the highest tax bracket for our personal?
Thanks,
Do you use full 4% CCA as usually you end up with little if any income taxes payable while holding ?
The only other option is to expense more via higher management fees, higher debt or higher CCA.
Consider offshoring some management fees, such as www.ibcbelize.com !