RTO on personal Name or Holding Company?
- Thread starter Joel
- Start date
We have had no difficulty with financing corporate purchases, especially
since the debt coverage and cashflow from RTO's is so good.
Gains on RTO's can qualify as active business income rather than capital gains, so buying them through a corporation can be advantageous from a tax-perspective. If you plan on making a business out of this, you should consider speaking to your lawyer and an experienced tax accountant to discuss structure - both for tax savings and asset protection.
since the debt coverage and cashflow from RTO's is so good.
Gains on RTO's can qualify as active business income rather than capital gains, so buying them through a corporation can be advantageous from a tax-perspective. If you plan on making a business out of this, you should consider speaking to your lawyer and an experienced tax accountant to discuss structure - both for tax savings and asset protection.
[quote user=Joel]On corporate financing you can get 80% LTV?
Yes, you can but you will be signing a personal guarantee.
Four reasons to incorporate for smaller residential properties:
1) limited liability, unless personal guarantee is required for mortgage
2) income can be paid different ways, such as dividends or management fees to various people
3) JV partner can be brought on board without having him/her on mortgage and to protect them from a disaster, via shares and/or shareholder loans
4) different shares % and shares classes allow for elegant profit splitting and separation of "control" from "profit sharing"
Three reasons NOT to incorporate for smaller residential properties:
1) It is more difficult to get a mortgage, as not all banks hand out residential mortgages to small properties held in a corporations
2) you will have to sign a personal guarantee .. so in Alberta, for example, you will be personally liable for a mortgage default if in a corporation, whereas a personally held non-insured mortgage will have recourse ONLY against the property, but not you personally ! This is an Alberta advantage that does not, to my knowledge, exist in other provinces !!
3) annual filing and accounting costs .. probably about $2000 to $3000 or more PER YEAR .. depending on complexity
other links and discussions here:
http://myreinspace.com/rein_members_only/Members-Only_Discussion/81-9751-Tax_Tip__Reasons_to_NOT_incorporate.html
http://myreinspace.com/rein_members_only/Members-Only_Discussion/81-6784-Joint_Venture_Agreements_and_LLCs.html
http://myreinspace.com/rein_members_only/General/83-4779-Business_Income_Vs_Personal_Income.html
Yes, you can but you will be signing a personal guarantee.
Four reasons to incorporate for smaller residential properties:
1) limited liability, unless personal guarantee is required for mortgage
2) income can be paid different ways, such as dividends or management fees to various people
3) JV partner can be brought on board without having him/her on mortgage and to protect them from a disaster, via shares and/or shareholder loans
4) different shares % and shares classes allow for elegant profit splitting and separation of "control" from "profit sharing"
Three reasons NOT to incorporate for smaller residential properties:
1) It is more difficult to get a mortgage, as not all banks hand out residential mortgages to small properties held in a corporations
2) you will have to sign a personal guarantee .. so in Alberta, for example, you will be personally liable for a mortgage default if in a corporation, whereas a personally held non-insured mortgage will have recourse ONLY against the property, but not you personally ! This is an Alberta advantage that does not, to my knowledge, exist in other provinces !!
3) annual filing and accounting costs .. probably about $2000 to $3000 or more PER YEAR .. depending on complexity
other links and discussions here:
http://myreinspace.com/rein_members_only/Members-Only_Discussion/81-9751-Tax_Tip__Reasons_to_NOT_incorporate.html
http://myreinspace.com/rein_members_only/Members-Only_Discussion/81-6784-Joint_Venture_Agreements_and_LLCs.html
http://myreinspace.com/rein_members_only/General/83-4779-Business_Income_Vs_Personal_Income.html