- Joined
- Jan 9, 2008
- Messages
- 196
Where does creating a corporation come into play when investing in real estate? Is it best to create one right away or to roll properties into one down the road? I originally thought that it would be best to create a corporation, loan it money for stocks and real estate to grow and that way it would be separate from my work earnings and it could enjoy a 16% tax rate. I understand that to have a real estate co. you need 5 full time employees to qualify as one to get the 16% tax rate. If you go with doing something else with the corporation as in being a renovator, it has to be in it 90% of the income. You get 10% of whatever else, stocks, real estate etc under the 16% tax rate, otherwise there is no difference holding it outside of the corporation since the tax rate is the same as the personal tax rate. The only advantage of a corporation is the limited liability factor then. Is there a blueprint on how you want to take the right steps in leading up to using a corporation to make the most of what you have? And of course how to avoid pitfalls with one. The big pitfall seems to be the extra expenses to operate one. I tried to get a corporate rate financing for a line of credit secured by several properties and it was around 2% more than my personal line of credit. They said because the corporation is more risky, even if i put my properties into it??? It seems the best way to buy properties is to use a line of credit against your principle residence and then roll it over into the corporation once you pay it off and then go and acquire another.
