What do I need to know to start my own business in Real Estate Investing?

[angelhardy]

<h1 style="">In a year or two my husband and I want to start our own business in Real Estate Investing. We are currently closing on a house that we are going to rent out. When we start getting more into it, such as with the renovations and everything, should we have our own name and make ourselves a company or should we not even be company and just buy houses and sell it or rent it out? If we do start a company how do I go about in doing that? I`m clueless right now. thanx alot!</h1>

 

[JohnS]

QUOTE (peterwhite @ Jul 2 2008, 07:48 PM) <h1 style="">You should always run your Real Estate Investing Business as an entity of some sort; ie. (Corporation, Limited Liability Company, Limited Partnership, or Combination such as a Limited Partnership with your Corporation as a Limited Partner.)
Join some local real estate investment groups a.s.a.p.
Also visit and join some real estate investment sites such as www.creonline.com Sign up for R.E.I. newsletters.
For help deciding which type of entity, and setting it up you could visit with an attourney that is familiar with real estate investment; or you could visit irs.gov and go to the business links for starting a new business.
NEVER EVER run a business under your soc. sec. number.
ALWAYS run a business with an E.I.N. Employer Identification Number</h1>

First off, I guess it depends on what country/province you`re in. I know lots of sophisticated investors in Canada that don`t incorporate, but it might be different in the States, where Peter is investing.

This is one of the questions that comes up repeatedly, and the answer really depends on the individual cases involved. The advice that has always made the most sense to me is don`t just assume you should incorporate in some fashion - incorporate for a specific reason that makes sense to you, and not as an automatic reflex because it`s something you think you should do.

Have a good one!

JohnS

 

[NeilUttamsingh]

Angelhardy,

If real estate investing is something that you think you and your husband are going to be committed to in the long run, I recommend the following.

Attend a Real Estate Investment Network Live QuickStart. This would be a great first step.

Best Regards,
Neil.

QUOTE (JohnS @ Jul 2 2008, 08:11 PM) First off, I guess it depends on what country/province you`re in. I know lots of sophisticated investors in Canada that don`t incorporate, but it might be different in the States, where Peter is investing.

This is one of the questions that comes up repeatedly, and the answer really depends on the individual cases involved. The advice that has always made the most sense to me is don`t just assume you should incorporate in some fashion - incorporate for a specific reason that makes sense to you, and not as an automatic reflex because it`s something you think you should do.

Have a good one!

JohnS

 

[Thomas Beyer]

the legal structure is LESS relevant than skills and (access to) cash ! You can always incorporate later once you own 3 or 5 or 7 assets .. although opening a company from the get go is an option that should be considered .. but it has pro`s and con`s .. and that I might list when I find the time ..

to start, read this here: http://myreinspace.com/public_forums/General_Discussion/61-4391-How_to_get_started_.html

 

[GSI]

QUOTE (angelhardy @ Jul 2 2008, 04:08 PM) <h1 style="">In a year or two my husband and I want to start our own business in Real Estate Investing. We are currently closing on a house that we are going to rent out. When we start getting more into it, such as with the renovations and everything, should we have our own name and make ourselves a company or should we not even be company and just buy houses and sell it or rent it out? If we do start a company how do I go about in doing that? I`m clueless right now. thanx alot!</h1>

Hi Angel,

Good comments by John and Thomas. I think when you say `real estate business` the question that comes to mind is will your `business` be private (just you/spouse) for your portfolio or will you be looking to attract other investors and/or offer services to your customers?

If you are investing yourselves and plan to keep it that way, operating without a corp. may be fine, at least for the first 3 - 5 properties. If you are catering to outside people/customers or dealing directly with the management of tenants - then a corp. or other entity may serve you well.

The short answer is you can invest all you want (with partners too) without a corp. Same goes with a corp..

The questions I have are why do you want to form a corp (how do you think it will benefit you- legal? taxes?) and who does your business serve?

Hope that helps,

 

[MikeMcCrae]

From a financing stand point, being incorporated has the opposite effect you would think as far as credit protection. The lenders I deal with always require a personal guarantee when buying in a company name. Buying personally avoids that.
Some lenders will not lend in a company name and some will only lend in a company name. Sorry but there is no simple answer to the question. I have ended up with some personal and some in company names because of partnership situations as well as lender situations. I think the idea that you must have a company name is not always correct. Speak with your lawyer and accountant before going to the expense of setting up companies.

 

[Thomas Beyer]

QUOTE (MikeMcCrae @ Jul 3 2008, 12:43 AM) From a financing stand point, being incorporated has the opposite effect you would think as far as credit protection. The lenders I deal with always require a personal guarantee when buying in a company name. Buying personally avoids that.
Some lenders will not lend in a company name and some will only lend in a company name. Sorry but there is no simple answer to the question. I have ended up with some personal and some in company names because of partnership situations as well as lender situations. I think the idea that you must have a company name is not always correct. Speak with your lawyer and accountant before going to the expense of setting up companies.
I can echo these EXACT comments .. buying a smaller property personally is usually the way to go as it avoids a personal guarantee .. and buying a larger/commercial property usually always requires a corporation that holds this asset ! Usually, we hold only one or a few assets per corporation or LP, as I do not wish to co-mingle an investment of investor group A with 3 investments of investor group B .. so usually totally new corporations (or now limited partnerships due to size and security commissions in various provinces ..) per investment group ..

Having a corporation also allows you to have different classes of shares so you can dividend money to your spouse, kids, a trust, your grandmother etc. ...

 

[CarlaJohnson]

Congratulations on your first investment purchase. It is a big important step.

Just take it one property at a time right now. There are many options to consider and things will be much clearer in time. You will be busy learning a lot with this property. You are establishing your foundation, so put your energy into your new investment. Put together a team and create a structure that will make it smoother to add more properties. Incorporating and creating a business name are decisions that can be made later when you understand yourself in this business better.

All the Best!