To corporate or not corporate that is the question.

13 Replies

Hello to all,

I have been doing a fair share of researching and although I do understand why some people decide to corporate. I still can't find enough information allowing me to make a clear decision. I'm hoping anyone with experience on this subject will share. 

Background:

My mother and myself own a property in GA free and clear. Purchased the property 2 years ago through hud. Between me and my father we have renovated it with a new kitchen, one out of the 3 bathrooms, paint and flooring. Proprety needs just finished touches. We purchased at around 50k but I am for sure the property is worth at least 100k. At this point in my life I am finishing up my degree using VA educational benifits which means I make money it's just not taxed. I'm moving to NY this fall to finish up school the next 2 years. I have planned to get back in real estate investing but find myself with a few issues. I have decided to get the real estate license for either NJ or PA maybe both just to allow me to be able to compare properties acurrately and to be the go to guy for family and friends. Even though I own my house I really don't have an option to refinace do to no w2. I was thinking that creating a llc would allow for me to bypass this. My credit is decent but I'm thinking if the company owns the property, since it's paid for. I would be able to get loans because of the company's assets. Allowing me never to really worry about a w2, but wouldn't I have to buy future properties in my name then transfer to buisness after their payed for specialyl if it's home path property?

In general  I would love to hear about some of the doors that opened when you incorporated and some of the doors that closed. 

Thanks BP community

I will say this @Michael Robinson , for as long as you are alive, in my opinion, dont expect a bank to care about the assets of a corporation/LLC that you own/control. You will personally guarantee every loan and every loan will be based on your personal credit/income.

Well, @Rob Beland guess I will have to wait till I finish school and get thay coporate salary. Or possibly a job while I'm a student.

Thanks for the heads up

Originally posted by @Michael Robinson :

Hello to all,

We purchased at around 50k but I am for sure the property is worth at least 100k. 

What makes you so sure the property is worth 100K?  

I have decided to get the real estate license for either NJ or PA maybe both just to allow me to be able to compare properties acurrately and to be the go to guy for family and friends. 

The go to guy for what?  Consider defining what you want real estate to do for you from a business perspective.  You are all over the place -- living in Alaska, moving to NY, owning in GA and wanting to get licensed in NJ or PA.  Both of which have two different sets of laws for you to learn.   

Even though I own my house I really don't have an option to refinace do to no w2. 

This statement doesn't make any sense -- what is there to refinance?  You own the house? 

I was thinking that creating a llc would allow for me to bypass this. 

When you incorporate, you are your LLC for all intents and purposes.  You would need to Deed the property to the LLC -- but I will stop here.  You need to speak to a CPA on your options for incorporating and if it is in your best interest and consider speaking to a Real Estate Attorney. 

Medium erm logoMichael Roy MBA, EastRoy Management, LLC

Excuse me @ Michael R.

What makes you so sure the property is worth 100K?

-Other houses in the neighborhoods have sold around the 90k-130k range, my property has a little more sqft and upgrades. 

I have decided to get the real estate license for either NJ or PA maybe both just to allow me to be able to compare properties accurately and to be the go to guy for family and friends.

-The reason for becoming a real estate agent is that I really believe it will help me out while investing, along with giving me a job I'm sure I will enjoy while in college. This could also benefit when it comes to family and friends buying or selling houses. Plus there is that MLS incentive.

-I was thinking of refinancing my house now to give me capital to work with. So if I decide to buy a house, renovate and then rent I can fund this all on my own. Im looking for properties in the 15-25k range. The problem with refinancing tmy property now is the fact that I don't have taxable income (W2). All I have for income is the rent ($1000) from the property I own plus the post 9/11 education benefits which is not taxable

I was thinking that creating a llc would allow for me to bypass this.

When you incorporate, you are your LLC for all intents and purposes. You would need to Deed the property to the LLC -- but I will stop here. You need to speak to a CPA on your options for incorporating and if it is in your best interest and consider speaking to a Real Estate Attorney.

-My thinking was that I could start the ground work now for my LLC. Incorporate, get banking accounts started and build credit. Transfer the house over to the LLC giving the LLC some what of credit history, and a house as assets. I believe I will be able to save enough cash to buy a rental and if I needed credit for the rehab or wanted refinancing after I renovated the property my business would be in a good position to do so.

Apply the KISS principle.  Don't make it complicated.  If you are worried about liability get an umbrella policy or increase your liability policy.  If you are worried about taxes... One property won't break the bank. 

Since Im moving to NYC to finish school. I just thought this would be a opportunity to get in markets surrounding the city like Allentown, PA or maybe Harrisburg, PA there are plenty. I hoping to get a rental for around 20k renovate, rent and then pull the equity to do the next. If anybody has any type of advice especially pertaining on how to get from where I am at to my goal.

Much is appreciated. 

Thank You Guys

Since Im moving to NYC to finish school. I just thought this would be a opportunity to get in markets surrounding the city like Allentown, PA or maybe Harrisburg, PA there are plenty. I hoping to get a rental for around 20k renovate, rent and then pull the equity to do the next. If anybody has any type of advice especially pertaining on how to get from where I am at to my goal.

Much is appreciated. 

Thank You Guys

This post has been removed.

Originally posted by @Michael Robinson :

Since Im moving to NYC to finish school. I just thought this would be a opportunity to get in markets surrounding the city like Allentown, PA or maybe Harrisburg, PA there are plenty. I hoping to get a rental for around 20k renovate, rent and then pull the equity to do the next. If anybody has any type of advice especially pertaining on how to get from where I am at to my goal.

Much is appreciated. 

Thank You Guys

 So you mean to take a line of credit from your current house, that makes sense to me now. Thank you for clarifying your other statements too.

re: starting your LLC and deeding your house to it is, in my opinion, a great idea. I say that because the longer you are in business, the better it looks for lending purposes. But I would strongly advise putting a plan in place to cash flow and to outline what you want your outcome to be. Possibly get to NY and hit up the REIAS in NJ and NY. PA too if you are so inclined, but to know markets like Harrisburg from NY or NJ is ambitious. I thnk your ambition is awesome and the truth is, your strategy will unfold as you get there and grow.

Medium erm logoMichael Roy MBA, EastRoy Management, LLC

Michael -

   Buy this book and all your questions will be answered.  "Inc. & Grow Rich by C.W. Allen.  ISBN # 0-9671871-0-9. It was recommended by Robert Kiyosaki in Rich Dad, Poor Dad.

Michael Robinson,

Good strategy, just be sure to do some homework before you dive into one of those $20K Harrisburg, PA properties. 

Andrew

@Darrie Bennett thanks for that tip. I will definitely get some reading done! 




@Andrew Bosworth I will definitely do my homework before buying in the Harrisburg are. Where in PA do you invest?

I know I seem all over the place but I thought I would give you guys a heads up on what I have been doing. So originally Im from GA a small town outside the perimeter of Atlanta. Ive decided to use my parents (where I grew up) zipcode to get a list of houses from list source. I know the area really well so since I know the market why not try to get a deal. Ive already merged the list to letters and plan to mail out over the weekend. I figured if I get some calls I can have my parents be my boots on the ground. They have already agreed so things seem like they will work out. I have never tried wholesaling before so Ive invested a little money just to see. I will be going back over my material on wholesaling so Im ready if a call comes. 

Fingers Crossed

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