S Corp and Owner Occupancy

3 Replies

Hi BP!

As new investors we are about to get into our first multi-family property with owner occupancy (house hacking!). My husband and I will be buying this property in Washington State through an S Corp . Does the S Corp designation affect owner occupancy, if at all? Or do we need to buy personally since we are owner occupants?

Could we essentially pay ourselves "rent" from our S Corp? Could we use outside income to supplement the S Corp?

Any insight would be greatly appreciated as we navigate some new waters! Thanks! 

Hi Kristin, and welcome to Bigger Pockets! House hacking is sure a great way to get started. I don't know anything about S Corps, but how do lenders look at S Corps and will they allow you to do owner occupied financing with the S Corp buying? Not sure....

All the best to you as you learn about the wonderful world of real estate!

@Kristin Clarkman s corps are usually used by flippers who want to reduce their self employment taxes in the real estate realm. It’s not usually used by buy and hold investors and especially not by house hackers. For house hacking, I recommend to get the property under your personal name.

The point of house hacking is to get owner occupied financing and low down payment options to purchase a property. Lenders typically don’t give owner occupied financing terms to any business entity. At the least, you will have a bigger pool of lenders competing for your business if you finance under your own name. It also doesn’t make sense to buy as a business entity since you won’t have much assets to protect if you buy with low down payment. Liability and umbrella insurance policy should be sufficient.

@Julie Marquez Thank you! I will have this conversation with our lender.

And @Sung Park your explanation makes perfect sense. Thank you! You mentioned "liability and umbrella insurance policy should be sufficient". If we plan on purchasing more investment properties in the future do you suggest creating individual LLCs for each property for further protection?

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