Buy as company asset or form a new company

5 Replies

Hello all,

I'm new to BiggerPockets and I'm planning to get into RE investing.
I have read through some of the threads and resources and the information provided by you guys is really valuable.

I have an IT company based in DC metro area.
Right now, we are leasing our space and we pay about $80K per annum for the lease.
Rather than leasing the property, I'm planning to buy a commercial space (preferably Class A building) for my business.

Could you please clarify the following questions - 
1) Should I buy the a commercial property (Around $1.5Million with 10% down) or keep leasing?
2) If I decide to buy, I want to put down 10% down payment and SBA loan to finance the rest 90%. Any better options for financing?
3) Should I buy the property with the same company as company asset OR should I be forming a new company and hold the property in it's name.

Say, if my IT company is ABC, Inc., should I form a new company as XYZ holdings LLC and buy the property with XYZ holdings LLC and let ABC, Inc. pay the lease for it?

4) If I go with the above route, will banks finance the XYZ Holdings company?
My IT company is well established and my local bank has already agreed to finance the property.
  

5) I have been advised to hold the company real estate assets through another company, but not really sure about the pros and cons. 
Eventually I'm planning to get into residential and commercial RE estate investing and was thinking to keep all my investment properties under XYZ Holdings LLC and I was thinking this Commercial property would be a good addition to start my XYZ Holdings LLC. Do you guys see any downsides of doing so?

Thanks in advance,

Kranthi

The one benefit I'd see is that if you buy as a separate company, you can sell one or the other separately down the road. Other than that I don't see a lot of benefits for a single owner LLC. All the liabilities come back to you personally anyway from what I hear. I'm sure others will have better insight. I'm facing the same question right now, but with multiple owners of the corporation. We're likely to set up a separate company as the owners of the real estate will likely vary a bit from the owners of the software company.

HI @Alan Mackenthun , single member LLC "All the liabilities come back to you personally anyway from what I hear"

just learned something new. do you know where you found that out from?

thanks

Buy the property using an LLC and keep the building assets seperate from the companies assets, unless you have a tax reason to purchase using the same entity.

I have a very good friend of mine that strictly deals with SBA lending and I am fairly certain that the building has to be an asset of the business to qualify for the SBA program. There are also restrictions in terms of how much of the building you must occupy.  In general the occupancy requirement is designed to keep SBA loans more in the small business lending domain, and not in the real estate investor domain.  

My friend lends nationwide and could certainly give you more information on the program if you would like.  Feel free to PM me if you would like his contact information.    

Thank you all for your suggestions. 

William Jenkins - Can you please PM me your friend contact information.