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Corporate of personal?

D

Doc898

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Nov 29, 2010
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Hello,
I have a questions for all experienced investors out there. I currently own a principal residence in Prince George, BC, as well as two suited single family dwellings in the same city. I have just met with my broker, and he advised me that as these houses are all in my personal name, I would have a hard time finding a mortgage company that would look "outside the box" as far as ability to service my debt.

My houses have never sat empty, and my credit rating is over 700, but he indicated that with the formula that the companies use, I may not qualify for another mortgage. He did say that an option was to transfer the houses into a corporation, and keep good clean books for two years, then the companies will use a formula that differes from the one that they use for personal. Both my rentals cashflow about $300/month after all expences, and they clearly make money.

I guess my question is this; I`ve found another "fixer upper" that I am looking at, but what options do I have if the mortgage companies say no? Should I transfer the houses into a corporation and wait a couple years? Should I do that anyway and look into JV for the next purchase untill the two years is up?

Any advise will help,
Many thanks,
Mike
 
QUOTE (Doc898 @ Dec 6 2010, 08:50 AM) Hello,
I have a questions for all experienced investors out there. I currently own a principal residence in Prince George, BC, as well as two suited single family dwellings in the same city. I have just met with my broker, and he advised me that as these houses are all in my personal name, I would have a hard time finding a mortgage company that would look "outside the box" as far as ability to service my debt.

My houses have never sat empty, and my credit rating is over 700, but he indicated that with the formula that the companies use, I may not qualify for another mortgage. He did say that an option was to transfer the houses into a corporation, and keep good clean books for two years, then the companies will use a formula that differes from the one that they use for personal. Both my rentals cashflow about $300/month after all expences, and they clearly make money.

I guess my question is this; I`ve found another "fixer upper" that I am looking at, but what options do I have if the mortgage companies say no? Should I transfer the houses into a corporation and wait a couple years? Should I do that anyway and look into JV for the next purchase untill the two years is up?

Any advise will help,
Many thanks,
Mike


I would consider getting a different mortgage broker or dealing directly with a mortgage specialist at one of the chartered banks. Assuming your properties are carrying themselves well, you should be able to get a 20% down mortgage through a chartered bank lender, I would think.

Michael
 
QUOTE (Doc898 @ Dec 6 2010, 08:50 AM) Hello,
I have a questions for all experienced investors out there. I currently own a principal residence in Prince George, BC, as well as two suited single family dwellings in the same city. I have just met with my broker, and he advised me that as these houses are all in my personal name, I would have a hard time finding a mortgage company that would look "outside the box" as far as ability to service my debt.

My houses have never sat empty, and my credit rating is over 700, but he indicated that with the formula that the companies use, I may not qualify for another mortgage. He did say that an option was to transfer the houses into a corporation, and keep good clean books for two years, then the companies will use a formula that differes from the one that they use for personal. Both my rentals cashflow about $300/month after all expences, and they clearly make money.

I guess my question is this; I`ve found another "fixer upper" that I am looking at, but what options do I have if the mortgage companies say no? Should I transfer the houses into a corporation and wait a couple years? Should I do that anyway and look into JV for the next purchase untill the two years is up?

Any advise will help,
Many thanks,
Mike


Nonsense. Many REIN members have multiple properties on their own name, including myself.

Try Garth Chapman at Jencor in Calgary: 403- 245-3636. Their are many other mortgage brokers on this forum that should be able to help as well.
 
look for a different broker..

QUOTE (Doc898 @ Dec 6 2010, 10:50 AM) Hello,
I have a questions for all experienced investors out there. I currently own a principal residence in Prince George, BC, as well as two suited single family dwellings in the same city. I have just met with my broker, and he advised me that as these houses are all in my personal name, I would have a hard time finding a mortgage company that would look "outside the box" as far as ability to service my debt.

My houses have never sat empty, and my credit rating is over 700, but he indicated that with the formula that the companies use, I may not qualify for another mortgage. He did say that an option was to transfer the houses into a corporation, and keep good clean books for two years, then the companies will use a formula that differes from the one that they use for personal. Both my rentals cashflow about $300/month after all expences, and they clearly make money.

I guess my question is this; I`ve found another "fixer upper" that I am looking at, but what options do I have if the mortgage companies say no? Should I transfer the houses into a corporation and wait a couple years? Should I do that anyway and look into JV for the next purchase untill the two years is up?

Any advise will help,
Many thanks,
Mike
 
Hello, and thanks for all the great reply`s. I`m going to start looking for another broker to start, but I see many of you have corporations, and I`d like to know if I should have one when I`m this early into my "business"? I`ve owned a business before and am quite familiar with the operations and the tax implications, but only having three houses thus far, is there a benefit to this other than taxes? I`ll be expanding, with or without my existing broker, so should I begin this process soon, or wait until I have more properties?
 
QUOTE (Doc898 @ Dec 8 2010, 02:26 AM) Hello, and thanks for all the great reply`s. I`m going to start looking for another broker to start, but I see many of you have corporations, and I`d like to know if I should have one when I`m this early into my "business"? I`ve owned a business before and am quite familiar with the operations and the tax implications, but only having three houses thus far, is there a benefit to this other than taxes? I`ll be expanding, with or without my existing broker, so should I begin this process soon, or wait until I have more properties?


Hey Mike

It sounds like you`re ready to speak to a quality accountant


You already have a bit of a track record and if you are committed to growing your real estate portfolio then beginning the process would make sense. If you wait till you have more properties and "sell" them to your corporation you must do so at fair market value so you may be triggering capital gains taxes and land transfer taxes. However, if you are working with JV`s who are on mortgage and title and you want the property to be held by your corporation then the JV will have to be part of that corporation.

Long story short is there is no easy answer if you should incorporate or not but I would recommend you have this discussion with a quality accountant. I`d refer you to George Dube if you were in Ontario but maybe you`d prefer someone more local


All the best!
Erwin
 
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