My business partner and I have decided to become incorporated before purchasing rental properties, if we have 30-50% down on a property can we buy it as a new corporation? Are we judged on our personal credit or the company's and will we be able to purchase w/ no company history??
2007-08-17 15:26:12 · 6 answers · asked by midnightrose 2 in Business & Finance ➔ Renting & Real Estate
You can't get a conventional mortgage loan as a corporation, you'll have to use your personal credit, income, assets, inc. However, once you close, you can transfer title to the corporation to protect your personal liability.
Good luck!
2007-08-17 15:47:10 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Your question is if you are required to put up personal guarantees (Recourse) or can your corporation qualify for a loan (Non-recourse)
Credit for a corporation is like credit for an individual. You have to establish it over a period of time. The corporation also has to be able to prove it can repay any obligation it enters into.
#1 The corporation has no provable income.
#2 The corporation has no established credit report (Dun & Bradstreet)
#3 The corporation has no income tax for the last 2-3 years
#4 The corporation has no seasoned funds or a bank account
Based on those factors you would be hard pressed to find a lender that will lend to a corporation such as this.
A few lenders will allow you to purchase a property as a corporation, but you and your partner will be required to place personal guarantees for this loan.
I suggest you contact a mortgage broker tell them that you are looking to buy a property in a corporations name. This mortgage broker will take an application for the 2 of you and upon recording the deed it will be recorded in the name of the corporation.
Since you are putting up personal guarantees you will only be required to put down a normal 10%-20% down if you so desire. You may place as much down as you really like.
Once the corporation has been in business for awhile, acquired a dun & Bradstreet credit report, and can prove the ability to earn money as well as have money in the bank, you may then purchase anything you want through the corporation to include properties and through lenders as an individual would.
If you intend to purchase rental properties, establish your bank account with a small local bank. When you have over a certain amount of funds in this local bank, see if you can get their list of rental properties that have not been sold through the normal way they sell them.
You will need a history so start by taking picks of your first properties. Place ads in your local paper that you are now int the business of buying properties that are in default, probate and other properties no longer desired by the current owner.
I hope this has been of some use to you, good luck.
"FIGHT ON"
2007-08-17 17:35:39 · answer #2 · answered by loanmasterone 7 · 0⤊ 0⤋
You will be able to obtain a loan through the business for this property. However, as with ALL small businesses that are closely held, the bank will give you a mortgage, but you and your co-shareholder will be required to sign personal guarantees. So, whether your an individual, a partnership, or a corporation, you will end up with the same personal and legal liability.
2007-08-17 15:54:15 · answer #3 · answered by Homeslice 4 · 0⤊ 0⤋
That is a tough one. The guidelines are almost changing daily. You would be judgment on personal credit, but if you are self employed less than 2 years and you will be required to provide the most recent complete federal 1040's and 1120's as applicable. More than likely, the mortgage company will require the closing documents be drawn in your names rather than the company, but you can still declare the income on your 1120s. If your company goes under, they will want your personal guarantee.
2007-08-17 15:40:24 · answer #4 · answered by Etta P 4 · 0⤊ 0⤋
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2016-10-16 00:05:08 · answer #5 · answered by riva 4 · 0⤊ 0⤋
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2007-08-17 15:43:31 · answer #6 · answered by DPL06351 5 · 0⤊ 0⤋