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Old 12-10-2012, 08:43 AM
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Wink real estate investment and forming s corporation

Hi,
i have 5 rental properties and 3 off them paid off. i have 2 mortgages on remaining 2 condos.
my question is :
1) does bank will call pay off on the loans if i put those in the corporation?
2) is there any lenders who can combine the 2 loans in to 1 and allow the corporation to form?
3) should i form the corporation on paid off 3 properties, take out loans and pay off the individual loans on those 2 properties which is still not under corporation but once paid off i can include them into corporation?

all help will be greatly appreciated. thanks.



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Old 12-10-2012, 03:23 PM
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“1) does bank will call pay off on the loans if i put those in the corporation?”-----> You can’t transfer any of the properties out of your name into a corporation without triggering the “due on sale” clauses that are included in most mortgage notes. Once you transfer any and/or all interests in secured property, the mortgage note can be called in total. Many banks have sale or transfer clauses in the mortgage contract and can call for the full mortgage amount if a property is transferred. While this clause is not always exercised by lenders, it is a factor that should be carefully considered.Iguess you need tocontact your leders for more acuarate info in detail.
Do not transfer real estate in to and S corp. This is a legal and tax taboo in most instances because you may have huge built in capital gains if you ever sell it or transfer it out of the S corp; you have to pay yourself a salary as an officer of the corp. which is unncessary as you hold it now ; it would require you to comply with corporate formatilies for no particular reason. If you are forming a new corporation or just interested in transferring assets into your existing corporation keep in mind that any transfer of property in an exchange is generally taxable in the same manner as a sale for cash. The gain or loss in the exchange will be measured by the FMV of the property received and the basis of the property transferred. One of the exceptions to this general rule is where a person transfers property to a corporation solely in exchange for its stock if immediately after the exchange he is in "control" of the corporation as long as the transferor or transferors receive stock and are immediately after the exchange in "control" of the corporation.


“2) is there any lenders who can combine the 2 loans in to 1 and allow the corporation to form?”------>You need to contact a commercial loan officer for professional help on it.

“3) should i form the corporation on paid off 3 properties, take out loans and pay off the individual loans on those 2 properties which is still not under corporation but once paid off i can include them into corporation?”------->Iguess You need to contact a commercial loan officer for professional help on it.



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Old 12-13-2012, 10:35 AM
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thanks for your response, what corporation do you prefer for real estate?



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Old 12-13-2012, 11:45 AM
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“what corporation do you prefer for real estate?”--------->I guess needless to say, it depends on many variables/financial(taxation) situations; forming a C- or an S corp for an investment property is one way to reduce your liability. When a corp /LLC as a S –or C corp owns a property, a potential lawsuit from a tenant would be directed at the biz, not at you. This can protect valuable personal assets from a judgment. However, in transferring a property to a corp has some benefitsand disadvantages. Many banks have sale or transfer clauses in the mortgage contract and can call for the full mortgage amount if a property is transferred. While this clause is not always exercised by lenders, you need to carefully consider this factor.So as an owner of rental pty, you should weigh the pros and cons of transferring the rental pty to an S corp . ALSO, other types of protection,i..e, personal liability insurance, should be researched. Income made from the rental pty can be classified as passive income. You are better off to place the entire rental properties under the same LLC, or a Full Corp.The reasons for doing this the Tax relief, Insurance and Liability.It is cheaper from an Insurance point to have a LLC or CORP. insure all land and buildings than to do them seperate.I guess you need to consult a good Corporation Lawyer in your local area for more accurate info in detail.



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