How To Open Business?

by Tatyana
(Calgary)

My husband and I want to start investing in real estate and want to do it right.

Should we form a company first and place investment properties there, or hold properties inside our current business or hold them in our own names?

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Aug 14, 2013
 RE: How To Open Business...
by: Tom Karadza

Thanks for the question, it's a great one and a common one.

We rushed out and started corporations after taking some high priced real estate "bootcamp" training.

It was the wrong move (for us at least).

We recommend you get 2-3 properties under your belt in your own name first.

Get the proper insurance so you're covered/protected properly and when the properties generate enough cash flow to pay for the overhead of using corporations (corporate tax returns, bank accounts, phone lines etc) only then begin to consider using corporations to buy and hold property.

Financing will be a lot easier if you purchase personally as well, from our experience.

And this applies even if you have corporations already... we would suggest starting by holding them in your own name.

Without knowing all your details and goals and experience it's tough to give blanket advice like this. So perhaps run this same question off your accountant/lawyer as well.

There's one exception. If you're self employed and show very little income personally you may have to use corporations to purchase and qualify for the mortgages. In that scenario you're probably experienced with corporate tax returns etc. and there's no harm going down that route.

We just don't recommend it for new investors who would have to go out and start new companies, deal with financing issues, and then have to deal with all the things that come along with buying investment real estate. It's a lot to chew off at the start.

I hope this is making some sense and helps a bit!

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