Buying an investment property in cash using C corp funds
I am a small business owner, and currently have slightly more than $1M in cash (retained earnings). I am thinking of investing this money to buy a small condo, e.g. 1BR, in cash, in the South Bay. That's where I live and it'll make it easier to purchase and manage the property. SO and I are high-income earners (and I try to adjust mine to find an optimal point between corp tax and personal income tax), and we don't want to move this money to our personal accounts for tax reasons. We'd rather have the corp invest in "something". Note that I'm not looking to hire at the moment, so it's not money I need to stash for headcounts as well. Reason for all cash: 1/ my corp has no credit score whatsoever 2/ I (well, the corp, but I own 100% of it) want to avoid taking on additional debt as SO and I already have two mortgages. Does real-estate investment via a corp sound reasonable? Any potential bad tax implication to look at? Other pitfalls? Anything better I should be looking at? (I don't want to invest that much in stock.) #realestate #investment #ccorp
.01% of 1M will find you a good tax attorney & cpa. Using free advice on blind in this subject matter will turn your 1M into what you’re supposed to be spending on professional advice instead. 99.99 > .01. My 2 cents.
1. Why are you running a C-corp if you're the sole owner? Why not LLC? 2. Start building the credit history of your corp asap. 3. What are you going to do with the apt? Long-term lease? Airbnb? 4. How about investing in commercial real estate instead? 5. If you already have two mortgages, you should diversify your investments more. In particular, investing in another real estate in the same geographical region may be unwise. There are plenty of other investment instruments, but it all depends on your situation. Last but not least, seek advice of a professional.
1/ Started as C-corp, primarily b/c I thought I would need to raise capital / read: the Valley way got into my head :/. Turns out not needed and not a path I'm planning to take on (at least not with this biz, I like the lifestyle model, allows me to focus almost 100% on the product). Anyway... also wanted to shield pro activities from personal life. My CPA mentioned switching to S-corp. I guess it's something I'll need to revisit. 2. Noted. But will a CC be enough to build a solid CS? My biz expenses are epsilon rel. to annual profits. 3. Long-term lease, just like we're doing with another property. 4. Will look into that. 5. Agreed agreed... we're terrible at managing our money. We're sort of decent at making some, but for how long? Really gotta learn more about that, but it's also something I don't want to spend too much time on. Anyway, thanks for raising those interesting points!
1. LLC is a limited liability company. It still gives you the legal protection (business is a separate entity, personal property is separate) without the burden of managing a corporation (filings, reports etc.). Note: it's a passthrough tax entity, which could be even better for you, if you want to save on your taxes. 2. No, but a CC is better than nothing.
Talk to an expert. CPA and such. Not blind. 99% of blind population are financially illiterate, like can’t spell abc illiterate.
abd, I spelt it right, RIGHT?