Brad_Edwards_Fan Posted June 24, 2009 Share Posted June 24, 2009 So i am in a fortunate position in this enviroment that i bought my home a good while ago with a traditional down-payment. I am now being relocated by my employer and, despite having some wiggle room on equity, I know it is the totally wrong time to sell my home. I am going to be able to rent it out (have a couple leads already) for about 15% over my total monthly costs (taxes, insurance and HOA included). I am planning on running this past a lawyer, but figureed i would start with "non-proffesional" advice here so that i can have a more educated conversation with the attorney. My questions arrise out of what needs to be done to protect myself. If i was to create some sort of corporate entitiy and "sell" the home to the new company (and paying the transfer costs) if something disasterous came up and the home ended up foreclosed, would it reflect on the company or me personally? Since I live in a state where the lender can come after you for whatever they lose on the foreclosure sale, would they be coming after me, or the company. What if the company dissolved/bankrupt during the foreclosure? Any help on this would be greatly appreciated. Link to comment Share on other sites More sharing options...
SnyderShrugged Posted June 24, 2009 Share Posted June 24, 2009 So i am in a fortunate position in this enviroment that i bought my home a good while ago with a traditional down-payment. I am now being relocated by my employer and, despite having some wiggle room on equity, I know it is the totally wrong time to sell my home. I am going to be able to rent it out (have a couple leads already) for about 15% over my total monthly costs (taxes, insurance and HOA included). I am planning on running this past a lawyer, but figureed i would start with "non-proffesional" advice here so that i can have a more educated conversation with the attorney.My questions arrise out of what needs to be done to protect myself. If i was to create some sort of corporate entitiy and "sell" the home to the new company (and paying the transfer costs) if something disasterous came up and the home ended up foreclosed, would it reflect on the company or me personally? Since I live in a state where the lender can come after you for whatever they lose on the foreclosure sale, would they be coming after me, or the company. What if the company dissolved/bankrupt during the foreclosure? Any help on this would be greatly appreciated. I was thinking of doing the same thing, but the rental market isnt a good fit for me because there are so many people doing the same thing. Have you consulted with a property management company yet? I was told that they require a significant down payment for lease to own renters in order to protect the owner if they walk away from the agreement. Link to comment Share on other sites More sharing options...
IbleedBnG83 Posted June 24, 2009 Share Posted June 24, 2009 I work for the Comptroller of MD with business taxes, so I maybe of some help. You would need to register as a corporation and file articles with SDAT(department of assessments and taxation) You would need to pay taxes on the property "sold" to your company. How will your "company" obtain a loan to "pay you" for the property? Perhaps you could transfer all ownership and debt to the company, I'm not sure how that works you will have to contact SDAT. As long you have a valid corporate charter if the house should get forclosed on, then the company, NOT you, will be held liable. But if you have not been filing your corporate taxes, then your charter can be revoked. In which case you would be acting as a sole proprietor and you can be held personally. I would also check on the type of loan or any government assistance you may have had when you purchased your home that says you would have to live in it for "x" amount of years or you will have to repay the assistance...if that effects you, i don't know. Check the HOA articles about a corporation owning the home. If I were you, i would rent it. You can find a local real estate management group that could take care of the management of the place while you were away. Hope I have given you some sort of help. Link to comment Share on other sites More sharing options...
Brad_Edwards_Fan Posted June 24, 2009 Author Share Posted June 24, 2009 I work for the Comptroller of MD with business taxes, so I maybe of some help.You would need to register as a corporation and file articles with SDAT(department of assessments and taxation) You would need to pay taxes on the property "sold" to your company. How will your "company" obtain a loan to "pay you" for the property? Perhaps you could transfer all ownership and debt to the company, I'm not sure how that works you will have to contact SDAT. As long you have a valid corporate charter if the house should get forclosed on, then the company, NOT you, will be held liable. But if you have not been filing your corporate taxes, then your charter can be revoked. In which case you would be acting as a sole proprietor and you can be held personally. I would also check on the type of loan or any government assistance you may have had when you purchased your home that says you would have to live in it for "x" amount of years or you will have to repay the assistance...if that effects you, i don't know. Check the HOA articles about a corporation owning the home. If I were you, i would rent it. You can find a local real estate management group that could take care of the management of the place while you were away. Hope I have given you some sort of help. That is helpful, thanks... I plan to rent it out, but am looking to see if there is anything that i ought to do in order to protect myself from worst case scenarios (including liabliltiy with the renter). Link to comment Share on other sites More sharing options...
MKnight82 Posted June 24, 2009 Share Posted June 24, 2009 Isn't setting up a corporation overkill? Why can't he just set up a Limited Liability Company? Link to comment Share on other sites More sharing options...
IbleedBnG83 Posted June 24, 2009 Share Posted June 24, 2009 Isn't setting up a corporation overkill? Why can't he just set up a Limited Liability Company? LLCs are the wave of the future. But honestly, starting an LLC is not much easier than starting a corportation. An LLC is a type of corporation. They are both relatively simple to set up. But then again you are dealing with the government, so its all relative. Link to comment Share on other sites More sharing options...
National Defense Posted June 24, 2009 Share Posted June 24, 2009 i did this for a few years as a sole proprieter, and it can work out great if you do it right. tax treatments of rental property are quite generous. you need to change your insurance coverage if you rent, and your taxes may also change as the property is no longer your homestead. property management companies can do quite a bit, but they take a large bite as well. you can do it yourself, but get a list of vendors ready who can fix a toilet/replace a socket, etc when the tenant calls to complain that they have broken. to protect yourself, run credit checks/call references on your potential tenants, and get a nice security deposit. take lots of "before" pictures. when you say that rental would cover your costs-are you talking about your mortgage payment, or just the interest portion? they are not the same thing finally, is the house under-water, or do you have a profit on it? if you sell, there are new tax treatments for tax on gains of rental property (the old rule of 2 out of 5 years occupancy are no longer in effect). Link to comment Share on other sites More sharing options...
SoCalSkins Posted June 24, 2009 Share Posted June 24, 2009 Who would lend a new corporation money to buy a residential property without personal guarantees of the corpororate officers? You would have to come up with a significant down payment even if you found a bank willing to lend. At that point, barring significant further declines in property value, the bank would be protected by the value of the property. You would not be able to sign your existing mortgage over to the corporation. It doesn't work like that. Why not sell the house since you have equity and buy a new one where you are relocating? Link to comment Share on other sites More sharing options...
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