NEED SOME HELP ! Refinancing a 100% owned property

[Neil Da Silva]

Hey guys,

I wanna start out by saying I found BP two days ago and I have not done anything outside of real estate since then! Podcast after Podcast I'm absolutely obsessed with this community you guys are awesome!

I would normally be self sufficient and do some research on the forums before asking questions as I'm sure my questions have already been answered BUT, when I was listening to a podcast @Joshua Dorkin and @Brandon Turner said to repost all questions to promote forum activity so here I am!

I got into real estate like many of you after reading Rich Dad Poor Dad, I attended many seminars and I currently own 2 investments properties. I'm currently 26 years old and I live between Toronto, Canada and Kissimmee, Florida. My properties are single family homes in Kissimmee. Both rented.

One of my properties is worth about $200,000 in today's market and has no mortgages and encumbrances. It's rented for $1300 a month, monthly expenses are $70.00 for insurance and $100.00 for taxes. which leaves $1100 positive cash flow PLUS 100% equity.

Questions:

1. I want to refinance my home so I can get some cash to buy more properties, either a flip or multi family home. I currently have a mortgage broker working on a deal to refinance however I want to know from you guys what you think the best method to do so is? I.e. Cash out refi, heloc, etc.

2. I also wanted to point out that this property is currently in my personal name and not my corporation, however I do want to put the property under my Corporation name. Is a corporation a suitable business entity? I noticed many people have LLC's.

3. How do I change the ownership of my property to my corporation? I'm aware I have to re deed however I'm still not 100% sure how.

4. Should I change ownership to my corporation an then obtain financing?

Thanks so much for your time and all of your help! I love BP and I love Real Estate!

-Neil

[Stephanie P.]

@Neil Da Silva

Hey Neil,

Welcome to Biggerpockets.  You're right, tons of great information on here.

You say you go between Toronto and Kissimmee; are you a US citizen or Canadian or dual?

To answer some of your questions i would say:

1. I want to refinance my home so I can get some cash to buy more properties, either a flip or multi family home. I currently have a mortgage broker working on a deal to refinance however I want to know from you guys what you think the best method to do so is? I.e. Cash out refi, heloc, etc.

Answer: There are two distinctly different camps on this question; one camp says never encumber your personal residence unless you have to and the other Rich Dad Poor Dad version says mortgage it to the hilt. I say a mix of the two and would advise you to get a HELOC on your primary residence to maximize your flexibility and low rate and pay it off as soon as you can switch to using your rental properties as your own personal ATM.

2. I also wanted to point out that this property is currently in my personal name and not my corporation, however I do want to put the property under my Corporation name. Is a corporation a suitable business entity? I noticed many people have LLC's.

Answer: A Corporation like an S Corp or C Corp is a suitable business entity, but probably not necessary yet. Take out as many loans in your personal name to get the best financing you can first and then worry about S or C Corps once you get to 10. LLC's are handy, but treated by the IRS as a pass through entity, so the only liability is the cash you have in.

3. How do I change the ownership of my property to my corporation? I'm aware I have to re deed however I'm still not 100% sure how.

Answer: Ask your title company to do it, but be careful because switching from your personal name to an LLC could be constituted as a transfer and trigger a due on sale (or transfer) clause.

4. Should I change ownership to my corporation an then obtain financing?

Answer:  No, not yet.  Exhaust your conventional options first.

Hope that helps and again,

Welcome to BP!

Stephanie