Refi options for S Corp properties....

[Eric Wallace]

I am 25% owner in an S Corp with my brothers. We have 3 properties, (one is a duplex) the others are single family. Two are financed through a local bank via 7 year balloon commercial mortgage each at about 5-6% APR, with payments amortized to 30 years. These loans are coming due soon and we are wondering what folks here would suggest our best options to be for refi. One of the loans is on the duplex that is worth about 200-225k and we owe about 170k and the other loan is on one of the single family homes that is worth about 80k and we owe about 60k. One final caveat is that we own the third home free and clear but it would only appraise for about $25 to 30k.

Is there any way to work things so that we could secure 30 year mortgages on these properties and keep them under our S Corp umbrella? Should we consider other options?

[Duncan Taylor]

@Eric Wallace,

If you want to try that I'd suggest a smaller local bank or credit union. Preferably one you already have a business relationship with and who knows you and your brothers.

Be ready to personally guarantee the loan and you might consider consolidating all three as collateral for the new loan. You could probably negotiate a slightly better rate. Yes, I know one of them was paid off but it still might be worth it.

Then, however you refinance these, were I in your shoes, I'd be focusing on paying these off as quickly as the cash flow allowed.

Others disagree on that strategy, you might too. But even though interest is deductible, you only get back your marginal rate. You will always throw away over half of every dollar in deductible interest you pay.