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Updated almost 10 years ago on . Most recent reply

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Art S.
  • Hallandale, FL
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S-Corp purchasing rental property - needing cash out line credit

Art S.
  • Hallandale, FL
Posted

Hi all - here is my situation.   I am a 100% owner of an S-Corp for the last 2 years. I made some money in advertising. Now that is winding down, I am looking to get into real estate.

The funds are currently under the S-Corp bank account, as I haven't withdrawn much.  So what I would like to do is to purchase a rental property all cash under the S-corp,  then turn around and pull out cash through a line of credit of sorts. (and hopefully do it all over again). So my questions begin:

  • Would the lenders give a line of credit loan on a property owned by a S-Corp if I would personally guarantee it?
  • What are some other options - such as if I create an LLC as a partnership between myself and the S-Corp (i read this somewhere, but not sure of the logistics).

Thanks! any advice is appreciated.

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Linda Weygant
Pro Member
  • Investor and CPA
  • Arvada, CO
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Linda Weygant
Pro Member
  • Investor and CPA
  • Arvada, CO
Replied

A corporation - either S or C - is not a recommended entity to hold real estate in.  Unless you structure things VERY carefully, the passive nature of the income is lost in a corporate structure, including favorable Capital Gains income.  

Take a shareholder distribution from your S-Corp and move forward.

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