Rental Property Investor · Stoney Creek, Ontario · Member since 2016 · 34 posts · 4 votes
Good Afternoon BP community,
I'm starting to try and build my real estate team. I currently have an accountant however he isn't too familiar with real estate investing so I was hoping to find someone who has a bit more expertise. I also want to incorporate so I can house (pun intended) my properties (1 current one and my future ones).
I currently own 1 SFR and my hopes is to get 1-2 more under my belt in the next 12 months. I will eventually move towards multifamily homes. But in my immediate future I will stay in the SFR market.
If anyone has any advice against incorporation please let me know as well.
The decision and benefit of holding properties in your name, in a corporation, or even in a family trust will depend on your individual circumstances. For most folks, especially starting out, your tax burden, and administrative costs, will be lower if the properties are in your own name.
In our instance it actually made more sense to start with a company due to the source of our seed funding (it came from the retained earnings in another company).
The use of a Limited Liability Partnership (LLP) in most provinces is restricted to groups of professionals (doctors, lawyers, accountants) carrying our their profession. For a real estate venture, you would be able to use a general partnership or limited partnership (LP).
Specialist · Orlando, FL · Member since 2015 · 183 posts · 83 votes
10y
Hi Robin. Incorporating makes sense. I did it myself with some investors, all family and friends, so we are all protected. However, unless you're buying commercial, lenders are very hesitant to give mortgages to corporations. Just make sure you talk to a broker... A good broker who understands the rules, and what your options are. I went through at least 3 who promised the world and when it came down to closing they couldn't get it done. I eventually got financing bit with 'B' lenders. Just make sure you get all the facts and partner with those who understand investing.
Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
10y
Giuseppe, why does it make sense for an individual landlord to incorporate? My understanding is that lenders want personal guarantee and there is no liability protection in Canada anyway.
You said you have a collection of investors, so that is a different situation... I assume an LLP, but please help educate us!
The decision and benefit of holding properties in your name, in a corporation, or even in a family trust will depend on your individual circumstances. For most folks, especially starting out, your tax burden, and administrative costs, will be lower if the properties are in your own name.
In our instance it actually made more sense to start with a company due to the source of our seed funding (it came from the retained earnings in another company).
The use of a Limited Liability Partnership (LLP) in most provinces is restricted to groups of professionals (doctors, lawyers, accountants) carrying our their profession. For a real estate venture, you would be able to use a general partnership or limited partnership (LP).
Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
10y
Thanks Roy. I never considered a family trust. I will have to connect with a CPA who understands this environment... I am sure that one of my first BP connections was a London CPA, I'll have to go back through my inbox!
A quick word of advice... do not hire an accountant to form your corporations. Have a lawyer do it. I am a lawyer and make quite a bit of money fixing corporations created by accountants. Also, do not hire a lawyer to do your taxes. Corporation are legal structures and lawyers understand how to do it to fit you and your situation.
I dont work in your geographic area, only California. That is just a bit of advice from someone who has seen a lot of mistakes.
Thank you for the follow up. I was able to have my account connect me with a lawyer who has subsequently set up my corporations. I appreciate your advice on the matter.
Accountant · Cherry Hill, NJ · Member since 2016 · 173 posts · 201 votes
9y
I am a CPA who is also a real estate investor. I agree completely with the attorney who advised you to go to an attorney. I have seen so many messed up formations. People want to form online, and save some money but the rules vary state to state. Some mistakes I can fix, but others have to go to an attorney. The money these people saved by filing online they lose when they spend it on the fixing. Do it right the first time.
Also, for what its worth, here in New Jersey, a 1975 State Supreme Court sub-committee ruling stated in part that for a CPA to help form or dissolve a corporation could constitute practicing law without a license. I think my company is an excellent CPA form real estate investors, but I think we're a terrible law firm for real estate investors.
It has been my experience in Canada, that you need to involve both your accountant and your attorney to achieve the ownership structure which meets your present and (can easily morph to meet your) future needs while mitigating your tax liability along the way.
While your attorney will have the expertise for form your corporation(s), the accountant will hold the tax knowledge you require as an input.
Investor · Toronto, Ontario · Member since 2014 · 320 posts · 125 votes
9y
@Robin Valadares - Make sure you have your lender / broker at the table for these incorporation discussions. My lender and accountant both recommended recently, that due to lending rules tightening, that I don't incorporate as it would make getting lending options a lot more difficult. MY accountant said, while there are still benefits of incorporation, he's not in the business of blocking business deals. My broker mentioned that it would cut the number of lenders I have access to in half. So, based on their advise, the only incorporation that I'll be creating will be an operating corp for my flips / home sales.