All Forum Posts by: Taylor Green

@Steven Hamilton II thanks for breaking that down for me. I find it unbelievable you find stuff like that fun!! You made that so much easier for me to understand...

Would there be any reason not to lend out of a C-Corp? I've read a lot of people are doing it out of an S-Corp...

Also, if your lending business makes $75,000 profit. Would you want to form a second C-Corp to keep the tax rate at 15%?

Thanks again Steven.

Okay thanks @Bill Walston

So the money I have to take as a salary from the corporation would be then subject to self-employment tax on my personal return? The corporations only tax would be the regular tax rate?

Also, could I leave the rest of the money in the corporation as retained earnings?

Thanks for the help.

I'm bringing this old thread back to life again!

Could somebody please correct me if I'm wrong! Which there is a good chance I am...

If I lend money, (say $100,000 to make it an easy number), out of a C-Corp and I get 15% interest for the year, I'd make $15,000 before tax.

The $15,000 would then be subject to the C-Corp tax rate of 15% (for any earned income under $50,000) and also Self-Employment tax of roughly 15%.

C-Corp tax rate of 15% = 15,000 x .15 = $2250 paid in tax.

Since I'd like to re-invest all of the money I made, I'd pay myself the minimum salary allowed to hopefully avoid an audit. (I've read varying opinions, roughly 40% of income made).

Does that mean on the $15,000 made, I'd pay Self-Employment tax (roughly 15%) on the $6,000 I took out in salary, (40% of $15,000) which equals about $900.

So the total tax I paid (not including deductions to keep it simple) of the $15,000 I made would be $900 for SE Tax and $2250 for the C-Corp tax rate for a grand total of taxes paid of $3150...?

Also, if this is correct (which it might not be) and I was to make over $50,000 in income from lending, would it be best to open a second C-Corp to lend out of to keep the same tax rates at 15% again?

Thanks!

@Ann Bellamy

@Steven Hamilton II

Thanks @Ann Bellamy

I'm sure if you ever have to collect on the personal guarantee it's not a very fun thing to do. I'm assuming the collection could be any collateral, like 401k, IRA, cars. etc... Also, your attorney would take care of all of this correct? It's not like you'd have to be a repo guy I'm hoping...

I had another question about lending so I thought I'd just bring it back up in this thread...

When lending to somebody for a flip, the property being flipped is the collateral and 'assuming all properties were the same' the lower the LTV is, the safer the loan is. I think I've got that part down.

My question is: Can you get a personal guarantee from the borrower to get your money back? By that I mean, take over any collateral that the borrower might have, if they default on the loan?

@Ann Bellamy

@David Beard That was a solid response. As far as getting money from ULOC's, what do you need to be able to prove to the bank? Do you need a track record, or will income/assets be good enough?

Hi Zack,

I was wondering what split you ended up going with on this project?

@Ann Bellamy Your answer was better than any numbers you could have given me. Thank you for your response. Everything you said made perfect sense to me.

Along with all the other responses I've had on this post I feel as if I have a much clearer view of what I was originally asking, so thank you.

I have been reading over this thread trying to get a grasp of how to lend money out of 401k. I originally planned on not using my 401k to use for lending money and planned to keep a mix of stocks and bonds. The returns and relatively 'low risk' lending offers just seems to crush that of what I could get in the stock/bond market.

I'm not sure if I can even make this happen because my 401k is sponsored by my employer that I'm still working for. I think it might put me in a different than a solo 401k, but I have no idea. Hope somebody could help me out, thanks!

Thanks Bill, that response was very in depth and gave me some better insight of how some HML's work.

With regards to a new investor not having a track record and still getting a loan from a HML, one of my questions was if the borrower put in 50-60% of the money into the property and was to only borrow 40-50% from the lender, would the lender feel comfortable giving money to an inexperienced investor based on the fact, on which you touched on, the lender would have so much equity in the property to make there money back if the borrower defaults? Basically, the more money the new investor puts into the property, the better the chance of a lender giving him the money?

Also, when you mentioned the old saying 'if you can show you don't need a loan, you can usually get one.' How would the borrower show a HML he doesn't necessarily need a loan? Could the borrower bring the lender statements of other ongoing investments, bank statements, etc.?

Thanks again.