Transfer my house from my name to my company.

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Transfer my house from my name to my company.
Posted by: Adrian Apr 2 2004, 11:59 AM
I owned a house, it’s valued at $51,000, completely paid off. Right now, it’s a rental property. I purchased this house under my own name. Now, from the advice previously, I’m going to look to start my own S corportation as a real estate holding company. This way, I can be shielded from liability, adding $51000 to my company, etc.. My question is: is this possible? Or do I have to sell it to my company from myself.
Posted by: loanuniverse Apr 2 2004, 02:05 PM

The answer is yes. You can transfer the house to a newly established corporation. I just don’t know the exact mechanics of the transfer. I can not tell you if the transfer can be done by merely signing over the deed or if you actually have to sell it. I recommend that you contact an attorney with that question.

However, a much better question would be: why do you want to do that?. If the intention behind the transfer is to make your balance sheet look better, my opinion is not to bother.

It is one thing to take a look at an operating company’s financials and another one to take a look at a real estate holding company’s financials when assessing the credit risk.

If I am analyzing an operating company such as a “shoe manufacturer”, then I want to take a close look at the capital structure of the borrowing company. After all, the loan will rely mostly on the financial performance and condition of the borrower.

If I am analyzing a real estate holding company for the financing of a particular project or building, my focus is mostly on the project or the building itself and whether it cash flows. The strength of the borrower is important, but as long as the company overall is not losing money, then chances are good.

Hope this helps.
Posted by: Adrian Apr 2 2004, 03:31 PM
Reason for this is because I want to build up as much as I can. I talked loan officers, and as you have mentioned in the articles, and posts. Generally speaking, it requires 20-25% down payment for commercial loans. In residential loans, you can use equity from one house to purchase another house, and so on and so forth. Basically, moving money (equity on the first house) around to get as much income as possible. I want to do the samething with commercial loans. That’s my biggest concern.
For example:
My house is worth $51,000, with great rental income of $8,000 a year. If I take out another loan on the house for $50,000, even with a high rate of 8%, with 15 years, my mortgage will be $5724 a year. I can easily pay that with my rental income. And this way, I can use that $50,000 on the down payment on my next house (10 unit apartment building I mentioned before). This way, I can increase my monthly income from currently $670 to easily $1,500. Does this make sense, or am I just dreaming? blink.gif
Posted by: loanuniverse Apr 2 2004, 08:39 PM

The idea behind the use of equity is sound. The problem is that you think that you need to transfer the property in order to access that equity. In my opinion, this is an unnecessary step. You can go ahead and get a loan based on the existing property under your own name and cash out in order to use that money as a down payment for the building.

You can even be more creative and request a loan for both the existing house and the building and use the equity in the house as your equity for the combined value of both. Some lenders might have a problem with not actually seeing any cash on the table, but most will understand and be comfortable with this plan. You can even get the loan with the company as the borrower and you as the guarantor.

Remember, income producing properties are looked at mostly from the angle of “deal-specific” not so much from the angle of we are lending to XYZ Corp. so we have to analyze the performance of the whole company. Of course, once the company is established, the lender wants to see the financials, but it is all about cash-flows.
Posted by: Adrian Apr 2 2004, 09:58 PM
I now see what you mean by that now. My previous post basically shows that in order to avoid having the house/debt showing up in my credit history. A real estate holding company can do that for me.
It seems to me that I can simply use my current house as a equity/loan to purchase another house under my company name. And go from there and on, moving the new house equity to another one.
Thank you again for your helpful information.  I’ll be visiting this site constantly now. I just wish there is a site for landlord information like this.
Author: Commercial Loan Underwriter