Many people set up corporations to buy and sell real estate as an additional protection against liabilities. Others create a corporation to mask personal involvement in property transfers and public records. Regardless of the use of a corporation, you can buy real estate with corporate credit as an alternative to using your own cash or IRA. By capitalizing on the credit rating of your corporation, you can buy real estate and build your corporate holdings portfolio.
Using Corporate Credit to Buy Real Estate
A corporation is a separate entity and has its own credit rating and financial statements. Securing a loan from a financial lender or credit union is one way that corporate credit can be used to purchase real estate. The historically low interest rates that are now available is making is easier to receive funding. Your personal funds do not have to be tapped into to make a purchase. This allows a corporation to stand on its own to purchase and sell real estate.
Requirements to Receive Corporate Credit
You have options where you can apply for a loan based on your corporate credit. Commercial lenders and credit unions are two sources of financing that you can use to help finance a real estate purchase based on corporate credit. There are specific requirements that you must have before an approval of corporate credit will be granted.
The most common requirements include:
• Corporate Credit Report
• Copies of Financial Statements from Investments
• Cash for Down Payment of 10 to 25 Percent
• Certified Home Inspection Report
If your corporation already owns real estate or rental properties, the credit review process can be completed faster. Ownership of current assets that can be liquidated in the case of financial insolvency is one of the most important requirement. When you do not own any business assets, it complicates the lending process due to the high risks of corporate failures.
Personal Guarantee May Be Required
If your corporation owns no assets, the financial lender that you select may require you to provide a personal guarantee. This ensures the amount of a loan will not be lost if your corporation is dissolved before repayments are complete. If you have more than one officer in your corporation, his or her personal credit rating could improve the changes of a lending decision. There are many factors that influence lending decisions when buying real estate with corporate credit.