Expert: liznarr - 11/23/2008

Question
I have an S Corp. How do I purchase a house in my corporation name? I am considering having employees live there. My company does consulting and some of the consultants are relocating and will need housing, so I figured I'd help with housing. My personal credit is not bad (700's), I currently own a home and have never been late, and I'm not in foreclosure. I just want to know how to purchase a house using my corporation as I heard it can be done. I do live in Georgia, but will accept general answers on how it can be done or very specific answers on Georgia requirements/procedures. Either is an acceptable starting point for me.

Answer
Hi Nikki,

Since a corporation is a legal entity, just as an individual is, your S corporation would have to independently qualify for a loan.  

For answers to specific questions for an S corporation loan, I would suggest contacting a commercial lender first, as I do not have expertise in that area.  Remember, too, that as a result of the mortgage crisis we are experiencing, many lenders will require your personal guarantee.

Most income-producing property loans are underwritten using the net operating income as a source of repayment and that is what many lenders will usually look at first.

If you have not already done so, I would also recommend consulting with a CPA and/or a tax attorney on any tax consequences and liability of purchasing property in the name of an S corporation, as another avenue might serve you just as well, or better.  There are a few states that tax an S corporation like a regular corporation.  (The tax division of your state treasury department can tell you how S corporations are taxed in Georgia.)

If you do purchase in your S corporation’s name, consider commercial insurance to protect your corporation’s big asset – the property itself – from being subject to any claims made against your S corporation.

I hope the above is helpful and points you in a direction you may not have yet gone.

Good luck to you, and feel free to write again if you have other real estate questions.

Regards,
Elizabeth