Hello all, I have posted here before regarding other ideas, but I believe I have found something I am really interested in. I am looking at purchasing a rental property, and eventually more after that in hopes I can form a business and do this full time. My questions about this are, should I find a lawyer and incorporate myself first before even buying my first property just to cover myself. And would it benefit myself to do this because then I could have the benefits of a business especially for tax purposes. If I were to incorporate would it be a bad idea to take out a small business loan to cover my first properties downpayment and closing costs and initial lawyer fees, or should I do personal savings. My only thing is I am not sure if I would want to clear out my personal savings to cover this.

Any help with this I would greatly appreciate it.

Thanks,

You can buy it in the form of an LLC if you would like. However, I wouldn't worry too much if its your first and only investment so far (plus it may be harder to qualify for the more attractive loans if its a coporate purchaser).

By the way I assume you are purchasing a residential property. If you are buying a large commercial property, definitely set up a LLC or something similar.

As far as downpayment goes, I highly doubt a traditional bank will give you a "small business loan" for the down payment. However, the loan markets are still very borrower-friendly. You should be able to find 100% financing in some form (probably a 80% first mortgage, 20% mortgage).

If you buy in your own name as a rental, you will be still be able to write off expenses associated with the operation of the property.

Also, make sure you do your homework on your deals. Alot of stupid things are going on out there. In my area, its almost impossible to find a deal that makes sense (especially as a rental) unless its an off-market acquisition.

Good luck!

Also, a good indication of how dedicated you are to your project is how much risk you are willing to take. Of course there are circumstances to consider like having a family and things.
But no one will give you a loan if you are not willing to put up your own funds.

If you want to test the market, maybe you should try investing in a REIT.
Real Estate Investment Trust.
It's a good way to invest in the market without having to be a landlord (trust me, it's a pain and the maintenence on a property that other people live in, could kill you if you are looking for the rent to make the mortgage.)
Also if you have an IRA or are starting one, you could start a self directed IRA, which will allow you to invest in a REIT, seriously compounding your interest.

But on the possitive side, especially in my market, the average working family cannot afford a new home anymore, so renting is the only option.
Also there are management companies that will handle all the administrative work, including finding tennants, but you have to have back up funds in the bank to handle maintenece and repairs.