In this episode, Quentin talks with a member who wants to know whether he should start putting properties under his personal name, or under a corporation. We explore the pros and cons of each option.
The member shares that he is a fairly new investor, who started just a year ago after reading the quote “If you have only one job, you're this close to a poverty line…” He shares that he has closed on a property in Hamilton and is about to close on a second property in April as well. He says that he is looking for niche properties where he can find big lands and use the BRRR strategy. He is currently converting it to a second suite while also preemptively working for the third unit.
As for his second property, he says that he could do two or more dwelling units. He could build a triplex and go up to six units if needed. Quentin says that focusing on one area, in the beginning, is a great way to build geographic expertise, he adds “don't invest too much money in the pre-planning phase, do the stuff that's behind the walls, but don't do the stuff that's expensive…”
On the subject of having a bare trust agreement and a corporation, Quentin adds that having a corporation is quite beneficial, but when you're working in the one-to-four-unit range, you really limit your financing options, if you are already going with a lender that will allow corporations, you might as well use it. He suggests putting it in a corporation if you are intending on growing the portfolio. Quentin also suggests him to talk to his mortgage broker to plan that process.
As for leases, Quentin says that he could have it as a property management company. Additionally, moving from personal to a corporation can have tax consequences. He adds “you may want to send your accountant the trust agreement, before you close on the property so that you show them that the intent was always to have it in that bare trust agreement.” He says that he is also recommending people to move to corporations because of potential tax implications in the near future.
In conclusion, Quentin says that he can do a Section 85 Rollover to include the first property. He also adds that that in BRRR, avoid going into a fixed-rate mortgage, and go into a variable rate product.
• Introduction [00:00]
• His Background and Experience in Real Estate Investing [01:03]
• What is the Cashflow on Both of the Properties? [05:27]
• Is a Bare Trust Agreement Good Approach for Him? [09:22]
• Whose Name Should Be on the Bare Trust? [12:54]