Incorporated Companies & Bare Trust Agreements
Do you want to purchase a property under your Corporation???
If you are considering purchasing a property and would like to do so under your incorporation, you can use a Bare Trust Agreement (inexpensive lawyer prepared document) in order to achieve the same benefits to the company and shareholders as though it was owned in the company name. This will allow your broker to choose from the various lenders that look at rental properties vs. the restricted few that allow purchases in a company name. This, in turn, allows for better rates!!
It is very simple - it simply states that you are personally holding the property on title for the benefit of your Company (becoming the beneficiary).... so in fact the company ends up reporting it as an asset and equivalently reports the related rental income or loss on an ongoing basis.
The benefit typically in this type of arrangement is that normally the banks will not allow a corporation to hold a mortgage as an operating company (“the company”), and typically persist that you hold this asset in a holding company that has no other assets (so you can imagine if you find a few rental properties you could in fact be holding several holding companies). It can be a fairly expensive way to hold the property/properties which is really only satisfying lending policies of the financial institutions. In any case, the lender will have you personally guarantee the mortgage regardless.
There are many times I advise holding property via a Bare Trust Agreement - you can feel comfortable understanding it certainly works both from a taxation perspective and from a financing perspective.
Contact your accountant and Real Estate Lawyer for more information.
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