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  1. #1

    Hedging real estate using your small business

    This is my first post here. I have posted this question on another similar section of a Canadian finance forum but I don't think that I have collected very pertinent opinions
    I need your 2c on this. The idea might sound crazy but I would like to know what you believe about this

    Here is how I would do it:

    My Canadian registered Inc will buy the house. I expect that RE will go down in the coming years
    At the bottom the business sells the house to myself.
    From the point when the business sells the the house to myself forward the business can start writing off the loss caused by the fact that the house decreased in value and it was sold at loss (yet fair market value)
    From that point forward the business will pay less corporate taxes on future corporate income
    The asset will be transferred to me at a fair market value and hopefully will start appreciating.

  2. #2

    caveats: I will still need enough cash in the company to pay the asset in full. I am not sure if the banks easily lend money to corporations.
    I can probably do the move by liquidating other persona assets and lending myself the money to my own company but I will not be able to cover the entire amount.
    I will get my money back when my own company sells me the house back. At that point I can apply for a mortgage and pay company's debt as well

    I do not foresee any problem with this plan.
    Do you ?
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  3. #3
    Thanks for the feedback
    #3 seems to be the biggest problem here. For this move I should set a corporation with IT & RE as the object of the business.
    My income comes for IT. I might use the corporation for a few other RE transactions as well.

  4. #4
    I think you also have issues with capitalization. Will you loan the money to the business or buy shares? When it comes time to buy the house back, where will you get the money. Banks will mortgage property but I doubt they would lend to your business.

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