Real estate company

Some buyers are considering the purchase of a property through a real estate company. In that case, you will form a company (generally a LLC (Société anonyme or SA in french / Sarl or Société à responsabilité limitée in french) and will purchase the property through it.

Below are the advantages and disadvantages of this process :

Advantages :

• The rental value will not be added to your taxable income. Owners, living in the property acquired through their company, will pay their « rent » to the company, therefore avoiding the rental value system

• In most cases, the income generated will be taxed at a lower rate than if acquired under your name. The net income belongs to the company, and will be taxed at a flat rate usually lower than the taxable income of an individual

• Buying through a company could offer the owner a protection in case things take the wrong turn (for exemple, you cannot pay the mortgage interests due to financial struggles). Under certain terms, the company would go bankrupt, and your personnal wealth wouldnt be affected by it

• Buying through a company could be tax efficient, as you will be able to deduct several costs (car costs, phone bills, company management fees, etc.) that you can not do when buying under your name

Disadvantages :

• The owner of a investment property bought through his/her company opting to use the revenue, will pay personal income taxes

• A detailed accounting review will need to be held

• When selling the property, the profit could be taxed at a higher rate than if done under your name

• Obtaining the highest loan possible will often be harder, since it is the company finances that will be considered by mortgage providers