Category Archives: Lenders

Advantage and inconvenience of real estate credit

Unmarried couples and pacsés know it, indivision in the acquisition of a property is not what is necessarily the most desirable. With statutes validated by the public finance center of the head office on which your Civil Real Estate Company depends and since 2014 by sending documents and statutes to the Registry of the Commercial Court, you can make financial arrangements to buy several without justify a relationship. This system  is an advantageous solution to avoid blockages that may arise from indivision , ensures a transfer of shares with a tax benefit and can also be a great protection against personal creditors as we will see in this article.

  1. Advantages and disadvantages of a real estate loan
  2. XYZ current account to finance the repayment
  3. Transmission of property is a succession benefit

The matrimonial regime and the loan do not have any more relation as well as the principles of the common indivision. It is the XYZ that borrows and it is therefore she who bears the debt first. The natural persons who constitute it stand surety for this debt and the bank will therefore be interested in the indebtedness of each natural person to grant or not the loan.

As a manager of an XYZ and to ensure the success of the operation, you are strongly advised not to bring the XYZ into deficit because the bank does not like this type of situation. This is why, during the financial package, we first of all observe to what extent the rent (s) covers (s) the monthly repayments of the credit contracted.

If your XYZ is subject to the IR (Income Tax), the partners will be able to fill the gap. If the XYZ is subject to the IS (Corporate Tax), a bank will want more balance of accounts and may require a written commitment by the partners for reimbursement.

WCR (working capital requirement) including potential delays in the payment of rent. An XYZ remains a full-fledged company requiring cash requirements for its operation and generating a turnover related to rents that may vary (although elements of economic stability enter the balance of decision, especially for the banker ).

Be careful, even in XYZ a bank can always refuse a credit and is not obliged to warn a borrower of the risks he incurs.

Pay attention to the revisable rates for bank financing real estate . If the variable capital of an XYZ can be interesting to bring new partners, it is not necessarily interesting (especially in 2018) to contract a variable rate loan.

It is then that the partners are insured. As such, and as for any bank loan, there is a borrower insurance and the bank can therefore cover them differently depending on income earned.

The main thing is to ensure a 100% loan, the negotiation of the borrower insurance is always possible in other cases!

The advantage of the transfer of ownership and debts in XYZ

For the rest, this advantage is well known in the field of property transmission that constitutes the XYZ. Ultimately, a real estate company offers a real asset advantage because it can be given partly in the form of a donation of shares in a more flexible way than a classic property that will be in joint ownership.

This procedure over time makes it possible to benefit from the allowances available in French law for donations made during the lifetime of the donor, a clever way of avoiding or reducing the inherently expensive inheritance tax.

It is the shares of XYZ that are transmitted and not the real estate. The same is true of debts.

Get help from a professional in this case, even if you theoretically do not need a notary, the valuation of shares will be more reliable through him, especially to avoid tax disguised donations .