How do you, tax efficently, move money between your REI entities?

[Arlen Chou]

Hello All,

I am still a relatively new buy/hold investor, but over the past 2 years I have put together a small portfolio of 13 doors.  Although I am fairly comfortable with the mechanics of buy/hold, I am still trying to figure out the best way to move money between various "internal" entities.  

I am still getting conventional loans that are generated under my name for MFR properties. However, I have placed my properties into an LLC and I have a S-corp to handle management tasks. This seems to be a pretty standard set up on BP. What I am trying to better understand is how money should move between the organizations ESPECIALLY when it comes to tax time.

Currently, it seems that loans from banks need to be generated under my personal name, LLC's are the entity to hold the property, and S-corps are the way to go if you are doing activities like management. I realize that there are on going discussions about taking the personal loan (HELOC or otherwise) and then transferring the property at a later point to the LLC. Assuming that I don't want to take the risk of the bank activating the "due on sales" clause, and I keep the loan in my name, but the property in the LLC, what is the most tax effective way to move money around these entities? Do you just call the initial money to buy the property "capital investment" and just leave it in the LLC?

I am assuming that the tenants should write checks out every month in the name of the LLC. Additionally, since the loan is in my name, the banks will send out the interest payment info out with my name on it at tax time. This leaves me with a situation where the income is going to one place, but the tax benefits are going to another. I am trying to figure out this dilemma.

As for getting money into the S-corp, I am assuming that either the LLC or I personally should be "paying" for services based upon some simple contract.

Any insight would be greatly appreciated!

-Arlen