Cash out refi from VA loan and Put home in an LLC?

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Cash out refi from VA loan and Put home in an LLC?

Account Closed
Rental Property Investor · Abilene, TX · Member since 2016 · 61 posts · 8 votes

Alright I have 2 rentals and currently live in the 3rd rental. I have 2 homes in a VA loan and am looking to sell my first home into a LLC that I establish to essentially do a cash out refi. As I write this I feel I might have to pay taxes on the profits from the sale/transfer. Is that correct? Anyone ever do something like that? Tips or advice on what to avoid?

This will allow me to restore my VA eligibility to buy a 330K home. I will take the cash out from the selling of the home to buy other BRRR properties in the future.

The goal of this plan is to free up VA benefits to purchase a new home, rent out the current home that I am in and get cash to put into other investments.

Please feel free to offer any advice or critiques. Thanks in advance. 

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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    Transferring from your name to LLC is a sale. Property taxes increase and Transfer taxes apply. Don't do this before you have the new deal approved and clear to close concurrent. The VA does not allow the title to not be in your name. Cash out is not mortgage interest that is deductable in the same old way (Income taxes). It can only be deducted if used on the same subject property for capital improvements, which you say you don't plan.  Read about: Tax Cuts and Jobs Act of 2018. There are layers of taxes here that I put in bold. Talk with a CPA with a pen not a pencil.

    Can you use 100% of your benefit on a higher sales price (make sure you qualify first) and carry the loan on the above house with 41 debt to income ratio or do you have something great to make an exception? It needs to make clear sense on paper. Your job sits where the new purchase is owner occupied, you have a lease and deposit for the old house, you are going up in value. 

    Do you know what percent of your award you used in the current house? 

    I am not a tax advisor. I am an expert on VA loans.
    Thank you for your service! VA loans are a fabulous benefit!

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    4y

    @Account Closed

    You may want to consider a transfer of assets from yourself to an LLC that you are a member of.
    This would not be considered a sale and not result in capital gain.

    Best to consult with a CPA.

    Best of luck

    [email protected]917-280-8544
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