Sandpoint, ID · Member since 2015 · 68 posts · 37 votes
It has been awhile since I've been on the forums but I am needing some input regarding the best way to structure the purchase of our next investment property which will be in Central Louisiana (we will be touring properties Feb. 9th and 10th and making a decision on which one to go with at that time). So, my original plan was to use our personal HELOC to buy and rehab the property. Under the new tax law, the interest from the HELOC would no longer be tax deductible so I was thinking I could use the funds from the HELOC to make a formal loan (promisory note, ammoritization schedule, etc) from myself to our Construction LLC and then buy the property and rehab it under the name of the LLC, because interest paid for business loans is tax deductible. Are there problems with my plan or a better way to do it?
Interesting question since I am in a similar situation in terms of using a HELOC for purposes of rehabbing property. I’m interested to see what responses you get.
Interesting question since I am in a similar situation in terms of using a HELOC for purposes of rehabbing property. I’m interested to see what responses you get.
If you were to leave out the LLC you're basically talking delayed financing. You'd be able to do a cash out refi w/ in 6 months (I think) using the new appraisal value vs purchase+rehab price.
Now, the if I remember right the LLC makes that commercial and commercial loans, which I know nothing about.
I would just draw on the line and put the fund in the LLC's bank account and count the whole thing as a contribution... but to a certain extent you can use the HELOC and make all purchases in it contribution to the LLC... as a start up most of those little details are pretty blurry and I would tend to lean towards the assumption that such a transfer should be fine. If its not fine i need to know because i have been doing that will my RE LLCs for years lol. When you buy the property just do so in the name of the LLC and in most cases the bank is going to want a personal guarantee anyway to pierce the corporate veil effectively making it easier for them to target you personally in the case of an issue but your still protected from others from what I understand in the case of other liabilities... Best course of action is to clear such questions with a good lawyer and accountant IMO (they are worth their weight in gold and should be on you team/ in your roladex at this point anyways). PS i am not a lawyer its worth the cost to get a professional opinion even if it turns out to be fine the down side is almost always more expensive than the upfront cost of a harmless question.