How to pay rent and avoid piercing the LLC veil

Question

We just started a rental property business.  We have purchased 2 homes in our personal name.  Both properties will be deeded over to our new rental property LLC.  The mortgages for both properties are in our personal name.  Legally speaking, what is the best way to pay the mortgages for these properties?  Can we simply pay the mortgages from our LLC checking account?  Or do we have to take a distribution from the LLC checking account and then use those funds to pay the mortgage?  Thanks for the help.  Chad.

Chad Potter · Answer

Thanks for the detailed message!

Chad

Megan Templeton · Answer

Hi Chad - until the property is in the LLC, the cleanest way is to distribute the funds from the LLC account to yourself individually as an owner distribution, and then pay the mortgage directly from you. Sorry for any confusion! Happy to hop on a call to chat through specifics if you have any other questions.

Adah N. · Answer

@Megan Templeton

Megan - I am curious about this too. What are implications of paying mortgage from an LLC account when property is still in an individual’s name?

Megan Templeton · Answer

Hi @Chad Potter

Once the properties are in the LLCs, you can pay the mortgages from the LLC. Until the properties are in the LLC (while they are still in your name), you should take a distribution from the LLC to yourself individual and pay individually.

Thanks,

-Megan

Chad Potter · Answer

Spoke with our lender.  Not possible.  Cannot add an LLC to a secondary market loan.

Mike D. · Answer

@Chad Potter

I would ask the bank to add your LLC to the mortgage and then pay the mortgage out of the LLC checking account.