Using LLC to pay for expenses of rental property (MORTGAGE)

General Landlording & Rental Properties
8yFollow

Using LLC to pay for expenses of rental property (MORTGAGE)

Edgar Perez
Kenosha, WI · Member since 2017 · 93 posts · 21 votes

Hello BP community,

I recently created an LLC to manage my rental property and separate business and personal expenses. I have questions about how to use my business checking account to pay for expenses for the rental property.

Background info: the rental property and mortgage are both currently in my personal name, the property is a 4-unit building where I have to pay the heating and hallway lighting bill, tenants pay electric. I have tenants making rent checks out to the LLC to separate personal and business income. I currently have the LLC make a check to my personal name which I use to pay the heat and mortgage. I do not live in the property. Location: Kenosha Wisconsin

Now because the rental property is being used for business purposes, am I able to make direct payments from the business checking account directly to the bank that holds the mortgage as well as paying directly to the utility company?  

This is my first LLC and because the rental property is in my personal name I am not trying to run in to any legal issues.

I appreciate any related info.

Tags: LLC taxes mortgage investment cpa law property management

0Reply
218 views

Most Popular Reply

Joe Hines
Investor · San Jose, CA · Member since 2017 · 118 posts · 108 votes
8y

Making the payments directly from your LLC accounts to creditors, vendors and utilities is exactly the right way to go. You shouldn't even considering doing it any other way, really. If your audited by the IRS or your state, you'll want clean a clean accounting trail showing your income and expenses. The only money leaving your LLC for your personal accounts should be a salary or some owner's compensation being paid to you.

3Reply
See this reply in the discussion

12 Replies

Jump to latestLatest
  • Joe Hines
    Investor · San Jose, CA · Member since 2017 · 118 posts · 108 votes
    8y

    Making the payments directly from your LLC accounts to creditors, vendors and utilities is exactly the right way to go. You shouldn't even considering doing it any other way, really. If your audited by the IRS or your state, you'll want clean a clean accounting trail showing your income and expenses. The only money leaving your LLC for your personal accounts should be a salary or some owner's compensation being paid to you.

    3Reply
  • Edgar Perez
    OP
    Kenosha, WI · Member since 2017 · 93 posts · 21 votes
    8y

    @Joe Hines how does this factor when the utilities are in my personal name because the property is still in my personal name?

    0Reply
  • Joe Hines
    Investor · San Jose, CA · Member since 2017 · 118 posts · 108 votes
    8y

    I have a few rentals, like my personal vacation home and another home which I bought before I had an LLC, both of which have utilities and one has a mortgage in my personal name. They are used for rental purposes, so I pay all expenses and deposit all rents into my business account. The accounting is clean and I don't think the mortgage company or the utility company cares whose name is on the check.

    1Reply
  • Dick Stevens
    Rental Property Investor · Haverhill, MA · Member since 2017 · 290 posts · 185 votes
    8y

    Why bother with an LLC if the property is in your personal name?

    0Reply
  • Paul Martinez
    Real Estate Agent · WHITTIER, CA · Member since 2017 · 26 posts · 4 votes
    8y
    @Edgar Perez I have my own LLC, and since the very beginning after making my saving and checking account, I started paying everything through my business account. Your bank statement is what you want as proof for your taxes. Good luck!
    0Reply
  • Paul Martinez
    Real Estate Agent · WHITTIER, CA · Member since 2017 · 26 posts · 4 votes
    8y
    @Edgar Perez also one more thing, once you start using your checking account frequently, they should start sending your letters for credit cards. I’d recommend opening one up and paying everything you have to with the credit card so you can build your business credit/capital.
    0Reply
  • Edgar Perez
    OP
    Kenosha, WI · Member since 2017 · 93 posts · 21 votes
    8y

    @Dick Stevens I purchased the property before I had an LLC, I created the LLC to separate business and personal finances and to eventually purchase property and manage under the business name. I have not gotten to the point of moving the property to the ownership of the business as of yet.

    @Joe Hines thanks for the information, I had a feeling as long as I can prove that the home is being used for business purposes there shouldn't be an issue paying out of the business account but I didn't want to make unsafe assumptions

    @Paul Martinez I currently have 2 business credit cards for that exact purposes and to take advantage of reward points.

    0Reply
  • Dick Stevens
    Rental Property Investor · Haverhill, MA · Member since 2017 · 290 posts · 185 votes
    8y

    If it's a 4 unit property I'm assuming you have a residential mortgage. If that's the case, you cannot move it into an LLC. Personal mortgages must be in an individuals name.

    Too many people get hung up on LLCs.  You don’t necessarily need one and there is no guarantee that it will protect the owner from liability.  Good insurance and keeping the property in good condition are your best ways to protect yourself.

    2Reply
  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    8y

    I have my mortgage payments set up under my LLC as an automatic withdrawal and the mortgage is under my personal name. It is totally fine to do that.

    1Reply
  • Jon Dorsey
    Rental Property Investor · Millersville, MD · Member since 2017 · 127 posts · 44 votes
    8y

    @Brock Mogensen @Edgar Perez Who pays the property taxes and insurance? Who's name are those in, your name or LLC's?

    Does it matter which state you setup your LLC for in this situation?

    I'm a FL resident and have two investment SFRs: one in FL and one in MD.

    In the thread members have tenant paying LLC, LLC pays me, LLC pays mortgage, property taxes, insurance (though all in my name).

    Can I setup a FL LLC for both or do I need a MD LLC too?

    1Reply
  • Fabian Gonzalez
    Meriden, CT · Member since 2018 · 21 posts · 5 votes
    8y

    Thanks @Edgar Perez. Your question brought me answers to questions I've had myself regarding LLC and rental properties! Good luck to ya moving forward!

    1Reply
  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    8y

    I pay the property taxes and insurance under my name-just so when tax season comes that is all on the same entity.

    The main reason I decided to have rent payments go through an LLC is so I can build up a business LOC.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free