Changing gears from a flip to a house to live in?
I wonder which BP forum this question is best suited for? Suggestions appreciated. I think it's mostly a tax question?
Here's the sitch...
We took on a significant single-family rehab that for lack of a better term, "hasn't gone great," first intended as a buy-and-hold rehab. When it became a bigger project than we expected, so we decided instead to sell it off after done. Then there were complications, and setbacks, and town/permit issues, and contractor issues and Covid and so on. We've been at this since December of 2018. Yikes. We literally have made no progress from mid December until about 2 weeks ago (mid May). Things are finally back in motion I think it will be done with the last of it in a few weeks. So 1.5 years so far.
The purchase and the rehab is 100 percent borrowed money, mostly off a business credit line we have secured by apartments we own. We are now being "forced" to convert the line to a loan that terms out on a 3 year/balloon with no prepayment penalty, instead of what we were hoping would be just a 3 to 6 month extension on the original credit line. This is how the bank wants to do it, due to their fears in the current economic climate. The subject house does not secure the loan, our apartments do. I am not worried about maintaining the payment indefinitely, but it is an expense that is burning resources as every month goes by. I don't expect the project house to be profitable at this point, if sold.
In considering all options, one thought is to sell the house we are living in and pay this and other stuff off with that money and then (so to speak) buy the rehab house from our LLC and then live in that. I just wonder from a tax point of view if anyone has taken on a house intended as a flip and then went through whatever motions it would take to convert the deal instead into a primary residence?
From an accounting and tax point-of-view, can I buy the house from my LLC and make it my residence instead of selling it off to third party? With an above the board/legit paper trail and legit transaction to myself, without causing some kind of tax audit or other ugly problems?