Lender Refinance and Transfer between LLC's

[Ariel Broome]

Good Day All- 

I purchased a property with a hard money loan under LLC #1 (the flipping LLC) , I renovated the property and rented out the property, and then refinanced it while simultaneously transferring the deed to LLC #2 (LLC holding rental properties) .

I purchased the property unsure if I was to rent or flip, after renovations decided to keep- that is why it was purchased under the Flipping LLC (LLC #1).

How do I record the transfer and the Cash Out in my books for the 2 LLC's.? The Cash out amount will go back/stay with LLC#1.

Thanks for your help. 

[Ricardo R.]

Hey Ariel — nice work seeing that project through and being organized enough to keep your LLCs separated. The bookkeeping here can definitely get confusing the first time around, but it’s actually pretty straightforward once you think of it as two entities doing a simple business transaction with each other.

Here’s how to handle it:

1. Record the transfer as a sale from LLC #1 to LLC #2.
Treat it like LLC #1 sold the property to LLC #2 at fair market value (the same value the refinance was based on). You'll record that "sale" on LLC #1's books — debit cash (from the refinance proceeds) and credit the property asset off your books. If there's any gain from the sale, that shows as income to LLC #1.

2. Record the purchase on LLC #2’s books.
LLC #2 now owns the property, so it records it as a new asset at the same fair market value you used in step one. The refinance loan is the liability on LLC #2's books.

3. Cash-out handling.
Since the refinance proceeds stayed with LLC #1, that's essentially a return of capital or intercompany loan from LLC #2 to LLC #1. You can book it as:

• Intercompany receivable (LLC #2)

• Intercompany payable (LLC #1)

That keeps things clean and traceable between both sets of books.

4. Taxes & paper trail.
Make sure your refinance documents and deed transfer clearly show the ownership change between the entities. You’ll also want to let your CPA know, since how you treat the transfer (as a sale vs. a disregarded transfer) can vary depending on how the LLCs are structured (single-member, disregarded, partnership, etc.).

You did the right thing by moving it into the holding LLC once you decided to keep it — that's a good habit for scaling later. The key is just making sure both sides reflect what really happened: LLC #1 sold it, LLC #2 bought it, and the cash stayed with the first. Clean, simple, and audit-proof. Ariel, I really hope this helps you a bit, I sent you DM on BP... it's one of the reasons I do this, I hope you can assist. Thank you in advance.