Capital Contribution or Loan to fund LLC for flipping?

[Michael Laurencelle]

When funding my new LLC for flipping, should I use capital contributions or loans? I like the idea of a mix - with a smaller capital contribution being my buy-in and then a second larger amount for funding the first deal being a loan that will get paid back to me over time - over say, 5 years. I also feel like there are potential tax benefits to a loan instead of contribution/distribution. I would much rather pay tax on just the interest income rather than on a distribution of that amount, that I've already previously paid income tax on.

But, when getting funding for deals, from either hard money lenders or other lenders, will having that loan on the books create a roadblock that could make getting funding more difficult, potentially costing me deals?

Any advice or thoughts on the topic would be appreciated.

[Mike Klarman]

If you season the money in the LLC bank account no one will ask any questions. If it is not seasoned someone may ask where did they fifty come from all you have to say is: "this is money I have saved for the purposes of investing in real estate" that's the textbook answer that no lender will ever question. The Lender does not need to know that you are lending your LLC 50k let's say. That's a private agreement between you and your LLC and that loan is not recorded in any banking data base that it would be put on any credit report.

You are fine just depositing the money and then moving forward.