Can my LLC Secure Loan from Personal Home Equity?

Question

I am new to real estate investing.  I was told the best thing to do was establish an LLC as I begin my venture.  I plan to access some of the equity in my home, along with cash on hand, to purchase and reno property.  I was not sure the legality and tax implications of using personal assets to help fund LLC ventures.  I appreciate any advice you could give.

Phillip Murdock · Answer

Thank you so much! One last question: Would it be wiser for me to pursue funding options personally and then fund my LLC, or would it be better to seek funding options via the LLC?  In other words, secure funding privately or secure funding commercially?  I have listened to a lot of the BiggerPockets podcasts, and I just cannot figure out the best avenue for me to begin with on my journey into real estate investing.  Thanks again!

Doug Smith · Answer

It can legally be done. I just depends on the lender as to if they will allow it. You can hypothecate collateral from one person/entity for use by another person/entity, but you might want to borrow the money as a home equity loan (fixed payments and term...one time funding) or a home equity line of credit (HELOC). Once you do that, you can always make a equity contribution to your LLC or even a loan from you to the LLC using the money from the loan or line that you personally borrowed. As to the tax implications, us lenders have been programmed since birth to retort "consult your tax advisor". I wish you well in your real estate investing journey.