Living off investment earnings

[Kyle Neff]

Hello BP Community,

General question regarding using some of the cash flow from REI to fund monthly expenses. As an example, if I have 10 properties each bringing in $1000/month net for a total of $10k net monthly REI income, and I want to reinvest 80% of these earnings directly back into my investing but use the remaining 20% to fund daily & monthly living expenses, how is it technically done?

Meaning - can you transfer funds directly from a bank account that is tied to an LLC to your own personal account without penalty to the LLC?

I am using this strictly as an example because right now I have only two properties bringing in $1600 net monthly income, and every bit of that gets reinvested, but I want to plan for the future as we are talking about my wife quitting her job at some point, etc.

What is the best way to approach this?

[Jake Kinoshita]

@Kyle Neff

Awesome strategy. I should be doing the same! 

I am not an expert to maybe you should consult with lawyer and accountant but if its sole-ownership LLC, it doest not really matter for tax purpose if you are filing schedule E.

If you are on a partnership and file 1065 and K-1 for your individual tax return, if you send money from your LLC to your personal account, it could be considered as equity movement. You can consider it as a loan to you but then you have to pay the interest even its your company. Maybe pay as a salary? Your accountant will be able to help you out for sure.

Good luck!