Investing Cash flow in LLC

[Mai Nguyen]

Greetings,

Just curious if anybody has done it and if it is legal.

Does anybody who have rental properties in an LLC, take the cash flow they get each month and instead of increasing reserves or buying another property, just invest it in the stock market via the LLC? Seems like it could be something to do that could make the cashflow work more.

Reason I ask is as I put proformas to see if buying a rental is better than investing in the market if I had the same cash available to start and additional cash flow each month (or negative)

Thanks

[Kevin Sobilo]

@Mai Nguyen, no legal issue, it probably does not make sense to do.

1. If your LLC is sued, those stocks are an asset that can be taken! Where as if you did an owner distribution and bought the stocks in your own name they are protected by the LLC.

2. If your cash-flow is tied up in stocks, that limits your ability to expand your portfolio. Stocks are pretty liquid, BUT selling them triggers tax consequences and the timing of when you want the money for real estate purposes might not coincide with the best time to sell the stock.

If you tie up money in stocks within your LLC and then a deal pops up, you might have to choose whether to lose the deal or sell your stocks at a LOSS. Not really the position you want to be in.