Cash Flow Split Rental

[Maximilian Glodde]

Good Morning All,

Need some advice please.

A good friend and I are buying a rental property at $165K and structuring it as follows:

- Formed an LLC in the state - both are 50% owners

- I am contributing the down payment $16K

- He is contributing set up costs (furnishings, etc.) - $7K

- My name is on the loan

- The LLC holds the property

To get us back to a 50/50 equity split in the property, I would like to reimburse 100% of the monthly profits to myself from the LLC until ($16k/2) ($7K/2) = $4.5K is reached. Given the points above, this would mean we both have invested about the same $ amount in the property. Does this make sense?

If the $16K is contributed by myself to the LLC to buy the property, can I pull out up to $16K effectively tax free since it's paying back my initial investment? Almost like I lent $16K to the LLC for the purchase and it's paying me back?!

Thanks for your advice in advance!