Loan & Cash Flow Question

[Fady Riad]

Hi Everyone,

I have a question about loans and making sure you're cash flow positive. I've doing all my calculations as if my loan interest is tax deductable and even though the principle is not I can claim depreciation to reduce my taxes. That way, I'm only paying taxes on money in my pocket and I can't get in a situation where my expenses are post-tax and I'm cash flow negative because of taxes.

Searching for loans, I can't find banks that will give a loan in the name of an LLC. My concern is that if I take the loan out in my name but I make the income through the LLC then I will have to pay taxes on everything and I can't claim deductions. Alternatively, if I forget the LLC altogether and charge rental income directly to myself then I can deduct all those things but I won't be able to take the personal exemption so effectively it's like not being able to deduct taxes on $4k+ of expenses.

Any advice on this? Am I able to take a loan out in my own name but still claim tax deductions on loan expenses (loan interest, depreciation) against the income coming into the LLC?

Thanks!

[Jaysen Medhurst]

• Okay, @Fady Riad, let's clear up a few things.
• There are no tax benefits to holding a property in a LLC. You can write off all of the same stuff no matter what.
• You will not be able to get a mortgage in the name of a LLC (unless the LLC already has a strong track record of profitability), you will have to personally guarantee the note. You can hold title in a LLC. Whether or not that's worth it right now depends on a few things. If you don't have a lot of other assets to protect, a LLC may not be worth the trouble for just one property. Just get an umbrella policy to protect yourself.
• If you get a solid deal, you should be cash flowing. Actually cash flowing, not just on paper. In fact, the point is to be realizing more profit than you actually show on paper.
• What "post tax expenses" are you worried about? If an expense is legitimately business related, it will be deductible. The only place this can bite you is with Capital Expenditures that need to be amortized.