Giving yourself a W2?

[Kevin Harrison]

I was wondering from some of the more experienced investors, is it possible to pay yourself a "salary" and give yourself a W2? This would be coming from your LLC I assume.

The reason I ask is because I know there is a period where you jump to REI full time and are too small to justify loans just based on your experience alone. Many lenders do not want to make a loan to someone in this position without a W2 income, do you think that this might solve that problem? and what about the tax implications of now having "earned income"?

This is all just hypothetical, but I am curious.

[Rob Beland]

I think what you are asking is whether or not there is a benefit to converting your passive rental income to earned income in order to establish a work-history, no? Short answer is no, you can not do that. An LLC is a pass-through entity for one thing so its basically all your money anyways. For practical purposes, the bank wouldn't really care whether you gave yourself a W2 or kept the money in the LLC. Again, it's all your money. The IRS won't allow you to pay yourself as a W2 for the purposes of converting the passive income to earned income. Many people ask about paying themselves as a property manager. Same story, you can't do it. You should contact a local bank with a commercial lending department and start building a relationship with them now. Over time you will learn what their lending requirements are and you can show them your experience and how profitable your investments are. Many banks will use a portion of your rental income as a way to qualify you if that is where you derive the majority of your income.