Paying rent to my own LLC in a House Hacking structure

[Zeb Wallace]

I live in one unit of a triplex which I own (i.e., House Hacking). Both this property, and another property that I own are in a single member LLC, of which I am the sole owner. Because I have been staying for "free" in the unit, the cash flow of the triplex (and the cash-flow of my LLC as a whole) are not what they would be if I were renting out my unit.

The LLC is not generating positive cash flow, but would be if it had the additional income from my unit. As a result, I have to periodically put additional funds into the business to cover repairs to the units or the mortgages.

My question is this: What would be the implications if I were to start paying the LLC an amount of money each month that I feel represents the market rent for the unit? Are there any negative tax consequences (or other consequences) that I would suffer from doing this? Any other pro/con issues that I should be aware of?

I would prefer to pay the LLC rent, (which would make the business self-sustaining), and take periodic disbursements from the LLC when there is surplus cash not needed for reserves or other purposes.

Does anyone have any experience / thoughts on this type of a structure?

Thanks in advance!

-Zeb