Nonprofit Organization Real Estate Question

[Larry H.]

I've had the desire for a while to create a nonprofit organization and purchase a single family house to provide free housing for families who have a child as a patient at the Children's Hospital. I'm doing some preliminary research and I feel like we need at least one more rental to have the extra cash flow in order to help pay for the recurring costs. My plan is to collect donations until we have enough to purchase a house with cash. My question is, if I purchase a house in the nonprofit corporation using cash, would it be legal to get a HELOC from the equity in that house to purchase a rental property in a separate LLC to help pay for the recurring costs of the charity house?

[Account Closed]

Hold it right there @Larry H. 

Before you start throwing around nonprofit and LLC in the same sentence, and make grand plans about funneling money from nonprofit to LLC, there are a few things you need to be aware of.

When the IRS grants a nonprofit an exempt status.. you can't mingle funds and assets of the nonprofit with a for profit entity. You can of course, if you really trying to do some federal time and get hit with federal fraud charges.

You cannot use the nonprofits funds or assets for anything other than the exempt purpose for which the nonprofit status was granted.