Living off loan proceeds from a property in your LLC

[Jeff Dimock]

I have heard many people talk about getting a larger loan than needed on an investment property – either from a private lender at purchase or perhaps from a bank refi later - then using the excess as available cash to live off of. While this is fairly simplistic and easy to understand if you own the property and the loan in a personal name, if you do so in an LLC or other entity how do you take the money out of the entity appropriately? It is not profit so it wouldn't be a distribution or other taxable income. But you shouldn't just pay personal expenses from the business account or you'll be co-mingling. So I suppose you would have to write a check to yourself from the business account. How would an accountant categorize these funds?