Paying yourself back the initial investment for LLC

[Adam Joe Wolf Jr.]

Hello,
I am getting ready to make the jump into Real Estate. In June, I will have X dollars to invest in buying a home. I plan to add a home or two every year for the next 10 years. From what I have read, it is best to set up a Series LLC, BEFORE buying my first property. (This is argued, and I am not sold on it yet, but let's go with that for the sake of this conversation).

My question comes from the following scenario. I (with a lawyer) will create the LLC. I will then lend my personal money ($X) to the LLC so the LLC can purchase Investment Property #1 in cash. That property will then be used as equity for the second property down the road. After the LLC starts making money back from the rent on Investment Property #1,, can I pay myself back as the lender to the LLC (however long that takes) and not be taxed on that portion of money that was used to buy the property? I think it would be untaxed until I get into profit, and I would not be making profit until the initial investment is paid off. Right? If I cannot do that, I would be getting triple taxation. (Taxed on my personal income that I am saving to start this, taxed on the purchase of the home, and taxed on paying myself back.) 

 I cannot find anything on the finer details about how to pay yourself back the money you lend to start the LLC. Paying back the initial investment... I see no difference paying myself back than if I borrowed from a bank to start it. I will have the cash, so I want to borrow from myself, and pay myself back with interest. It makes sense, but I do not know the legality, the process, etc. 

I see that I am also supposed to pay a salary to myself. I would make that small the first few years so I can 1. pay back the initial investment 2. save up for repairs 

Any advice, or recommendations to a good source would be appreciated. 

Thank you, 
Adam

[James Miller]

Originally posted by @Adam Joe Wolf Jr.:

Hello,
I am getting ready to make the jump into Real Estate. In June, I will have X dollars to invest in buying a home. I plan to add a home or two every year for the next 10 years. From what I have read, it is best to set up a Series LLC, BEFORE buying my first property. (This is argued, and I am not sold on it yet, but let's go with that for the sake of this conversation).

My question comes from the following scenario. I (with a lawyer) will create the LLC. I will then lend my personal money ($X) to the LLC so the LLC can purchase Investment Property #1 in cash. That property will then be used as equity for the second property down the road. After the LLC starts making money back from the rent on Investment Property #1,, can I pay myself back as the lender to the LLC (however long that takes) and not be taxed on that portion of money that was used to buy the property? I think it would be untaxed until I get into profit, and I would not be making profit until the initial investment is paid off. Right? If I cannot do that, I would be getting triple taxation. (Taxed on my personal income that I am saving to start this, taxed on the purchase of the home, and taxed on paying myself back.) 

 I cannot find anything on the finer details about how to pay yourself back the money you lend to start the LLC. Paying back the initial investment... I see no difference paying myself back than if I borrowed from a bank to start it. I will have the cash, so I want to borrow from myself, and pay myself back with interest. It makes sense, but I do not know the legality, the process, etc. 

I see that I am also supposed to pay a salary to myself. I would make that small the first few years so I can 1. pay back the initial investment 2. save up for repairs 

Any advice, or recommendations to a good source would be appreciated. 

Thank you, 
Adam

I think you're confusing the concept of a loan, versus a capital contribution. If you just put money into your LLC, that's a capital contribution. You may, generally, then take "out" the capital contribution amount at any time and it doesn't affect income or expense. Pass-thru entities don't pay tax directly so you'll already be taxed on income and loss, regardless of whether you move money in or out.

It is possible to lend to an LLC where you're a member, but that's not usually done if you're the sole-member.