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Updated over 3 years ago,
Paying yourself back the initial investment for LLC
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