Renting to your own LLC

[Ryan C.]

I'm wondering if I'm allowed to purchase a commercial warehouse with my LLC, rent it to my other LLC for $XX/month to increase my NOI and increasing the property value, and then doing a refi on the property to buy another property and/or more equipment for my business?

[David M.]

@Ryan C.

Not enough details here and you really should consult a qualfied professional or two.  This looks like the classic self-rental "trap."  Even if you hold the properties and business in different entities, it still self rental if you are the owner of both business.  Nothing illegal about it, but the rental income becomes active income, pretty much the least preferred tax bucket.  Meanwhile, your deductions all remain passive.  So, its a double whammy since you can't offset your income and your rental expenses which are now "stuck" as passive losses with no passive income with which to offset.

@Jim Pellerin as a Real Estate Coach shouldn't you know this??