GCing Your Own BRRR - Paying Yourself?

Question

My husband and I are getting ready to do our first BRRR deal in the Central Texas area. Here's my question: Have any of you paid yourself to GC your BRRR deal? Have you done this successfully over a period of time?

The background: My husband is a professional homebuilder and we'd like to have more flexibility (we have several very young children) in his workday. We just need a little bit of cashflow each month to make it work and we are wondering if anyone else pays themselves to GC their own deals. It seems like the strategy could work (depending on finding a deal and how the numbers look, of course). Thinking through the tax implications, how that changes each deals numbers, and how we'd structure those payments has my head spinning.

Thanks for any and all help!

Brian Fung · Answer

Aloha Mary Lynn,

Simple Answers: 1. Yes, investors do pay themselves for the work they are doing (separating their construction businesses from their investment businesses)

2. Make sure you discuss the logistics of taking draws with your lenders ahead of time so they give you the green light.

This is in fact something that can be done and investors do. There are definitely tax implications for this that's worth discussing with your professionals. There's also potentially some liability protections you can have in place by having the work done by the GC rather than you as individuals (discussion for your legal team).

To help with you issue of cash flow, consider the idea of financing your rehab budget with your hard money lender. Make sure you discuss it ahead of time with them that your husband is a "Professional" GC and his company will be the one providing invoices for the work completed. The last thing you want to do is finance your budget and get pushback from your lender's construction draw team that you can't actually get the draw because your husband is both the GC and the Borrower (Owner Builder). Either way, you're going to want to make sure for both lending and your own records that your husband's company is submitting formal invoices on their letterhead for the work that has been completed for your draw requests.

Hope this helps! Aloha.

Jake Baker · Answer

@Mary Lynn Pruneda

I have seen this with some of our clients. Their contracting business will be an S corp that pays them a salary. They keep their real estate in a separate LLC. Of course, it is crucial to consult with legal and tax professionals when structuring your business and real estate holdings.

Jack Schwartz · Answer

Best of luck on your BRRRR journey, Mary Lynn! And a thanks to Brian for the insightful comment.

The scenario you described is akin to playing the role of a lender and paying yourself the loan percentage—investors pay themselves much like how a bank or private hard money lending institution would handle it.

As Brian emphasized, consulting with your legal team is crucial in such matters,

GCing Your Own BRRR - Paying Yourself?

GCing Your Own BRRR - Paying Yourself?

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