Personal Home In LLC And Then Rent From?
I know a few seasoned investors who own tons of property who have their own personal residence in an LLC and rent it from their company. Has anyone heard of this? And is it "bulletproof?"
If you personally own the property you have several benefits including:
1. mortgage interest deduction on your taxes
2. homestead discount on your property taxes
3. homeowner insurance is cheaper than landlord
In many states your home is protected from creditors (not your mortgage) under homestead laws. I know this varies state to state.
This is just a thought, and I'm by no means experienced at this, but wouldn't the owner be able to pay less in rent than what he is currently paying in payments? In this case he could be taking a loss on his personal residence to offset some of the gains in his business. Also, he would be able to take advantage of the mortage interest deduction as well as depreciation. I've never heard of a home owner being able to depreciate the home except in conjunction with the use of a home office.
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Of course maybe he just likes being able to call his property manager to have them fix anything that goes wrong
I have a similar question about a similar type situation. I am just starting to invest in tax default properties and obtaining tax deeds. In my State we have a 3 year redemption period after a deed has been issued to a purchaser. *But if we evict the previous owner and lets just say do a lease purchase with a tenant/buyer. The previous owner would have to pay all delinquent tax amounts paid by me, any improvements I make while I possess the property & pay off any contracts I have on the property. So if the L/P contract was $1000mo lease for 3 years and option to purchase @ $30000. In order for the previous owner to redeem the property he/she would have to pay me:
$36000 total lease amount
$30000 purchase amount
Total=$66,000 plus the default tax amount.
This makes it a little bit harder for the previous owner to redeem.
OK, Here is the deal; let’s say I have a delinquent tax property that I am personally interested in living in. If the tax deed to the property is held by an LLC that I am the registered agent or a member of, can the LLC legally lease or rent to me or my spouse?
My main concern is not mortgage interest deduction on taxes, homestead discount on property taxes or cheaper homeowner insurance. As stated above my main concern is making it harder for a default tax property owner to redeem this home.
*Ps…Not sure if the above example is exactly in accordance with the law of my state, so I am checking with an atty. on a situation like that, but if it turn out to be accurate I just wanted to know if this was possible for the LLC to do this.
From an asset protection web site I have consulted:
...We use this technique because the home can’t be placed directly in the Family Limited Partnership or an LLC without jeopardizing the important tax advantages of the mortgage interest deduction and the ability to avoid up to $500,000 of gain on sale. Although there is no clear law on the subject, it would be foolish to risk a denial of these benefits.
Wrt to agent v. member of the LLC, it matters which you role you take.
Agent of service if the real person (live body) that will accpet "service" on behalf of the entity (LLC). Maybe this is just a terminology issue.
Being a member, means you own part of the LLC. Understand what implication being a owner has as related to the interactions between you, as a LLC member and you personally.
It seems that there are other ways to accomplish the same benefit. PM me as it's off topic.