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My wife and I plan to purchase a property for short term rental use.
we plan to obtain a mortgage using our own personal name. After we close we feel like we should deed the property to an llc that holds the assets/ property. We will then have another llc that manages the property for rentals.
my wife and I will own 50/50 for. Oth as it will be multi member llcs.
we also plan to take on personal debt loans to fund most of the operations.
we want to be able to have LLC 1 deduct the personal mortgage debt and taxes as an expense. We also want to be able to have either LLC1 or LLC2 deduct the personal interest charge of the debt to fund operations.
my wife and I have filed married but separate for years and we want to continue to file this way.
how can I make this happen?
my guess is we would have to fund the lLcs with some small capital and then lend to the LLCs the mortgage and operations money so they can then be able to deduct the interest. If so then we would need to report it as personal income on our return but would we be able to offset any tax liability since we personally have to pay the mortgage company and personal loans an interest charge?
I know this might seem convoluted so whatever feedback you guys have let me know
ps we aren’t concerned about the “due on sale” clause in the vote.
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You really need to talk to a local tax pro to get educated on this "situation" you are trying to set up since it depends on state laws as to what is allowed and/or better. Jumping into an LLC may not be the best option and if you get a personal loan to buy the home and you don't title it into the LLC's name you may have other issues. Also you may not be able to get a mortgage in the name of the LLC and do you really need an LLC as a married couple. PLEASE take some time to get educated from a local tax pro and/or RE attorney.
Ah yes i get that the scenario is probably something I need some professional input on. I was just trying to get an overall idea of thoughts on it. I’m in Texas and the market here is booming.
Due diligence is not to be skipped especially when making large purchases.
ps we aren’t concerned about the “due on sale” clause in the vote. i assume that "vote" is "note". this likely depends on what state law considers "due on sale" and the bank's position if title to the property was transferred. In the worse case, the note would become immediately due and payable. failure to inform the bank of the title transfer could result in legal issues besides the debt becoming due. if you do not live is a community property state partnership returns would be required. the 2 LLC's in and of themselves could generate tax issues for you. passive losses on the rental side. non-passive self employment income on the management side. I agree you need a pro reviewing this. I'm not sure that a tax pro would be able to give legal advice on the mortgages so you may want to consult with a tax lawyer familiar with your state's real estate laws.
OP lives in TX, which is a Community Property State. Bit I agree that both local tax and legal advice is needed.
When seeking advice from the appropriate professionals in your local area, there is one thing you what to address, as laws differ on this state to state, and "rules" differ between lenders.
Typically, when you purchase real estate and title it to an entity, such as you and your spouse, you may not be able to just go arbitrarily re-title the property to another entity without the written consent of the mortgage holder. Doing so could be a breach of your mortgage agreement and you could be risking the loan becoming "due and payable in full immediately". Some lenders won't allow you to just change the owners, because it would be more beneficial to them if you either sold the property to the other entity (even if you own that entity) or "refinanced" the loan to the other entity that is in the names of the original buyers.
Again, all this depends on state laws as well as requirements of the mortgage lender. So you'd want to discuss this with an RE professional, as well as a banking professional such as a loan officer or loan underwriter.
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