First of all, thank you all in advance for your sage advice. I’ve read many bogleheads threads and gained valuable insights over the last few years. Now, with my first post.
Background- My wife and I purchased a large parcel of land just over a year ago under our partnership LLC, for which we paid the mortgage deposit as a capital investment. Later, we had $ from timbering which has paid the monthly mortgage payment and other expenses.
Now, we are ready to build an investment home on the property. We are planning to use this as a short term rental. In looking into funding options, we came down to a few options. Essentially construction loan vs self funding seemed to be the best options. We have preliminarily chose the latter. To use a heloc in our personal home and some cash for funding. The plan is to draft a loan document in which the LLC pays us back with a fmv interest rate. Does this seem like a reasonable idea? If not, why?
As I understand it, we will be able to claim the interest as a business expense, but also have to claim it as income on the personal side. We use a pass through model currently. We didn’t love the construction loan secondary to several thousand in fees and a higher interest rate. Also, our builder wasn’t keen on additional red tape. In the longer term, if rates come down, we would be open to bundling the land/home into one mortgage.
Thank you again for your advice.
[Thread has been moved to the "Personal Finance" forum. Moderator Pops1860]
Background- My wife and I purchased a large parcel of land just over a year ago under our partnership LLC, for which we paid the mortgage deposit as a capital investment. Later, we had $ from timbering which has paid the monthly mortgage payment and other expenses.
Now, we are ready to build an investment home on the property. We are planning to use this as a short term rental. In looking into funding options, we came down to a few options. Essentially construction loan vs self funding seemed to be the best options. We have preliminarily chose the latter. To use a heloc in our personal home and some cash for funding. The plan is to draft a loan document in which the LLC pays us back with a fmv interest rate. Does this seem like a reasonable idea? If not, why?
As I understand it, we will be able to claim the interest as a business expense, but also have to claim it as income on the personal side. We use a pass through model currently. We didn’t love the construction loan secondary to several thousand in fees and a higher interest rate. Also, our builder wasn’t keen on additional red tape. In the longer term, if rates come down, we would be open to bundling the land/home into one mortgage.
Thank you again for your advice.
[Thread has been moved to the "Personal Finance" forum. Moderator Pops1860]
Statistics: Posted by uncommonsense — Mon Jul 08, 2024 8:11 pm — Replies 0 — Views 125