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How to Set up your Own Property Management LLC or Corporation - YouTube
Channel: Clint Coons Esq. | Real Estate Asset Protection
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- Hi Clint Coons here
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with Anderson Business Advisors.
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And in this video I'm going to discuss
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using a property manager with
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your limited liability company.
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Alright, you may be an investor like me
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who invests outside the
state in which they live.
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So it really doesn't make sense for you
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to try and manage the properties remotely
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because that would just
become a nightmare.
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So what you'll end up doing oftentimes
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is hiring a local property manager
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to handle your real estate
investments for you.
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Now the issue often arises
for people who do this
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where do I have that property manager
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send the rent checks every month?
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Or my payment every month
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After they've held out their fees?
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Well I get the idea
that it can be confusing
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so you have to then look at your structure
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and determine how are you set up
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and where do you want that money to roll.
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There's two ways you could do this.
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Let's assume that we have
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our limited liability company right here,
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here's my LLC.
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It owns this property here.
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And let's say I have a few LLCs set up.
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Here's another property over here.
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Let's say these were Florida properties.
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And if you watch some of my other videos
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you know that oftentimes I'll tell you
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if you're using a state specific LLC,
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like these were in Florida.
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Florida offers no charging
order protections,
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watch those other videos on
charging order protections.
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If you don't know what that is
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it's very important that
you understand that concept.
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Then you'll have these
LLCs owned down here
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by what is referred to as a holding LLC.
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And that's just a term that I put on it,
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but this LLC is typically
going to be in Wyoming.
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And then you're going to own
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that Wyoming limited liability company.
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So, let's assume this is your structure
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and you have this out of state
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property management company over here
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that's managing all of
your real estate for you.
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So they're managing these properties.
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So where are they going to send the rent?
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Well ideally what you're
going to want to do
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is have them send the rents to
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the respective LLCs.
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So property number one is going
to send the rent check to here,
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property number two it'll
send the rent check to here.
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This is ideally the way it should roll,
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but oftentimes it's not
how it's going to happen.
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Because this property
management company over here,
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if you have multiple properties
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they want to keep it
as simple as possible.
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And if you're telling
them they need to have
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different entities they're
sending the rent checks to,
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that means different EINs
they have to account to
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for these payments.
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It complicates their business for them.
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So they're going to
ask you for one entity.
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They may even try to send
the money to you directly.
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A, you don't want the money
coming to you directly,
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you want it to go to one of your boxes.
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So this then leaves us with two choices.
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Choice number one is
you can have the money
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sent directly down here to
your Wyoming holding LLC.
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So this is another reason why I like
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this holding structure here,
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having this LLC.
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Because it makes the process of working
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with out of state property
managers a little simpler.
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So you have the checks collected,
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the money collected down here.
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Now, if you watch my other videos,
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I've told you how important it is
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to run money through the respective LLCs,
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keep in mind if you have to go this route
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because of your property manager,
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then you need to have really
good books and records here.
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You need to make sure that you're
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properly accounting for each
LLCs if it received the money.
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So this is where you need to have
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a superman CPA or
bookkeeper that's in there
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and they're doing a really great job
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of keeping things clean.
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Because if anything happened here
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and this one came under attack,
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a claim that a creditor could make
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or an attorney might make
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is that hey this is all
one common enterprise.
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You never collected any rents,
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the rents went to the blue box,
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never went to the brown box,
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therefore we're just going
to treat it all as one
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as if the blue box owned
the properties themselves.
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Now that's an argument,
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it's not a winning argument,
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but it is an argument.
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So your counter to that argument is,
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well the property manager,
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they wouldn't pay the box,
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they wanted only one
entity that they would pay
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so we had it paid down here
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and we just separately
accounted for the income.
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There isn't a legal requirement
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that you actually have to run the money
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through the brown box.
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But you do get into that co-mingling issue
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that's a potential
argument that could raise.
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So option number one, have
it run to the blue box,
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okay so that's how you would work with
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an out of state property manager.
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Option number two,
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maybe you have your own
corporation that you've set up.
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Maybe you flip property.
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Let's say you live in Texas,
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so you have this Texas corporation set up,
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because it's flipping,
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it's engaged in wholesale,
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something of that nature.
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Well another thing you could
do is manage your LLCs.
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So, wow if we've got this company set up
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where I have a management agreement
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between these limited liability companies
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and all this is is a piece of paper,
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a four page agreement
that you put together
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with your LLCs.
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Then what you could ask this out of state
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property management company to do
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is rather than sending the money here,
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have it sent up to your corp.
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Now your corporation will
collect those proceeds
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On behalf of these boxes.
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So think of it like a subcontractor.
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Alright, this is what this company is
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to your corporation.
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Your corporation is really the manager,
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but it's subcontracts out the management
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in that, in Florida,
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because it's not registered
to do business there
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so it's subcontracting that money out
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and so then it collects
the money back here,
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all the money comes in here,
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then what it could do
is separately account,
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have really good Superman books up here,
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and then distribute the money
directly to the blue box,
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or if you have bank accounts set up here
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then I would run the money directly
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through these brown boxes
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before it goes down to
the blue box like that.
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So when you're using a
property management company
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to manage your real estate,
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and you have boxes,
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there are some complications
that are going to come up.
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I mean it's just part
of doing the business.
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I've seen a lot of people just say
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oh I don't want to deal with this,
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I'm going to put all my
properties into one LLC,
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because it's going to make it easier
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for the property management company.
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Don't let the property management company
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dictate to you how you're
going to run your structure.
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Because at the end of the day
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if one lawsuit develops in an
LLC that holds 10 properties,
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I doubt your property manager
is going to come to you
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and say let me help
defend you in this lawsuit
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because we refuse to pay multiple LLCs
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and we forced you into this position.
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You see how absurd this becomes?
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Use sound planning,
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you can work around companies
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that will not allow you to do what,
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you know, have the money go
to the respective companies.
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My name is Clint Coons with
Anderson Business Advisors
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and in this video we discussed
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how to use an outside
property management company
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with your limited liability companies.
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