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Emily Anderson
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Making rental properties into a business.

Emily Anderson
Posted Mar 28 2024, 12:00

Hello! Can someone point me to a podcast, book or blog post about how to run your rental properties as a business. How do we know we qualify and what are the steps? We own two single family rental properties and an ADU in our back yard. I am not sure this qualifies. We do have an LLC created. In addition, my husband does some side work doing landscaping, installing turf, etc. Is there a way to group the rental properties and the work he does in turf/landscaping all under the same business?

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Kevin Sobilo
  • Rental Property Investor
  • Hanover Twp, PA
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Kevin Sobilo
  • Rental Property Investor
  • Hanover Twp, PA
Replied Mar 28 2024, 12:24

@Emily Anderson, more information needed about what you want to be different.

1. I would NOT lump your husband's side work under the same LLC as the real estate rentals. The LLC is there to protect your assets. Your husband's business is an active one and perhaps more prone to a potential lawsuit.

For example, your husband hires a day laborer to work and they get injured. They aren't covered by workman's comp and sue you. When they win that lawsuit because the real estate is in the same LLC as that business they can foreclose on your real estate to force payment.

So, I would have a separate LLC for the side work business.

2. If you are talking about a real estate investment business in hopes of getting some kind of "business credit lines", that likely will not happen no matter what you do.

Real estate rentals are not really considered "businesses" in some sense because virtually all the value is in the equity of the real estate. So, your mortgages will be secured by real estate and personally guaranteed by you personally. Even if you get credit cards at home depot for your real estate LLC, you will have to personally guarantee the debt even though the debt will be in the LLC's name.

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Emily Anderson
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Emily Anderson
Replied Mar 28 2024, 15:59

Thanks Kevin. Ok, let me see if I can clarify my questions.  What qualifies your rental properties and all that goes into them as a business, vs. an investment.  What I'm wondering is can we have these 3 properties qualify as a business, with all the write offs that come along with owning a rental business.

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User Stats

2,436
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Kevin Sobilo
  • Rental Property Investor
  • Hanover Twp, PA
2,533
Votes |
2,436
Posts
Kevin Sobilo
  • Rental Property Investor
  • Hanover Twp, PA
Replied Mar 29 2024, 06:09
Quote from @Emily Anderson:

Thanks Kevin. Ok, let me see if I can clarify my questions.  What qualifies your rental properties and all that goes into them as a business, vs. an investment.  What I'm wondering is can we have these 3 properties qualify as a business, with all the write offs that come along with owning a rental business.


Your rentals are a "business" (even if you owned just 1) in that sense because its an active thing with expenses you can write off. You can write-off mileage driving to and from the rental. You can write off expenses like taxes, insurance, etc.

An "investment" like owning a stock is completely passive and has no expenses for you to write-off.

So, I'm not sure what you are hoping to get that you don't already have.