Can I pay myself as a property manager?

Question

I have been managing my own rental properties for last five years and I have a full time job besides my rentals so I have never paid myself any management fee. I heard some of investors suggested I should pay myself 10% of the management fee since I'm doing everything. What are the recommendations on this topic? What are those pros & cons for doing that? I really appreciate your feedbacks!

Jon Holdman · Answer

There's no point in paying yourself.  It would be a deduction from the rental but then you would have to report the income, so its a wash for taxes.  If you mean, "can I take some of the accumulated cash from my rentals and use it for myself", then sure.  Its your money.

Curtis Bidwell · Answer

@Linda Higgins  There are times you might want to do this.  I was not in Social Security due to being in full time ministry, therefore would not qualify for Medicare at retirement.  When I left my position I began taking 5% management fee to finish my 40 quarters to qualify.  It also shows a reasonable management fee as an expense line on my books when I go to sell.

Otherwise you simply may want to take an equity draw which is a non-taxable event (check with your cpa).

Jon Holdman · Answer

Whether you take any money from the accounts you use for rental properties or not doesn't affect taxes.  The income from your rentals is always taxable.

Linda Higgins · Answer

I was not sure I should take some extra income now but pay the tax or just simply leave it for the future investment. Thank you for getting back to me tho.

Can I pay myself as a property manager?

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