Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 16%
$32.50 /mo
$390 billed annualy
MONTHLY
$39 /mo
billed monthly
7 day free trial. Cancel anytime

Let's keep in touch

Subscribe to our newsletter for timely insights and actionable tips on your real estate journey.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions
Followed Discussions Followed Categories Followed People Followed Locations
General Landlording & Rental Properties
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 3 years ago on . Most recent reply

User Stats

117
Posts
78
Votes
Kate Barry
  • Real Estate Agent
  • Vermont and New Hampshire
78
Votes |
117
Posts

Managing Investment Property - Better to have the expense or not?

Kate Barry
  • Real Estate Agent
  • Vermont and New Hampshire
Posted

Hi All

I am a Realtor as well as investor, and we have a property management company as well.  I am looking to invest with partner on some potential deals that will require a PM, and I'm wondering what the pros and cons are in terms of the financial strategy to charging management fees when partners are involved.  I'm considering just taking more equity of the property in exchange for managing it, but I wanted to ask the community here what else there is to consider when doing this.  The plan is to refinance in 5-7 years, so my thought is that its better to show more cash flow without having the 10% management fee on the top to be able to do this. 

Most Popular Reply

User Stats

3,193
Posts
3,310
Votes
Corby Goade
  • Investor
  • Boise, ID
3,310
Votes |
3,193
Posts
Corby Goade
  • Investor
  • Boise, ID
Replied
Quote from @Kate Barry:

Hi All

I am a Realtor as well as investor, and we have a property management company as well.  I am looking to invest with partner on some potential deals that will require a PM, and I'm wondering what the pros and cons are in terms of the financial strategy to charging management fees when partners are involved.  I'm considering just taking more equity of the property in exchange for managing it, but I wanted to ask the community here what else there is to consider when doing this.  The plan is to refinance in 5-7 years, so my thought is that its better to show more cash flow without having the 10% management fee on the top to be able to do this. 


 Great question- I am dealing with something similar now and learning about some of the nuance that I hadn't considered before. I am definitely not an accountant, but here is my scenario, something to consider; when you own a property management company and manage your own properties for free, the IRS could view that as not treating your own investments as a business venture- ie; would you manage someone else's properties for free? So- that theoretically could pierce your corporate veil and create liability for you and your partner. 

On the flip side- if you do charge yourself that fee, you are converting passive income to actuve income on the PM side, which defeats the entire purpose of what you are trying to do. 

What we are doing to mitigate that is "self managing" our personal rentals, keeping them out of our PM company from a financial and legal standpoipnt. Obviously we use the same lease (different landlord name on it, of course) but separate banking accounts and books. It's more work for sure, but worth the tax savings and maintaing that LLC protection.

Hope that helps!

  • Corby Goade

Loading replies...