LLCs and Utility Payment

Member since 2018 · 28 posts · 4 votes

Hey guys,

My dad and I were wondering what we should do when it comes to LLC's and Utility payments. Should we have a one LLC to one property ratio or would it be better to have multiple properties under a few LLC's? Any suggestions?

Next ?, would it be ok to have the landlord the pay the utilities instead of the tenant sometimes?

Are either of these "toss of a coin" issues, or what in your opinion makes the most sense. We are looking in the Cleveland, Galion, and Mansfield cities of Ohio. Thanks.

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Anthony Wick

Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes

@Grace Donahue

Waste of money and resources to have an LLC for each and every property. You can get a balloon liability insurance policy, plus the LLC, and be covered for probably 3-4 properties.

I had a short term tenant for a few months that wanted all utilities, garbage, and internet wrapped up into the rent. Sure thing! We agreed on a much higher rent.

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Tracy Scanlon
Chicago, IL · Member since 2014 · 5 posts · 7 votes
7y
As far as having one LLC cover more than one property, that is up to you. The LLC limits your liability, and while spreading it over more properties may save you some in the short run, it could be a riskier option. You should consult your insurance agent to see how it would effect your premiums as well.
For utilities, I sometimes bundle it in with the rent. As long as your municipal, county and state ordinances allow, it's fine. Just don't charge any more than the actual utility bill- I usually charge the exact amount or a little less to be safe.
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Hallie Wasserman
Flipper/Rehabber · Cleveland, OH · Member since 2018 · 21 posts · 5 votes
7y
We have decided to set up each property that will be held as a rental unit in it's own llc. This way any issues and risk is limited to just that single property. However, for the houses we buy to renovate and flip, we have set them up in just in a single LLC at this time since they will hopefully move in and out quickly. Once one of homes is sold to an investor and a tenant is placed (or for any of the homes we decide to hold ourselves), we suggest having the renter pay all utilities, and the owner pay insurance, taxes, etc...as expenses in each LLC.
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Anthony Wick
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
7y
@Grace Donahue
Waste of money and resources to have an LLC for each and every property. You can get a balloon liability insurance policy, plus the LLC, and be covered for probably 3-4 properties.
I had a short term tenant for a few months that wanted all utilities, garbage, and internet wrapped up into the rent. Sure thing! We agreed on a much higher rent.
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Scott SmithPro Member
Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
7y
Originally posted by @Grace Donahue:

Hey guys,
My dad and I were wondering what we should do when it comes to LLC's and Utility payments. Should we have a one LLC to one property ratio or would it be better to have multiple properties under a few LLC's? Any suggestions?
Next ?, would it be ok to have the landlord the pay the utilities instead of the tenant sometimes?
Are either of these "toss of a coin" issues, or what in your opinion makes the most sense. We are looking in the Cleveland, Galion, and Mansfield cities of Ohio. Thanks.
Regarding the debate on the LLC I usually break it down into the "five pillars" of protecting your assets. The first pillar is avoiding unnecessary and risky activities (don't drink and drive, insurance generally won't cover your poor decisions) and take good care of your investments - these simple steps will help you prevent lawsuits before they even occur. The second pillar is a good insurance policy as that will cover the majority of your exposure. However, it only protects you from one type of liability: accidents.
After that you want to compartmentalize your assets, which is often accomplished through the use of LLCs or corporations. I personally find the Series LLC to be a great tool for the individual investor who is planning to expand their operation, as it allows for you to scale infinitely - check out this article to learn more. The fourth pillar is somewhat similar - you want to separate your operations from your assets. That means you establish a Traditional LLC to carry out the operations of your investments, in order to separate the liability from your assets, including: paying property management, paying contractors, collecting rent, marketing, etc. Finally, with the use of Trusts while establishing these structures you can add a level of anonymity by removing your name from public record.
Using a Series LLC removes a bunch of hassle, as the entity allows you to scale much more easily.
When it comes to including utilities I would refer to the local laws and ordinances of your area - if they don't say anything otherwise you can include it into your rent.
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Grace Donahue:
Hey guys,
My dad and I were wondering what we should do when it comes to LLC's and Utility payments. Should we have a one LLC to one property ratio or would it be better to have multiple properties under a few LLC's? Any suggestions?
Next ?, would it be ok to have the landlord the pay the utilities instead of the tenant sometimes?
Are either of these "toss of a coin" issues, or what in your opinion makes the most sense. We are looking in the Cleveland, Galion, and Mansfield cities of Ohio. Thanks.
Your CPA will be much happier with you if you have 1 LLC per property. Makes tax time much less stressful.
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Account Closed
Investor · Columbus, OH · Member since 2016 · 139 posts · 136 votes
7y
I had water & sewer, as well as trash billed to the LLC. The city puts a lien on the property for any unpaid utilities, so if the tenants chose not to pay, ultimately it's the property owner's problem. The only problem you might run into, is a 4' tall above ground pool on sale at Walmart for $100, and you're eating the cost of filling it. A solution to this would be to not have any spigots outside, or attach an addendum that states if they exceed a monthly average of $90, it will be back billed to them.
The rent I was charging each month has these costs built in. City of Columbus actually has a table that you can reference to show approximate costs depending on how many people are in the household.
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Robert EllisBusiness Member
Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
7y
Originally posted by @Account Closed:

I had water & sewer, as well as trash billed to the LLC. The city puts a lien on the property for any unpaid utilities, so if the tenants chose not to pay, ultimately it's the property owner's problem. The only problem you might run into, is a 4' tall above ground pool on sale at Walmart for $100, and you're eating the cost of filling it. A solution to this would be to not have any spigots outside, or attach an addendum that states if they exceed a monthly average of $90, it will be back billed to them.
The rent I was charging each month has these costs built in. City of Columbus actually has a table that you can reference to show approximate costs depending on how many people are in the household.
This is a great tip or put something about getting approval for an above ground pool or something. I had friends who filled a pool like this every year around ohio state university campus and it was $$$$
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