Rental business LLC?
FL · Member since 2012 · 10 posts · 0 votes
Rental business LLC?
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Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
13yJames, if she will not listen then what is the point? Does she have an attorney and is she competent? If you suggest she seek legal counsel you have done your job IMO. It is funny how kids think they need to control their parents. She has done pretty well on her own.
If I were you I'd be focusing on building your own portfolio. Maybe at some point she will want to sell and you can pick them up at a good price.
Don't feel bad my parents never listened to me and did just fine. After all, it is their stuff and if they choose to lose it in a lawsuit they have that right.
42 Replies
- 13ySteven Hamilton IIPro MemberAccountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
Originally posted by Bienes Raices:
Steven Hamilton IIWould she have to get a commercial umbrella policy for 12 properties? I've been told by the personal lines agents that the standard umbrella policies will only do up to 6 or 7 properties.
Bienes,
There is a rider for everything and anything you could pretty much want. They may require a business policy at that point but it depends upon the agency.
I highly recommend what Chris Clothier was saying about layering insurance and such. Umbrella policies are cheap. Especially after the first 2-3 Million. Some companies I've seen after $3 Million be as cheap as ~$100 per additional Million.
Example:
You: $3m Umbrella Policy
Mom: $3m Umbrella PolicyFlipping entity LLC Business policy.
Buy & Hold LLC per Property Landlord's Policy.The cost of each LLC would be approximately $60 to set up excluding getting an operating agreement/articles of organization written. Then it would be ~$50 per year per LLC additional cost. So you would be looking at approximately $600 per year in additional cost over what she SHOULD already have now(Insurance on each property)
-Steven
- Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes13y
Haha Jeff S.,
That is so right on. My wife is always thinking of "advice" she can give her parents. In fact, there are things that we know more about than they do, but they will not act on any advice she might have for them even if they humor her and listen. I understand. I doubt I will be taking advice from my kids on much either.
There are so many different ways to go about it if you want to do an LLC. Much of it depends on your goals and risk acceptance. I would get a local real estate lawyer to walk you through the best approach for you.
If she is unresponsive to your suggestions, you are going to have to ask yourself if you accept the decision she makes with her property or if you need to uninvolve yourself with her affiairs. She's a big girl and doesn't "need" you per say.
- FL · Member since 2012 · 10 posts · 0 votes13y
Brian lets please keep this discussion about business,I really don't need any counseling about my relationship with my mother.Thanks
- 13ySteven Hamilton IIPro MemberAccountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
James Collins,
I don't mean to be disrespectful and I don't think Brian Hoyt did either. He was trying to help you understand the thought process. You have to understand the meaning behind what he was saying:
"You can lead a horse to water but you can't make them drink." Think about how kids rebel; parents do the same as they get older.
You mentioned that she seemed complacent in her holdings and not worried about asset protection. Some people no matter what you say(especially family) don't want to do anything additional.
That said: It is recommend to do something in regards to the property; however, contact and attorney to draw up the papers with her permission of course and go from there.
-Steven
- FL · Member since 2012 · 10 posts · 0 votes13y
Ok thanks guys I am going to make sure her Insurance coverage is adequate and leave it at that for now.
- 13yRobert AdamsBusiness MemberReal Estate Broker · Henderson, NV · Member since 2009 · 1k+ posts · 373 votes
LLC protections vary per state. I recommend you find a local expert and have them help you construct a solid plan.
You definitely need to make sure you are protected and risking all that you have worked for.
If you were in Vegas I could be a little more helpful.
The Adams Team at Rothwell Gornt Companies4.970 Reviews - FL · Member since 2012 · 10 posts · 0 votes13y
thanks Robert,I wish I knew a local expert to ask.I feel that people that should have been advising(attorneys) tried to take advantage of my mom after my dad died.There plans were things like "sell them all,I'll buy em" "Turn over the properties to me and I'll invest the money and give you a certain percentage" So I'm trying to figure it out myself
- Orlando, FL · Member since 2009 · 2k+ posts · 282 votes13y
Originally posted by Steven Hamilton II:
Originally posted by Bienes Raices:
Steven Hamilton IIWould she have to get a commercial umbrella policy for 12 properties? I've been told by the personal lines agents that the standard umbrella policies will only do up to 6 or 7 properties.
Bienes,
There is a rider for everything and anything you could pretty much want. They may require a business policy at that point but it depends upon the agency.
I highly recommend what Chris Clothier was saying about layering insurance and such. Umbrella policies are cheap. Especially after the first 2-3 Million. Some companies I've seen after $3 Million be as cheap as ~$100 per additional Million.
Example:
You: $3m Umbrella Policy
Mom: $3m Umbrella PolicyFlipping entity LLC Business policy.
Buy & Hold LLC per Property Landlord's Policy.The cost of each LLC would be approximately $60 to set up excluding getting an operating agreement/articles of organization written. Then it would be ~$50 per year per LLC additional cost. So you would be looking at approximately $600 per year in additional cost over what she SHOULD already have now(Insurance on each property)
-Steven
@Steven Hamilton II
Maybe I'm misunderstanding what you're saying (I'm no insurance expert), but here's the way I see it from what I know to be true in my area:
1) If the insurance policy for a property owned in one's own name here is $500/year, it will become roughly $900/year once you transfer the property into an entity.
2) I've been told you cannot put one umbrella over multiple LLCs because they are considered separate owners. So I am assuming that you mean putting all 12 properties into a single LLC with an umbrella over that LLC.
3) Assume an annual cost of $200 for annual filing fee + RA service.
4) start up costs
So for 12 properties, that's $4800 + $200 + umbrella cost + start up. So upwards of an extra $5000/year for this setup.
Am I missing something?
- Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes13y
James Collins,
Steven Hamilton II is correct, I wasn't trying to be outside the scope of business discussion except that my first comment was relating to what Jeff said and laughing about my own family experience.
In regards to the remainder of my comments, my advice to seek local legal council, I believe, is sound.
Finally, I could have been more sensitive to how you might have taken what I said about your mother, but you could replace mom with wife, friend, business associate, tenant, whatever, and I believe what I said still holds true and was not an attempt to give personal relationship counseling. Business relationship advice, yes.
At my day job, in my investments, in school and in my personal life, it is often those answers to questions that I did not ask that are the most helpful.
- Orlando, FL · Member since 2009 · 2k+ posts · 282 votes13y
Originally posted by Brian Hoyt:
James Collins,At my day job, in my investments, in school and in my personal life, it is often those answers to questions that I did not ask that are the most helpful.
This is what I was trying to get at in one of my earlier responses to James Collins. I inferred that his mother likes the way she's running her business now and doesn't want to make it more complicated. So while LLC's are not rocket science, creating umpteen entities and assorted bank accounts may not be the best solution for this particular situation.
- FL · Member since 2012 · 10 posts · 0 votes13y
I wish I had never mentioned It was my mothers business.I was really looking for how you guys would handle the business if it was yours.She is not incompetent but she is not real business savy either.Neither am I.
She would listen to me if I said here's all the reasons why you need to do this and this is how we do it.
Iam doing all the (physical) work in this business with her so I'm not just some know it all kid trying to tell my mom what to do.
- Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes13y
James, since you are in Missouri you might have less expensive properties. Some on here suggest limiting your property equity to 250k per LLC. If you are dealing with 25k properties 1 LLC might suffice. Many large companies hold massive holding under one company.
You could consider creating an LLC just for your management practices so if you do something then they go after your LLC first.
Check with your insurance carrier before you do anything. The last thing you want to do is invalidate your insurance that is existing before you figure out how to transfer titles.
I am of the school of thought that the best protection (along with insurance) is education in how to properly manage your properties so you don't make yourself liable. Stay on top of the latest changes in the statutes. Have all the alarms you need and be careful with peeling lead paint with children, don't sand lead paint which creates dust for kids, watch for discrimination possibilities and now watch out for companion animals.
BTW networking with other local investors can help you stay on top of your game too.
Like most on here say, insurance first. Good luck.
- Orlando, FL · Member since 2009 · 2k+ posts · 282 votes13y
@James Collins
I don't think anyone was trying to get into your personal business, just find the right solution for your circumstances. I think what people have been trying to say, in a roundabout manner, is that there is no cut and dry, one size fits all asset protection scheme. It depends on your risk tolerance and other factors.
For example some lawyers will tell you that you should put every property in a separate LLC. Do the majority of people actually do this? No. The lawyers' advice isn't wrong, it's just very cautious, and it may not take into account real world costs and the amount of time it takes to do things.
- 13ySteven Hamilton IIPro MemberAccountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
Originally posted by Bienes Raices:
@Steven Hamilton II
Maybe I'm misunderstanding what you're saying (I'm no insurance expert), but here's the way I see it from what I know to be true in my area:
1) If the insurance policy for a property owned in one's own name here is $500/year, it will become roughly $900/year once you transfer the property into an entity.
2) I've been told you cannot put one umbrella over multiple LLCs because they are considered separate owners. So I am assuming that you mean putting all 12 properties into a single LLC with an umbrella over that LLC.
3) Assume an annual cost of $200 for annual filing fee + RA service.
4) start up costs
So for 12 properties, that's $4800 + $200 + umbrella cost + start up. So upwards of an extra $5000/year for this setup.
Am I missing something?
Bienes Raices,
1) That would depend upon your location. The rates that I have here in Illinois are very close.
2) You personally should have an umbrella policy because any liability issues they most likely will list the manager as well.
3) In MO the annual cost is ~$50 per LLC. The initial cost in MO is about the same. They don't need a registered agent as James could be the RA for his mother.
Again the additional cost is dependent upon the location and situation.
-Steven
- Orlando, FL · Member since 2009 · 2k+ posts · 282 votes13y
Originally posted by Steven Hamilton II:
Originally posted by Bienes Raices:
@Steven Hamilton II
Maybe I'm misunderstanding what you're saying (I'm no insurance expert), but here's the way I see it from what I know to be true in my area:
1) If the insurance policy for a property owned in one's own name here is $500/year, it will become roughly $900/year once you transfer the property into an entity.
2) I've been told you cannot put one umbrella over multiple LLCs because they are considered separate owners. So I am assuming that you mean putting all 12 properties into a single LLC with an umbrella over that LLC.
3) Assume an annual cost of $200 for annual filing fee + RA service.
4) start up costs
So for 12 properties, that's $4800 + $200 + umbrella cost + start up. So upwards of an extra $5000/year for this setup.
Am I missing something?
Bienes Raices,
1) That would depend upon your location. The rates that I have here in Illinois are very close.
2) You personally should have an umbrella policy because any liability issues they most likely will list the manager as well.
3) In MO the annual cost is ~$50 per LLC. The initial cost in MO is about the same. They don't need a registered agent as James could be the RA for his mother.
Again the additional cost is dependent upon the location and situation.
-Steven
OK thanks.
- FL · Member since 2012 · 10 posts · 0 votes13y
thanks everyone.I sure have a lotto learn.Like I said earlier for right now I am going to make sure her insurance is adequate.
If it makes a difference I would say the houses are worth 100-110 thousand a piece.So around 1.2 mil worth of rentals.Her house is worth around 500,000 with 200,000 mortgage.
- Orlando, FL · Member since 2009 · 2k+ posts · 282 votes13y
Originally posted by Steven Hamilton II:
Originally posted by Bienes Raices:
@Steven Hamilton II
Maybe I'm misunderstanding what you're saying (I'm no insurance expert), but here's the way I see it from what I know to be true in my area:
1) If the insurance policy for a property owned in one's own name here is $500/year, it will become roughly $900/year once you transfer the property into an entity.
2) I've been told you cannot put one umbrella over multiple LLCs because they are considered separate owners. So I am assuming that you mean putting all 12 properties into a single LLC with an umbrella over that LLC.
3) Assume an annual cost of $200 for annual filing fee + RA service.
4) start up costs
So for 12 properties, that's $4800 + $200 + umbrella cost + start up. So upwards of an extra $5000/year for this setup.
Am I missing something?
Bienes Raices,
1) That would depend upon your location. The rates that I have here in Illinois are very close.
2) You personally should have an umbrella policy because any liability issues they most likely will list the manager as well.
3) In MO the annual cost is ~$50 per LLC. The initial cost in MO is about the same. They don't need a registered agent as James could be the RA for his mother.
Again the additional cost is dependent upon the location and situation.
-Steven
What you're suggesting is pretty much what I'm doing now, except some of the properties are still in my name, under an umbrella. Not ideal, but what I'm doing for the time being.
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