My father is looking to retire and wants me to take over his rental properties. I have been doing research on taking over the properties and I've found out a couple of things, but I still need help on some things. I found out that an LLC is the best way to go, especially since all the properties are in my fathers name and he wants to keep it that way. I have already contacted a lawyer about becoming an LLC and he would like to see our business plan. I have never created a business plan. I looked at the templates in word and I downloaded a program to help, but the questions that the ask are requiring a lot of detail to answer. So I guess my questions are:
1. Is it necessary to do a market analysis if the company is already up and running?
2. If so, does anyone have an example copy of a market analysis for rental properties?
3. How detailed does the entire business plan have to be?
Is there anything else that you can tell me that I should know?
I do not understand why the attorney needs to view a business plan to re-title the properties. Did he/she give you a reason for the need of a business plan? Generally, financial institutions would want to view a business plan if you were planning to obtain some sort of financing to display a "future thought process" for planning and experience prior to them lending you funds. I am interested to see other posts on this.
A business plan is not required to start an LLC. Actually if you looked around your states website you find an online portal to register your new business.
It sounds like the attorney is trying to make the most money he can off of you.
I would advise creating a business plan if you plan on growing your business or if you are going to look for commerical funding.
If you search Biggerpockets you will find some examples.
I would contact a few other attorneys and see what they say
Originally posted by Ernest Tyler:
especially since all the properties are in my fathers name and he wants to keep it that way.
Is your dad selling/giving these properties to you?
It sounds like he is keeping the properties and will turn the management over to you. If that's the case, why don't you become an employee of his?
Agreed on not needing a business plan. Why would you? You aren't starting a company in the normal sense of the word, you would just have a corporation that holds entities.
If your father wants to keep all the properties in his name, how would you put them in an LLC? They would then be in the LLC's name. Plus, if there are mortgages on them, quit claiming them into the LLC could trigger the due on sale clause meaning you'd owe the full balances on them immediately.
If you are just worried about asset protection, just get an umbrella insurance policy that covers all of them. It's super cheap and gives the same protection.
If you don't own the properties why will you need the LLC? Have you contemplated talking about either a Family Limited Partnership in which he gifts to you over time more interest in them but keeps 100% of voting rights?
Another thing to look at is maybe looking at a land contract for everything in which he stays on title until it is paid off.
Or become an employee of his.
The attorney never said why we needed the business plan, he just said we needed it and all the information we have on the properties.
Half of the properties are owned, the other half still have a mortgage on them. I will ask the attorney if there is a clause in our lease about becoming an LLC.
My father is keeping the properties in his name and will still be the owner. I will only be the property manager. We are looking into the LLC because we need to have a lawyer do evictions due to Ohio law saying only owners and lawyers are eligible.
My advice is to use an attorney to open and move the properties to an LLC. You could pull your own teeth with pliers, but wouldn't you rather use a dentist?
If your dads properties are mortgaged, you may want to use Trusts instead of an LLC to avoid initiating the Due on Sale clause in his mortgage agreement.
As for the plan, you can probably set up a plan on a napkin with your dad. He should have something in place already.
congrats on your new voyage! hope it works out well!
Ernest, I would ask the attorney the reason for the business plan. Maybe he just wanted a financial statement of all the properties, and not an actual business plan?
Rob K@Rob K. Nice suggestion. I was wondering how one becomes an employee in that sense? Would he be an employee of the LLC? How would this be set up?
Also, a question to everyone: Wouldn't liability insurance be enough? I assume this would depend on how many properties are in this portfolio and how much debt? Anyone have suggestions?
Ernest, I don't believe that to be true. A property manager can do an eviction in Ohio. I also think it is better to get them out of your property without having to end in the courts. There are many ways to do so which would save you time and money.
@ Ernest, answer to your question: I am an Ohio investor as well. This is from the Ohio laws and rules: "Landlord" means the owner, lessor, or sublessor of residential premises, the agent of the owner, lessor, or sublessor, or any person authorized by the owner, lessor, or sublessor to manage the premises or to receive rent from a tenant under a rental agreement. I hope this explains my answer.
Ernest..Was your father a "hands on" property manager for the rental properties or do he use a property management company. If this rental business is new to you, I think your attorney is giving you very good advice. I would find a reliable property management firm and discuss your situation before deciding to handle the management of rental propeties
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