What are the rules around self-managing?

Question

Here in WI, as in most US states, you need a broker's license in order to manage other people's properties. But you can, ofc, manage your own.

What does 'your own' mean when there are entities involved?

What does 'manage' mean here? Clearly, you can pay some people for some things. What are the limits?

If I own 2+ LLCs that own rental properties, and I wanted to self-manage, I assume that I can do that on behalf of each of the LLCs because I own them?

Can I setup a PropMgt LLC, that I own, to be the property mgr for the property owning LLCs that have the same ownership, or does that no longer count as 'self managing'?

And...as a self-managing PM...I can hire people to do parts of that overall job. I don't have to swing all the hammers. :P Can I hire someone to inspect contractors work once they're done? How about to meet prospective tenants to show the property? They'd be paid by me, or my personal PM company, to do specific things. Is that the distinction between hiring someone to work for my PM co and just hiring someone else as the PM? Or, are there things I must personally do in order for it to be 'self managing'?

Account Closed · Answer

Andrew, I see no need for a separate LLC to manage your own, but would be something you’d want to do if you are managing for others. You can deduct all business expenses, such as paying contractors and inspectors, as you would with any other line of business.

David M. · Answer

@Andrew C.

Hmm... Basically, do whatever you want with your own properties. However, look into what licensure is needed if doing something for somebody else's property. For example, to the best/worse of my understanding, property manager's don't need licensure EXCEPT when helping to find tenants. That becomes brokering of real estate in most to all States. Otherwise, collection of rents, getting repairs done, etc. isn't regulated --- to the best of my understanding.

Same but different... You personally go and do a plumbing or electrical job on somebody else's house and get paid --- you know (I think) that that requires having a license...

Enforcement would be the appropriate local municipality and/or State department (there are different names for them...). I hope that helps.

Andrew C. · Answer

That's a clarifying prospective and is in-line with Nathan G's response. I think part of my lack of clarity around the rules stems from not understanding who enforces it. Sounds like the enforcement of the rules is you probably can't get PM insurance when managing others w/o a license and you're at risk of being sued by the owners. Which makes sense.

David M. · Answer

@Andrew C.

I don't know the details of WI, but I am guessing its about the same thing as usual: liability. That's the main point of licensure. Who do you get to sue if the "management" messed up? Well if you are the owner or part owner, then you'd be suing your self. Well, that won't work so you don't need a license.

LLC's don't provide tax/accounting benefits. They are only for liability protection (if operated properly).

I'm not quite sure where you are going with the definition of self-manage, honestly.

Good luck.

Nathan Gesner · Answer

It means you can manage property you have an ownership interest in. If you own the property in your personal name, you can manage it. If you share ownership with a friend or family member, you can manage it. If you own 10% interest in an LLC, you can manage it.

What are the rules around self-managing?

What are the rules around self-managing?

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