How should I collect rent and manage property ?

Question

Hello BP family,

I just purchased my first ever Rental Property here in Illinois a few months ago. The home was purchased under my own personal name and has a mortgage. I will be self managing the home , but I was wondering what type of business structure most landlords use in the this situation. I plan to tell my future tenants that I’m the property manager & not the owner. I would like to keep my privacy....

I have an LLC that I created a year ago..so I was wondering if it’s okay to collect rent through there..??..even though the home isn’t actually an asset of the LLC, or should I create a DBA and do a sole proprietor￼ with a DBA??

Can someone please give me some tips to handle this?? Thanks in advance

Joe Homs · Answer

@Jeffery Drayton why don't you transfer the property into your LLC for more protection? For privacy reasons I use a land trust and the beneficiary of my trust is my LLC. However, to accomplish your simple goal, I would create a management agreement between yourself and your LLC to manage the property. Then you can collect rent through there and disperse the funds where ever you want them to go.

Good Investing...

Cameron Tope · Answer

Hey Jeffery,

@Joe Homs is correct - just transfer the property into an LLC.

You can manage the property personally and collect rents on behalf of your client (the LLC).

Scott M. · Answer

@Joe is giving out solid advice.  Nothing is foolproof but you have more protection through an LLC and you have even more protection through a trust.  Great question to talk with your advisors about, your lawyer/accountant and then you can decide if the costs (in terms of an LLC very minor) are worth it to you.

@Patrick is correct about privacy.  Your name is already on title and in today’s world one look at publicly available info will tell anyone you owned it then put it in an LLC.  Something to consider for your next purchase.

As both an investor and property manager for clients all over the world I can tell you there is a benefit to be an “unknown” owner.  Or maybe known but not easily trackable and that anonymity is something some of our clients enjoy.  They do not like telling a tenant no.  They do not like enforcing late fees or are as eager to start eviction if they are the ones doing it.

20 Years in this business managing many hundreds of homes for myself and clients and I can count on 1 finger the number of times a tenant has said “I will talk to the owner”.  They never did, just an empty threat.  So, never happened in 20 years.

This is more a personality question than anything, or maybe one for a psychological forum VS BP but there is nothing wrong with you being you and if you want to pretend to not be the owner, have at it.  Just know that the tenant can easily find out you are in fact the owner if title is in your name and be prepared in case, they ask you about it.  Might be awkward.

As for protection @Joe is spot on.

Patrick M. · Answer

@Scott M. There are far, far more hoops to jump through to gain the "alleged" protections of an LLC. It is a daily endeavor making sure that "your two worlds" don't collide. From not using a personal credit card for supplies to how you move your money in accounts. As I have said before- any of the protections (beside anonymity) are far better covered through proper insurance. And on top of all that- his finger prints are all over the property already. If such an egregious tort took place any lawyer worth his salt can pierce the veil of an LLC- especially one tied to real estate.

As both an investor and property manager for clients all over the world I can tell you there is a benefit to be an “unknown” owner. Or maybe known but not easily trackable and that anonymity is something some of our clients enjoy. They do not like telling a tenant no. They do not like enforcing late fees or are as eager to start eviction if they are the ones doing it.

Yeah- but he is already getting down in the mud? He is managing the property. He will be telling tenants "no" on a routine basis. But as the owner you have far more authority.

And by the way- in many jurisdictions, if you walk in to court to prosecute an eviction as an LLC you can be forced to retain counsel.

@Jeffery Drayton Embrace it- you are already putting yourself in the mix.

Patrick M. · Answer

You are going to lose the same amount of privacy whether you are the property manager or the owner. Tenants know to reach me via text and all is good. My home address is on my leases... because we live in the 21st century and it is a click away anyway.

All my tenants know that I am the owner of the properties and they see me down there working with my family, wife, kids, in-laws. I would like to say that they see the pride I have in presenting a beautifully, recently renovated apartment and I can tell them all about it, from studs to insulation to wiring, but who knows what they think. I do know that they have so far taken very good care of it and the common areas. They love living there and they know who to call when a concern arises.

If I was going to be "frightened" of any tenants, it would be the ones I removed- instead I laid down the law and they eventually moved on... I am certain they are probably over a year into taking advantage of this rent moratorium somewhere else.

If you didn't purchase the property in an LLC then anyone can find out you owned it before moving it into an LLC, trust me- your tenants will look and find you out.

So why the charade? Embrace it! Let them know that this is your baby! This is helping feed your family and you need them to abide by the lease.

Sorry... I really just don't understand it. You have far more authority as the owner, and when your tenants find out you are the owner they are going to wonder what you are trying to hide.

I love being the owner of my properties and letting the world know.

"I appreciate that, but I would like to speak to the owner about this issue." "I understand thatyou told him, but I am not sure you explained it..." "Can you please provide me with proof that you have presented this issue to him..." Gosh- one could run you through the ringer once they found out you were really the owner!

Embrace it!!!

Aigo Pyles · Answer

I agree with Joe.

Jeffery Drayton · Answer

@Joe Homs

Solid advice!! Thank you Joe

How should I collect rent and manage property ?

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