All Forum Posts by: Jay V.

IF you can find this arrangement (and that's a big if), why would they pay you 8% AND a salary?  They can hire a property manager for a salary OR 8%.

When they pay the 8% property management fee to an outside property manager that includes the salary of the property management employees.  If they hire someone to manage their properties they pay a salary, but not an additional fee (your fee is your salary).

Not trying to be a jerk, but from how I'm understanding your explanation I'm not sure you're going down a viable path here.

Is this for 1 multi-family property?

If so, unless it's huge, make sure you have realistic expectations.  Around here, most management fees are 8% and that includes all salaries.  Unless it was a huge property and you could demonstrate value, I'd never pay a fee PLUS a salary.

Retiring into property management sounds cool (conceptually), but make sure your expectations are reasonable.  Realize the value that you're providing and what a reasonable rate is for that value.

Property management seems to be very much about scale.  Since there are large fixed costs (salary) it'd be hard to do it for just a few properties.  But, if you get many properties it becomes much more feasible.

The one owner I know of a LARGE complex just has 2 property managers.  They're both part time employees of his probably making $12-$15 an hour.  They handle administrative duties and showings and make sure repairs are called in to the right people (owner pays for repairs). 

I'd imagine most large complexes utilize the employee property managers and smaller places will pay the fee (8%), but I struggle to think of scenarios where a fee and a salary make sense.

@John Hamilton 

Deerfield is a great area.  I worked up there for years.  I now work and live more in the western burbs, but head up north on occasion.

While I disagree with some of the opinions on here, there are good points. I'd assume (and recommend) that you're drawing up an agreement, using proper asset planning, thinking about taxes, etc... whether you go with an LLC or not. I'd also look at your insurance options whether you LLC or not. Ultimately, you should have proper planning whether you go with an LLC or not and it sounds like you're on that path.

My opinion was and still is that the value of an LLC for smaller investment groups is really only in protecting you from those black swan type events, which in my opinion it wouldn't do because the corporate veil is pierced. Obviously, others that are likely more experienced than I am think differently. I only plan on utilizing an LLC if I get pretty big where the cost could be bearable for whatever benefit you may receive ("big" isn't defined yet, but a ways away).

Either way, now you've heard the arguments on both sides.  You're doing the right thing in speaking with a real estate attorney - if you trust him/her you should probably follow their advice.

Best of Luck

That example may be true, but is it worth the $2,000 fees (as stated above) to have the gas bill in an LLC's name? The only way the LLC could be worth it (in my opinion) is if it protects you from the large liabilities that come from being a landlord. My non-professional, semi-educated thought is that it does not. If you buy in your name, QCD to the LLC how is the corporate veil not pierced?

You're probably right on smaller matters, but to me the corporate veil is there for the large matters.

@Christian Carson, your title says lawyer, do you have an opinion on the large legal risks being protected by an LLC?

I think your overall point is a good one, but the Lockport property is probably not the best example.  To be honest, I think you're asking price was fair, but the market value of that property is not $300k.  There are very, very, very few people who might know that town as well as I do and I'd argue there's no way it's $300k. 

Personally, when I considered it I set a conservative resale estimate of $250 (with the real range probably $260-270, MAYBE $280 if done very well).  I think there was room in your price to profit, but regardless of where your investor lives he's not getting $300k for that property.

I'm not sure I agree with Tom, who seems to be pushing you towards an LLC. I don't think an LLC does you much good here. I'd do more research and probably seek a professional's opinion, but my thoughts are:

1. Google "Piercing the Corporate Veil".  If these real estate LLCs that are controlled by a few people don't pierce the corporate veil, I don't know what does (especially given point 2).

2. Your LLC wont get a loan. You'll have to get the loan in your names and then Quit Claim Deed the loan to your LLC. The problem with this is that the bank can call your loan (because they weren't willing to lend to the LLC). I don't know the chance of your loan getting called, but it can happen. Additionally, to me - this process of going from your name to the LLC's name feels risky for piecing the corporate veil.

3. Fees - there are filing fees, tax return fees, renewal fees, plus you're probably paying a CPA and/or attorney extra for this work.  In Illinois this could wipe away virtually all of your profits.

There are many options - LLC, LLP, S-Corp, C-Corp, Land Trusts, basic partnerships, etc... I really don't know which is best when weighing the pros and cons.

My insurance agent was pretty adamant that an umbrella policy would cover a lot, but I am far from an expert in insurance.

Disclaimer: I am NOT a lawyer and this is NOT legal advice.  However, I am pretty well researched in these things (former CPA) and weighing pros and cons on this topic myself.

Not a lawyer by any means, but I'd be careful.  Therapy animals are NOT always seeing eye dogs or the like.  I know people with PTSD can be prescribed therapy animals that don't have special function beyond being a loving pet, this could conceivably be a cat.

I'd ask for an authorization note or some basic paperwork, but not push it too hard.

Plus, cats are usually pretty easy on apartments and you presumably have a security deposit already.

I understand that this is the recommendation that everyone give, but I have 2 issues with it:

1. Lender can call  your note if the individual is no longer the title holder

2. There is something called piercing the corporate veil which removes the liability protection from an LLC if certain conditions arise. This type of transfer seems like a slam dunk case for piercing the corporate veil to me.

Disclaimer: I am NOT a lawyer and I don't even have real estate investments yet. However, I have taken courses in business law and the above are my concerns. This is definitely not advice, but I'd make sure you're comfortable with the points above before transferring title in and out of an LLC.

hey @Cynthia Trautz .

I am a new wanna-be investor from a neighboring town.  I am looking for buy and hold single family or smaller multi-units in our area, so let me know if you get any great deals!

I am also new to BP, but find it to be a great wealth of information and the people are really helpful!

best of luck,

Jason