How to Set up your Own Property Management LLC or Corporation


– Hi Clint Coons here with Anderson Business Advisors. And in this video I’m going to discuss using a property manager with your limited liability company. Alright, you may be an investor like me who invests outside the
state in which they live. So it really doesn’t make sense for you to try and manage the properties remotely because that would just
become a nightmare. So what you’ll end up doing oftentimes is hiring a local property manager to handle your real estate
investments for you. Now the issue often arises
for people who do this where do I have that property manager send the rent checks every month? Or my payment every month After they’ve held out their fees? Well I get the idea
that it can be confusing so you have to then look at your structure and determine how are you set up and where do you want that money to roll. There’s two ways you could do this. Let’s assume that we have our limited liability company right here, here’s my LLC. It owns this property here. And let’s say I have a few LLCs set up. Here’s another property over here. Let’s say these were Florida properties. And if you watch some of my other videos you know that oftentimes I’ll tell you if you’re using a state specific LLC, like these were in Florida. Florida offers no charging
order protections, watch those other videos on
charging order protections. If you don’t know what that is it’s very important that
you understand that concept. Then you’ll have these
LLCs owned down here by what is referred to as a holding LLC. And that’s just a term that I put on it, but this LLC is typically
going to be in Wyoming. And then you’re going to own that Wyoming limited liability company. So, let’s assume this is your structure and you have this out of state property management company over here that’s managing all of
your real estate for you. So they’re managing these properties. So where are they going to send the rent? Well ideally what you’re
going to want to do is have them send the rents to the respective LLCs. So property number one is going
to send the rent check to here, property number two it’ll
send the rent check to here. This is ideally the way it should roll, but oftentimes it’s not
how it’s going to happen. Because this property
management company over here, if you have multiple properties they want to keep it
as simple as possible. And if you’re telling
them they need to have different entities they’re
sending the rent checks to, that means different EINs
they have to account to for these payments. It complicates their business for them. So they’re going to
ask you for one entity. They may even try to send
the money to you directly. A, you don’t want the money
coming to you directly, you want it to go to one of your boxes. So this then leaves us with two choices. Choice number one is
you can have the money sent directly down here to
your Wyoming holding LLC. So this is another reason why I like this holding structure here, having this LLC. Because it makes the process of working with out of state property
managers a little simpler. So you have the checks collected, the money collected down here. Now, if you watch my other videos, I’ve told you how important it is to run money through the respective LLCs, keep in mind if you have to go this route because of your property manager, then you need to have really
good books and records here. You need to make sure that you’re properly accounting for each
LLCs if it received the money. So this is where you need to have a superman CPA or
bookkeeper that’s in there and they’re doing a really great job of keeping things clean. Because if anything happened here and this one came under attack, a claim that a creditor could make or an attorney might make is that hey this is all
one common enterprise. You never collected any rents, the rents went to the blue box, never went to the brown box, therefore we’re just going
to treat it all as one as if the blue box owned
the properties themselves. Now that’s an argument, it’s not a winning argument, but it is an argument. So your counter to that argument is, well the property manager, they wouldn’t pay the box, they wanted only one
entity that they would pay so we had it paid down here and we just separately
accounted for the income. There isn’t a legal requirement that you actually have to run the money through the brown box. But you do get into that co-mingling issue that’s a potential
argument that could raise. So option number one, have
it run to the blue box, okay so that’s how you would work with an out of state property manager. Option number two, maybe you have your own
corporation that you’ve set up. Maybe you flip property. Let’s say you live in Texas, so you have this Texas corporation set up, because it’s flipping, it’s engaged in wholesale, something of that nature. Well another thing you could
do is manage your LLCs. So, wow if we’ve got this company set up where I have a management agreement between these limited liability companies and all this is is a piece of paper, a four page agreement
that you put together with your LLCs. Then what you could ask this out of state property management company to do is rather than sending the money here, have it sent up to your corp. Now your corporation will
collect those proceeds On behalf of these boxes. So think of it like a subcontractor. Alright, this is what this company is to your corporation. Your corporation is really the manager, but it’s subcontracts out the management in that, in Florida, because it’s not registered
to do business there so it’s subcontracting that money out and so then it collects
the money back here, all the money comes in here, then what it could do
is separately account, have really good Superman books up here, and then distribute the money
directly to the blue box, or if you have bank accounts set up here then I would run the money directly through these brown boxes before it goes down to
the blue box like that. So when you’re using a
property management company to manage your real estate, and you have boxes, there are some complications
that are going to come up. I mean it’s just part
of doing the business. I’ve seen a lot of people just say oh I don’t want to deal with this, I’m going to put all my
properties into one LLC, because it’s going to make it easier for the property management company. Don’t let the property management company dictate to you how you’re
going to run your structure. Because at the end of the day if one lawsuit develops in an
LLC that holds 10 properties, I doubt your property manager
is going to come to you and say let me help
defend you in this lawsuit because we refuse to pay multiple LLCs and we forced you into this position. You see how absurd this becomes? Use sound planning, you can work around companies that will not allow you to do what, you know, have the money go
to the respective companies. My name is Clint Coons with
Anderson Business Advisors and in this video we discussed how to use an outside
property management company with your limited liability companies. (upbeat music)

14 comments

  • Man u are a living your passion thanks Clint

  • So, the Texas Corporation could also be a separate LLC formed only for the purpose of property management?
    The Wyoming LLC would have a property management contract with the TX entity or would it be wholly owned by the WY entity?

  • If I don't have business in the state where I live, can I set up the property management LLC in WY instead of the resident state for lower fees and other WY benefits? Thanks.

  • Life Organization 411

    These videos are amazing. I had an appointment with Josh Terry yesterday and he helped me setup my business structure. Funny thing is we talked about setting up a property management company. Your awesome, he’s awesome, the whole company awesome! I do wish there was a discount for military lol

  • laportest coulson

    Аre Yоu searсhing gооd coursеs about Manаgement. Simрly Goоgle sеаrch аs "Ζоe Talent Solutіons".

  • I was at a seminar recently and they said to never let rent money touch an LLC holding property because money has a trail, which in turn wipes out the anonymity, which largely defeats the purpose of the LLCs. Were they wrong or am I missing something? Thanks.

  • In lived in Florida, I understand pretty much everything (setting up Wyoming LLC for single member/assets protection). Questions: I guess it okay for the property management (rather in state or out state) to send rents to either my Florida LLC or my Wyoming LLC ? But will my *lease agreement* with the tenant be under my Florida LLC or my Wyoming LLC? and Does both Florida LLC or my Wyoming LLC need bank accounts? If so, is Capital One or Azlo a good bank business accounts for each of them since it is all-online and virtual to open up for both LLCs? Otherwise, does each bank account for each LLC needs to be physically located in that State, not virtually online?

  • Terric Richardson

    1. Is the property management company owned by the Holding company and then the property management company owns the other two llc's that the homes are in?
    2. Could the property management company also be an llc Instead of a Corp. Or is corp the best option between the two?

  • @Real Estate Asset Protection For the WY LLC, I understand that it will be my only managing member for my Florida LLC. But, by me listing it as a managing member does that now makes it officially registered with the State of Florida? Otherwise, do I have to actually registered the WY LLC with a WY EIN number in the Sate of Florida to be make it official? Final important and original question: WY LLC will be out of state, Does for both entities need an EIN number from the IRS?

  • If you pay your employees great wages like 20 to 30 dollars an hour you could keep great employees if you pay small salaries you get what you pay for.

  • Bryant Marshall

    What is a husband wife team has blue and brown box. Cant husband represent one brown box and wife the other box?

  • Angelo Christian

    Great content. That is always a challenge of what direction to take. Lots of time it depends on the situation but that is still not guaranteed to be the right direction.

  • FL LLC has no COP? OMG

  • Absolutely, best way to go is your own PM company that hires out. Keeps LLC clean and all the bills are paid through them , acts as another buffer and write off, etc…

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