- 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.
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