Separating Your Property from Property Management Using Two LLCs

[Kyle Profilet]

My question is concerning whether or not is can be a good idea to separate your real estate operations into two entities: (1) an LLC that holds your property and (2) the LLC that holds your property management operations, where the LLC (holding the property) would pay a management fee to the LLC (holding the property management operations) for its services. I currently own just one Quad-Plex which is held inside an LLC, but plan on building my unit counts going forward as I learn and grow financially.

My thinking is that as I grow my number of properties I'll be able to sign management contracts with each and, if I get to the point where I can hire a full time property manager, I could begin taking on property management business from properties not owned by myself.

I'm interested in hearing people's thoughts in regard to the tax, legal, and practical implications that would result in using this strategy and whether anyone is or has used this strategy before.  Thank you to all in advance for any advice yall can give!