Good or bad idea? Property management firm for my own properties.

[Paul Teske]

Hey BP,

I'm considering starting a property management firm that will only deal with my own rental units. This company will not own the rentals, because I do not want to trigger the Payment Due on Sale clause in the mortgage; the properties will remain legally in my name for now. The primary goals are to keep the properties' books separate from my personal finances while also projecting a professional image that wouldn't be accomplished had everything been in my name. Other legal protections afforded by the LLC are a bonus, but I fully realize that I can be sued as long as the property is in my name. I wanted to ask anyone else who has done this how it worked out. Any pointers would be appreciated; I can't find much info about this.

This is in Florida. I will be drawing a salary (not commission), and will not manage properties that I do not own - therefore no need for a broker's license. I am fully aware of the extra paperwork and costs that come with LLC ownership. Forming the LLC is part of my long-term business strategy. Eventually, the LLC will also own the properties, but that's not an option at this moment.

[Nathan Gesner]

If you set up 123 LLC as your management company, how is that separating the finances? Rent goes to 123 LLC but then 123 LLC has to pay those funds out to the owner (you). So the money is still yours, still in your account. It's just adding a middle-man (the LLC owned and operated by you) to your operation. You'll still have to discipline yourself to keep funds separated from personal, which can be done by setting up a new bank account called "Teske Rentals".

As for professionalism, I think you're looking at it wrong. An individual can be professional and an LLC can be unprofessional. Your business card with logo may give people a perception of professionalism at the beginning but true professionalism is demonstrated by how you operate.

You asked if it's a bad idea and I think it is. Setting up an LLC to manage your own rentals doesn't make you a professional. It also doesn't add any additional layer of separation between personal and business finances because the LLC does not keep the finances. It sounds like you want to create work for yourself so you can give people the impression you're working. Why not just do actual work? It's like saying you want to show people you're a long-distance bike racer so you hop on a stationary bike at the local gym and start pedaling away. People may initially be impressed but they'll soon realize you're just pretending to race and not actually going anywhere.