How do you self-manage your rentals?

[Shamus Wheeler]

To provide some background, I am purchasing my first 4 unit property in a rural area. This town is my hometown, but I now live ~5 hours away. I need to put some sort of property management in place. There is only one property management company in this town, and when I talked to them, they were just OK. Slightly expensive, a few too many fees, slightly poor quality services. They could work as my property manager, but are not ideal in my thinking. 

I am aiming to acquire 20 units in the same town this year (or as many as possible). I am considering "self-managing" from a distance. By this, I mean dealing with all tenant communications and hiring someone to do the on-site management. Obviously I need to do my own analysis about what the best option would be. This seems like something that would make sense at 20 units, but possibly not at 4 units. That's enough for background, my questions in general are: 

1. If I were to self-manage, how should I structure this? Start a property management LLC and hire someone on a 1099 basis?

2. How do you self-manage/ run a property management company for only your units?

[Scott Smith]

Hey Shamus,

There are still more questions I would have regarding you investments, but here is what I would generally look into regarding the number of rentals you are looking into. This will both streamline your taxes while giving you a strong foundation in asset protection.

I would get it all set up in a Series LLC. This way you can establish it all under one entity and one EIN - if you are good with bookkeeping you can also run everything through a single bank account, too. From there you compartmentalize each property into separate "child/member" series within the Series LLC. I would then establish a normal (or Traditional) LLC to house my operations - paying property management, contractors, rent collection, etc. This separates liability from your operations and your assets. I would establish all payments and rent collection through the Traditional LLC, and if there ever is a law suit you can dissolve it and start a new one.

I would house each property into a Land Trust which I would be the Trustee, and the LLC would be the Beneficiary. That means I can still "manage" the property, but the Land Trust is still owned by the "child" series within the Series LLC

There are many other benefits to this structure, but this is the general structure I would set this type of an investment portfolio into. When tax time comes around it will still be straightforward, and you have liability protection from a sub-optimal property management company that also allows for you to scale up. 

This isn't legal advice, simple an approach I would recommend you look into. you can read more about the Series LLC in this article.