How to manage rental properties?

Question

I know that when you buy rental properties it's wise to keep each in its own separate LLC to limit liability and maximise asset protection etc.

However, let's say you have 30 rental properties, 30 different LLC's and 30 different business bank accounts how do you manage all that? Tons of accountants etc?

Anyone how is in a similar situation please give me some feedback please.

JD Martin · Answer

I don't do anything of the sort. I keep everything in my name and have maximum limit insurance and a personal umbrella policy with a high limit beyond that. It's virtually impossible that I would ever do anything to bring my level of negligence in a court of law to something that would exceed my insurance limits.

You don't need to have 30 LLCs. You really don't even *need* to have one LLC, but if you wanted to have one as another buffer I wouldn't argue with that.

As for bank accounts - that's crazy. We have a deposit account, a tenant-access account (for those who want to pay in some way other than online), a business checking account for paying expenses. That's it. Memo lines on checks and in your online banking and a reasonably good spreadsheet (I use Excel, you could get fancy with Quicken or similar) is all you need.

You're making this way more complicated than it needs to be. Do you have 30 properties and is that what you are doing now? If you don't, then why worry about something that hasn't even happened?

JD Martin · Answer

Let's get the first one and worry about it from there.

Aaron K. · Answer

Generally people don't do things that way, thus it is easier to manage.

Peter Tverdov · Answer

You do not need to do that. You can put a few houses in one LLC or just get umbrella insurance and skip the LLC. People LLC themselves to death, thinking they won't get sued.

Bellman Tumasang · Answer

Yes I fully understand where your coming from but I’m thinking about big deals not single family. I’ll give you an example.

Let’s say I buy 2 apartment complexes each 30 units so 60 in total. Let’s say both at $50k/unit so $1.5m each building and $3m in total.

I believe it’ll make sense for each to be in a separate LLC. Rents could be paid to separate property LLC’s, limits liability and maximises asset protection etc.

I know how with multiple entities and bank accounts etc it can be expensive but honestly when your doing big deals making a lot of money it’s a small price to pay that can really help protect your assets.

I have been doing research and it seems many lenders for Multifamily apartment buildings require each property to be in a special purpose entity such as an LLC.

Markus Shobe · Answer

@Bellman Tumasang 30 different bank accounts would be to much. If you have good systems in place it wouldn't be to hard to keep up with how much each property is making. I have seen some real estate investors do what you were referring to as opening an LLC and bank account for each property, but I think it just is to costly and unnecessary.

Bellman Tumasang · Answer

I’m referring to apartment complexes worth potentially millions of dollars with multiple units hence why I’m suggesting 1 per LLC. So if I had 30 apartment complexes I may have 30 LLC’s and 30 bank accounts.

Also I do not yet own any properties I am 17 turning 18 next month and I am learning step by step as I want to get into real estate one day.

Charles Carillo · Answer

@Bellman Tumasang

It depends on the properties you are referring to. It also depends on your personal financials. Before you make a decision, you should speak to your CPA or attorney. That being said, if you have 30 single family properties worth $100k each, you could group a few into each LLC. If these are much more expensive properties or apartment complexes, you would do one per LLC. Lastly, if you have this many properties worth millions of dollars, I would suggest you hire a bookkeeper for a few hundred dollars a month or have your CPA handle your bookkeeping for you (more expensive). Either way, you can have someone handle this for a minimal amount of money vs. the value of your portfolio.

Jaron Walling · Answer

@Bellman Tumasang You don't need 30 LLC's and 30 business accounts to run rental properties.

If someone told you that they don't know how to effectively run a business. Imagine the doing the taxes every year! Imagine the time wasted to manage it and cost to run the LLC's. In some states that could amount to thousands per year. We see the question "Do I need an LLC?..." on here all the time from novice investors. The answer is how many ASSETS do you have? If you have nothing to protect you don't need an LLC. It's a waste of time and money for something you don't need until you have PAID OFF property, cars, trucks, equipment, etc. People don't sue for something with a loan on it. Besides like J.D Martin said having good insurance is much more important.

How to manage rental properties?

Most Popular Reply