Owner Occupied -Proerty Management LLC???

Question

Hello all,

I just went under contract on my first duplex and I will be owner occupying it with a 5% Mass housing loan (Similar to FHA). I am looking to accomplish a couple of things and was wondering what experience you all had with Managing an Owner occupied investment

1. I want to Manage the property myself, but don't want to disclose to tenant that I will be the owner. - So I was planning on having the narrative of - I am the manager of the property and everything will go through me.

2. I would like to be able to utilize as many tax incentives and write offs as possible and I believe utilizing an LLC for all repairs, maintenance, etc would be a good start.

- Knowing that putting the house into an LLC may trigger a "Due on sale" clause on my lenders end I would like to not take that risk. However, my thought is to make a Property Management LLC and have all Income and Expenses come out of this account. Has anyone done this?

What are your thoughts??

Really looking forward to what you all have to say!

- RT

David Avery · Answer

I'm no tax accountant, but thinking you could also pay yourself to manage property.  Go to the max without triggering an IRS audit for starters.

When working with the other tenant, I would also state , " the owner is a pretty cool , but i need to watch every dollar keep the property looking great.".

Or  " The owner is a pretty tight with money but wants to keep the property looking great and well maintained".

Both those statements take a lot of stress off of you and put on the owner!!!!

( even though your the owner). !

The owner in your tenants mind is firm and wants to put the money in to make the place nice.

Then "the owner becomes the bad guy and your the good guy ( manager) that has to do what the owner needs done.

Rents are due on time, the place needs to be taken care of, and you will be able to have pretty good access to other side because it is your job!!!

Way to tie down a duplex Ryan!!!!

Drew Sygit · Answer

FNMA allows transfer of deed to LLC if mortgage originated after June 1, 2016 and original borrower owns a majority interest in the LLC and any 12 months of owner-occupancy is first met.

https://servicing-guide.fanniemae.com/THE-SERVICING-GUIDE/Part-D-Providing-Solutions-to-a-Borrower/Subpart-D1-Assisting-the-Borrower-with-Property-Related/Chapter-D1-4-Transfers-of-Ownership/Section-D1-4-1-Information-Relating-to-Transfers-of-Owner/D1-4-1-02-Allowable-Exemptions-Due-to-the-Type-of-Transfer/1041300841/D1-4-1-02-Allowable-Exemptions-Due-to-the-Type-of-Transfer-09-09-2020.htm

You can't pay yourself a management fee for DIY management. Similarily, you can't pay yourself for your time spent doing your own repairs on a rental. Confirm with a tax professional.

You can create the LLC and run all your rental income and allowable expenses through it before you transfer the property to the LLC.

How will you handle the, "hey new homeowner" mail that always seems to end up in the tenant's mailbox and their questions to you about it?

Ryan Tierney · Answer

@David Avery

Thank you for the advice! Will definitely be utilizing those phrases to get that across.