10 Units Wanting To Start To Self Manage - LLC Formation or Not?

[Ryan Lantzy]

I currently own 10 units and intend to double that this year. I'm considering self-management and I'm in the process of setting up systems for it. Should I create a separate management company through another LLC and pay it a standard commission, or should I operate it under the existing LLC that owns the units to avoid the complexities of setting up a new LLC structure? I understand the importance of consulting with my CPA and attorney, but I'd appreciate any friendly advice on this matter.

[Devin De Lange]

Hi Ryan,

1. Are you looking to expand your property management portfolio to manage other people's properties? If so, the LLC could be a good route to go to separate the expenses and income from yourself, and treat it as a separate business.

2. If the first answer is no, then it may be better to keep it as is. The IRS states: You can pay yourself a fee for managing your own rental property, but this may not be the wisest course of action. When you transfer money from your business banking account to your personal account, the IRS will see this as income, and you will be taxed accordingly. (Link for Blurb). 

Something I wish I would have done earlier on was follow KISS (keep it simple). I opened more LLCs, and got ahead of myself. More LLCs, more red tape, more documentation, more complications.