Best rental property structure?

Question

I want to run my structure by the BiggerPockets family. Please judge and critique away. Any advice and views are appreciated.

I have a mortgage on the property and the title and the mortgage is 100% under me – this will not change – I want to keep the title under me.

I leased the property out to my LLC. I have the lease documents; I do LLC minutes and go above and beyond to keep my personal and LLC separate. I do want to have an LLC.

The LLC then sub leases the property out to the tenant. And a property manager over sees everything.

I also have landlord insurance under me. The LLC does not have any insurances and only act as the middleman.

The contract is between the LLC and the Tenant, overseen by the property manager.

The tenant will pay the property manager, the property manager will pay the LLC and the LLC will pay me and I will pay the mortgage.

John Teachout · Answer

Sounds like a mix of LLC and personal. Not sure the LLC is providing any benefit in your case. ie, there doesn't appear to be any corporate veil so what's the point?

Alex Verdugo · Answer

If you have a PM, do you really need the landlord insurance?  I would think that the PM acts as the landlord, i.e. schedule repairs, collect rent, settle disputes.  You are simply the property owner and the LLC is the one that needs the insurance. To protect the owner and the LLC.

IM NOT 100% on how that all works, it's just me guessing.

I have an LLC but don't plan on using it til I move out of my house hack. Then I'll put that property into the llc and keep the next house hack in my name.

Mike McCarthy · Answer

@John Lee that’s the basic way I have my rentals set up. I have the mortgages under my name (for cost reasons), and have the LLC managing the properties.

It’s worked well for me so far, but I don’t pretend that the LLC is providing any real asset protection. Considering I’m the one managing the properties, if whatever happens, I realize I’m the one being sued. For that case, I have landlord insurance plus umbrella insurance. And I keep my properties in good repair to alleviate most of the risk of getting sued in the first place.

Tracy Streich · Answer

Seems pretty complicated...but maybe that is just me.