All Forum Posts by: Corey Duran

Quote from @Nathan Brown:

Quote from @Corey Duran:

Quote from @Nathan Brown:

many of my clients do one llc per property (or in some cases per portfolio), but you lost me at the whole management company for tax write offs thing. I mean are you already licensed and self-managing?

 What do you mean by licensed? I have a property manager who works for me who is unlicensed. He more or less just finds tenants, calls when they are late, and handles maintenance calls so I don't think its a problem him being unlicensed. I am a licensed real estate agent and I manage everything paperwork wise including keeping the books. If I make a management company I could charge my other businesses a fee that will convert the income from passive to ordinary (or something like that.. my accountant explained the benefit there).

"property manager who works for me who is unlicensed" bro be careful about calling unlicensed assistants property managers. Besides that, thanks for the clarification. The company I'm with here in AZ did exactly what you're thinking of doing. You might consider hiring out the role of DB though. That's a beast of a job that will suck your time away from doing the more higher payoff activities of investing.

I always assumed being licensed is on him not me. But I agree and appreciate the warnings on that.
What is the role of DB?
The company you are with has a management company as the hub and many llcs as spokes that that company owns? Any concerns or drawbacks of how they structured it. I have suggested this structure so I am trying to fully understand it.

Quote from @Rachel Mazzanti:

Quote from @Corey Duran:

I talked to an attorney who looked over my current situation (1 LLC) and recommended instead of having one LLC holding 15+ properties to divide them among smaller LLCs that contain fewer properties to separate them in case of a lawsuit. He then recommended having one LLC that owns those so I do not have to operate out of a different bank account every time. I then talked to an accountant who recommended I do the same thing but instead have the primary LLC that owns the others be a management company as well to change the income to favor more write-offs. Has anyone heard of anything similar to this? Do you do something similar? Any questions or concerns I should bring up? Complications with this?
I can provide more info but I was curious if any of you might have some insight on these suggestions.

I have to agree that 1 LLC with that many properties is a bad idea.

I know there are some investors who sets up a PM LLC to manage their own properties.

I probably can connect you with someone I know that might be able to help. I mean there's no wrong option, but it also depends what it is you are trying to do.

Do you mean payment master as the LLC to manage? That sounds similar to what the management company would do in my model. I could then charge myself management fees to move the type of income for my taxes. This sounds appealing because I want to keep operating the same (one bank account.. would do 2 if needed). I would wanna keep operating the same and then have separate llcs for protection. I do not know if just having separate llcs is the best way or having one LLC as an umbrella (or hub and spoke model) is the way to do it. I do not know if doing this adds more protection or not.

Quote from @Nathan Brown:

many of my clients do one llc per property (or in some cases per portfolio), but you lost me at the whole management company for tax write offs thing. I mean are you already licensed and self-managing?

 What do you mean by licensed? I have a property manager who works for me who is unlicensed. He more or less just finds tenants, calls when they are late, and handles maintenance calls so I don't think its a problem him being unlicensed. I am a licensed real estate agent and I manage everything paperwork wise including keeping the books. If I make a management company I could charge my other businesses a fee that will convert the income from passive to ordinary (or something like that.. my accountant explained the benefit there).

Quote from @Jason Marino:

Hi Corey,

What you are referring to sounds like a Hub and spoke model. This would involve creating spoke LLCs that own an asset or multiple assets. These spoke LLCs would then be owned by a Hub LLC. This is a fairly common asset protection structure that investors use to hold assets. I have not seen many investors that use the Hub LLC in a role as the Manager of the properties. The way that this is handled is usually with a separate Operating Company. This company would only be contractually linked to your Hub LLC and would interact with tenants and contractors. This helps to isolate the liability of the interactions in the Operating Company.

 Yes I have heard of this. However I am the sole owner of all the llcs so I think they thought is that I can have the property management own them and use their bank account as main bank account through all the LLCs. Maybe it would be better to not have that company own the others.. I operate out of one bank account and one llcs I am just trying to get more asset protection without changing too much how my business runs and operates on the banking side. If you have any advice it would be greatly appreciated.

Quote from @Bill B.:

I assume these properties are worth at least $5-10 million or you’d just use the umbrella policy you already have on yourself? After all. You are at least 10x more likely to be sued for something you do than the properties do (maybe 100x). And that means when they sue you they get your llc’s and what they own. It won’t matter if you have 1 or 20, 1 layer or 3. 

If they are worth more than you can get an umbrella for you’ll need an expert. But the llc’s are basically for barely/kinda hiding your identity in public records rather than asset protection. 

 No my portfolio total is around 800k. I have also heard that these layers will prevent them from taking it all. Also can they really take my llcs if I do something not associated with them. Of course they can try but is it really that likely? I do not know as I never put too much thought into getting sued until now. Not that I think I will.

Quote from @Chris Seveney:

@Corey Duran

Curious why your acccountant would say to have multiple LLC's?

Having multiple is a pain in the you know what.

I don't think you need an LLC owning the LLC. It's an over kill.

Also big difference here if you want 2 LLC's or 10.

I am a believer of keeping it simple and people understanding what could you be sued for that insurance wouldn’t cover?

I believe it all comes down to the separation of rentals. So if one rental has an issue and the LLC gets sued they cant go after all of the properties as they are owned by different llcs. I agree
I am trying to not complicate my business too much.. so I am looking for asset protection form multiple llcs but I am trying to figure out how to keep it simple for taxes, and for operation. I really only want to work out of 1-2 business accounts max. As a sole member to all the llcs I think that is possible from an accounting perspective (idk for sure though).

I talked to an attorney who looked over my current situation (1 LLC) and recommended instead of having one LLC holding 15+ properties to divide them among smaller LLCs that contain fewer properties to separate them in case of a lawsuit. He then recommended having one LLC that owns those so I do not have to operate out of a different bank account every time. I then talked to an accountant who recommended I do the same thing but instead have the primary LLC that owns the others be a management company as well to change the income to favor more write-offs. Has anyone heard of anything similar to this? Do you do something similar? Any questions or concerns I should bring up? Complications with this?
I can provide more info but I was curious if any of you might have some insight on these suggestions.

I saw someone recommend checking bigger pockets for an accountant. I do not see where I can post looking for one so I am trying here. I am looking for someone who is local or at least in OH. Any help would be appreciated.