All Forum Posts by: Aaron K.

Thanks everyone, appreciate the input.

That's exactly the scenario - he will be acting a bookkeeper as well as manager and issuing 1099's as necessary. The point about potentially leaving the manager in the future is a good one - separating him from the ability to conduct business on my behalf through the bank account is important, if I need to down the road.

That sounds similar to what I was describing - he collects rent into his own account, pays expenses as authorized (or as signed for by myself), and then sends my business a check.

My post may have been confusing - he didn't ask me to open an account for him and give him signing power, but the opposite.  He would open an account using his Tax ID, and I'd be the sole signer for that account.  Not sure what the practical difference would be between the two, other than the ability to remove him from his access to rental income and bills if it comes to that down the road.

Thanks for the input - he's been in the business for about 8 years, while this would be my first experience with a manager after managing my own properties for some time.   By "suggested" I mean he told me that's how he does it with his other clients and he wanted to do the same thing with my properties.  He clearly has it figured out but I wasn't clear that it's the best way to do it, which is why I made this thread.  I believe he sets up a separate account for each client, not for each property.

 I'm hiring a property manager for two properties I own.  I assumed that we'd set him up as a co-signer on my business bank account, the business that owns the property.  This way we could run all transactions through that account.

However, he suggested setting up a new bank account in my company's name but using his tax ID.  Rent would be paid to that account, and he'd use the account to pay for any repairs/maintenance, mortgage, etc.   When cash is available or upon request, my business (that holds the property) would take a check. I'd then take an owner's draw or salary from my own business.

He does maintain full financial reports on that account, and I can be the sole signer of any checks written from that account if desired.  

Do managers typically set up new accounts under their own tax ID for each property, or do they typically use the property/business existing account and act as a co-signer?    I'm new to using a property manager so I'm not suggesting that one is better than the other - just looking for opinions!

I want to run this past you guys to see if there's a solution in here somewhere.

A title search of a property I'm looking at purchasing indicates that there is an existing mortgage on record. The lien-holder is the previous owner of the property - she owner financed the property to the current owner. The current owner states that the mortgage was paid off years ago, but has no physical proof other than one copy of a check with a handwritten note stating "final payment". The lein on record is essentially the same amount as the current proposed purchase price.

I have no reason to doubt this individual, however this is clearly not substantial proof of mortgage satisfaction should the prior owner's family decide to recall the mortgage after the purchase. The title company won't accept this either.

The current owner has been trying to get in touch with the prior owner's family to issue a mortgage satisfaction statement, as the prior owner / lien holder passed away some years ago.

My questions are, if we do get a statement from the family, is that sufficient proof of mortgage satisfaction as far as the title company is concerned, and is it enough legal protection in case the family changes their mind down the road at some point? Also, what happens if we CAN'T get that statement - is there any room to get a deal done here?

@Dave Savage Thanks for the response. I'll definitely get title insurance, that's a good suggestion. I'm not really clear on the whole title transfer aspect as this is my first investment purchase, so I just wanted to make sure I'm not missing anything major during the closing.

Thanks!

Aaron

I'm closing on my first rental property soon. We've agreed on a purchase price and we're about to be in contract. Financing is in order. I believe I've done appropriate due diligence, but I'd love to have the list reviewed and critiqued to make sure I'm not missing anything.

I have done:

Full property inspection
Obtained a full title report (schedule A and B) to check for leins on the property
Checked all permits and C of O's for the property with the town to ensure that all structures and past renovations are legal.
Performed a formal survey to verify boundary lines
Received reports confirming in-ground oil tanks have been removed according to code
Verified location and condition of well and septic

Do I need to:

Verify anything else with the title company? Title insurance?
Be on the lookout for any red flags with the title transfer, like the wrong type of deed?
Be worried about any non-code wiring or plumbing at this point, as it relates to fines/penalties directly after the closing?
Do an environmental inspection on the land itself to search for contaminates or...?

Thanks!
Aaron

@Jerry W. Thanks for the info. That makes perfect sense.

@Account Closed My thought with the second management LLC was to be able to take the management income as a salary, which I would have otherwise paid out to a management company. The rest of the rental income would stay with the property LLC's for future use. You are right, however, about not having taxable income when it may not be necessary to do so.

Insurance is another subject and I will have sufficient coverage. I'm inquiring about the LLC structure, and if it makes sense for what I'm doing.

I'm closing on my first property soon. It's a property I've been renting for my business for a few years, and there are three other rental units on the property in addition to mine.

Here is my LLC plan:

One property ownership LLC. This LLC will own the property, and I will be the president. Rent will be paid to this LLC, and bills for this property will be paid by this LLC.

One property management LLC. This LLC will be hired by the first LLC to manage the property (day-to-day activities on the property) and I will be the president. A monthly management fee will be paid to this LLC by the first LLC.

My reasoning for two LLC's is this - as I acquire additional properties, each property will be under it's own LLC. They will all hire the same management company to manage the operations. This creates another layer of liability protection, and also further separates tenants from the property owner, because they're dealing directly with a management company. Yes, I'm the president of both companies, and I'm also dealing with tenants, but they don't need to know I'm also the owner.

Does this make sense, or am I crazy?

Thanks guys, I appreciate all of the different view points! Didn't mean to start a war, although it's all good info from both sides of the fence. I'll be consulting an attorney for sure just to weigh my options and figure out exactly what path I need to take, clearly it depends on the individual situation.