Start a Property Management Business

I discovered that problems with property management businesses are not a function of the business itself as much as due to lack of education. Property management business and managerial jobs are the most misunderstood parts of real estate investing and the most important, too.

If you do not have good property management, then you will have high management costs, poor tenant relationships, and high vacancies, and that will be the end of your investment business.

The good news is the property management business can be learned from good managers or at the school of hard knocks.

A good start is: select a business entity, buy a rental in the business name and manage tenants.

Setting a safe foundation for your property management business is very important. Before that, I will give some general information about Property Management Business entities.

Available business entities for real estate investing.

First, your business needs a structure, a name and a Employer Identification Number (EIN) for tax considerations.

• Personally Holding Property, is a not a tax advantage or disadvantage, but is a big risk. Better hold properties with the benefit of a limited liability business structure.

• Partnerships are of two types. General partnership is not recommended and the limited partnership (LP). LP is preferred entity for real estate holdings in some states. In most states, when taxed, the LLC is the preferred structure (see next).
  
  
• Limited Liability Company (LLC) can elect how to be taxed. If two or more partners, the partnership taxation is elected and the Form 1065 - US Partnership return - must be filled. An accountant may charge about $1,200 for one Form 1065 LLC return.

  If a single-member LLC is involved, the passive gain or loss from rentals will be reported on the Schedule E, the active gain or loss from doing business, will be reported on Schedule C of the form 1040.

  The LLC and LP hold better asset protection and both are "flow-through entities" with the gains and losses going to the individual taxpayer Form 1040.

  The gain from property sale is subject to capital gain and you want individual's not corporation's tax rate applied.

  "Real Estate Professional" status can be used to offset more than $25,000 in business losses.

  You can bring in or move out properties from LLC or LP at basis cost/price and it is a not a taxable event. For S Corporations or Corporations the appreciation is taxable.

My business entity is a Limited Liability Company with two partners, with 50/50 percent participation.

More info for you is on IRS/business link. Internal Revenue Service. Business

Do it step by step.

1. Go there and register for a small fee your LLC's name, for profit purpose, address, and the resident agent name (you) into an "Article of Organization for use by Domestic Limited Liability Companies".

2. Buy a Do-It-Yourself Kit "Limited Liability Company Kit" valid in all 50 states from Staple or Office Max and fill in the blank for Operating Agreement. Ask your lawyer and accountant for specific help. The lending institution wants to have a copy and at closing is needed for a correct Title.

3. You need a Tax Identification Number different from your social security number for your LLC. Go to IRS site and look for Form SS-4 Application for Employer Identification Number and instructions. Read instructions and you may get your number by phone or internet. This was the easy part.

What about "Property Management Accounting" class first and may be software later? Please look for Accounting for Real Estate

Property Investment Requirement Info

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