[Scott Townsend]

Scott Townsend

**This was posted in the “Property Management” area, but thought I might get more exposure over here.

I?m trying to visualize this Property Management “Tree”:

A rental property is held in a Land Trust (ideally) or LLC.

The Beneficial Shares of that Land Trust are held in an LLC.

(You may have many homes set up this way to keep everything separated).

A “Managing LLC” is set-up to collect all the rents. Renters make their rent payments to “Billy-Jo’s Property Management, LLC”.

Question:

Does “BB’s Prop. Mgnt, LLC” make the mortgage payments and pay for all the maintenance costs ?

Once a month, the bank account holding all these rent payments needs to be “swept” of the funds; don’t want to leave this one LLC holding all the “gold”.

Where does the left over money go from there ?

(a) Into a Personal Property Trust Account ?
(b) Or, does the “profits”, after debt service, go back to each individual LLC holding the shares of the rental properties ?
(c) Something else I’m not thinking of ?

Currently have rentals in LLC’s. Renters make payments to those LLC’s. This is a LOT of bookkeeping and challenging to keep it all straight… especially as more properties are acquired. Just trying to simplify and wondering how the IRS will view each entity and this “new” structure.

I know the Land Trust and the LLC holding the shares can be viewed as “Non-Entities” by the IRS for income. It’s what happens AFTER that with the Managing LLC and what’s after that, (Personal Prop. Trust) that confuses me.

Also, what “Agreement” needs to be set-up between the Trust; Managing LLC; and the Properties ?

Billy-Jo

PS> Is there a Jack Article, Audio or Video on this “pecking order” that can clear this up for me ?