A landlord asking what is the best approach for operating and managing a rental property is the question this week for Ask Landlord Hank. Remember Hank is not an attorney and he is not offering legal advice. If you have a question for him please fill out the form below.
I purchased a two-family home in Massachusetts with my sister in 2018. She lives upstairs on the second floor, I lived on the first. My wife and I moved out in 2021 and have been renting out the first floor of the two-family home. My sister has intentions to move out soon too, and eventually the home will be fully rented out and no longer be owner-occupied, along with generating additional income for both of us.
My question is, what is the best approach as to operating/managing the property? Currently the title/mortgage is in both our names. We have an agreement on roles we each have and responsibilities that get divided between the two of us. However, should we start an LLC? I’ve also heard of doing a family trust? Are there any tax benefits or perhaps an easier/more organized way of doing business? What we’re doing now works (we think)…
Hi Landlord Kevin,
Family business, just like any partnership, has strengths and drawbacks.
There is strength in numbers – being able to divide the workload, being available for management, maintenance and emergencies.
The drawback is that since there are two “bosses,” then you both have to be on the same page as far as business philosophy, and keep the dialogue with the tenants straight. If you were each going to manage your own units that may be the easiest, but if one of you likes to do management and the other maintenance or some other division of labor, that could work well too.
The nice thing is that right now all should be relatively simple since you have two units at the same address and you are intimately familiar with them. As far as LLC or S-corp, it’s nice to put your property there for limiting personal liability. These entities are easy to set up too. I would talk to a tax professional to see if one form is more advantageous to your unique situation. Good luck!
Each week I answer questions from landlords and property managers across the country in my “Dear Landlord Hank” blog in the digital magazine Rental Housing Journal. https://rentalhousingjournal.com/asklandlordhank/
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