Using a DBA to Collect Rent From Tenants
Calling all Landlords! We’re in the process of buying a 3 family in which we will live alongside our tenants. We were thinking that it would be best to use a DBA in order to lessen the psychological impact of “giving” away thousands of dollars to your neighbor/landlord every month. The standard “Landlording” book recommends…
Calling all Landlords!
We’re in the process of buying a 3 family in which we will live alongside our tenants. We were thinking that it would be best to use a DBA in order to lessen the psychological impact of “giving” away thousands of dollars to your neighbor/landlord every month. The standard “Landlording” book recommends that you ask the bank to create an account with the name “Joe Sample’s “Parkside Apartments”” or something similar. In theory, this allows you to accept checks to “Parkside Apartments.”
The problem is, our bank says you need to become a sole proprietorship to do this. My questions are: 1) Is there another way around this, or do we have to become a sole proprietorship? 2) If so, is it worth going through the hassle/expense/potential liability?, and 3) Do tenants seem to resent giving rent to you every month, regardless?
I don’t think you need to worry about tenants feeling bad about paying rent to you… it comes with the territory and if not you it would be someone else! Haing rented for years I’ve never personally resented the landlord for this.
I think there’s other scenarios in that Landlording book as well. You could say you are managing the bldg for somebody else, etc. But in reality you probably don’t want to be the strange guy in the bldg who is lying to your tenants and neighbors do you? They are going to ask whether you own the bldg and what are you going to say?
I’m pretty sure I’ve read the book you are referring to. It seems like it would only apply if you had an investment property elsehwhere and wanted to stay incognito.
Living in the building, you would pretty much have to lie to your tenants to hide the fact that you’re the landlord. We have three apartments, and don’t have that problem. They are paying for something that you are providing at a pre-set price. Just make sure you keep up your end of the bargain, and they’ll be happy.
I agree with the previous poster about the bank. Why would they make a loan to an LLC with no assets and no credit history? They made the loan to you, so unless the building appreciates a lot, or you put down a very hefty down payment, I imagine that would be a problem for them.
Plus I think tenants of owner-occupied buildings see how much work it is to own and keep up a building. Not everyone is envious of homeownership! Some people like to pay a set amount each month, have a nice (hopefully) place to live, and not deal with the headaches.
I don’t understand the question. What is the psychological problem you are referring to? My tenants just write me checks, no big deal.
Agree with above. I currently rent from my landlady who lives in the building (3-unit building) and I don’t mind at all. I’m paying rent. I’m not paying her blackmail.
If you put the building into a LLC, you better tell you bank first. They typically don’t like their collateral changing ownership forms and get very picky about retaining that first lien….
just find good tenants and that’ll lessen any psychological imapact you may be worried about.
I agree with Kitten, but I wouldn’t call your question stupid. When you are looking for tenants, you are going to have to do your best to find tenants who appreciate the building, their appartment and the service you provide as landlord and are therefore happy to pay rent on time. Sounds weird but so far I’ve been able to do just this. Good luck.