If you own properties in several LLCs, is okay to pay for the tenant screening costs in your own name, or is that considered commingling?
As anyone who has done this screening knows, because of various laws you cannot just order a credit report off the cuff, you have to jump through a bunch of hoops with whatever company is providing these to you first. I’ve already done this for the properties I own in my own name I called the credit check company and they do not have the technical capability to store several different credit cards so that I can pay for LLC#1 credit check separately from LLC#2 credit check, etc, so as not to comingle funds. They are not going to set up 8 different user ids and password accounts for me just because I happen to own 8 LLCs. How do other people handle this? Does it matter?
Here’s what I do, and it’s been given a seal of approval by a lawyer:
I have multiple holding companies (legal entities)
I have one mailing address for all of my properties
I have a separate debit card, checkbook & checking account for each holding company - and I keep separate Quickbooks records for each holding company
I take cash or a money orders ONLY from the tenant who applies with me, as if they pay you with a check and get denied they could cancel the check (yikes). A matter of fact, I don’t take checks PERIOD from anyone for rent, and I have never had a bounced check. =)
I run the NTNonline.com background check with my debit card (it has my name AND that unique specific company name on it), however even though I have multiple debit cards I have one login with NTNonline.com in my name because I am the property manager for all of my properties
I do additional phone & paperwork verifications as needed, and approve or not approve the tenant
Then I deposit the funds from the tenant, etc, etc whenever I have time to go the bank.
motivated,
Thanks for the detailed response!! I wish there was a way to give people rep points on this forum.
I understand everything you stated but I’m unsure about the debit card part…so if you own properties in 4 different LLCs with 4 different debit cards issued in the name of the companies, are you able to use those interchangeably to pay for different searches on NTN? Can you change the card online or do you need to call up NTN each time to change it?
I’m using QuickChek to do my screening right now (currently only own houses in my own name but planning to LLC in the near future), which is a great, cheap screening service, but they have almost no flexibility on payment–you can only have one card on file at a time and you need to call QuickChek on the phone if you want to change it to a different card, which won’t work for me in this situation.
Are you able to use those interchangeably to pay for different searches on NTN?
Yes
Can you change the card online or do you need to call up NTN each time to change it?
Yes. You have the option for NTN to remember your credit card information, and I just never check that little box. So next time it wants an all new credit card.
They also send you a receipt via email in PDF form, which you can save for your records. Its a good service
Great, that is exactly what I’m looking for–I’m actually already registered with them for the “scored” reports, but not for the credit reports. I guess I will make contact with them again and arrange for the person to come inspect my home office so that I can be approved for the credit reports.
You can check with your city and county police depts to see how to do background checks on them. I expect all my tenants to have garbage credit so I get more out of just verifying current income and doing the background checks thru the police.
^ Justin, most of mine have so-so credit as well, but I like the credit reports because it reports their previous addresses so I can see if they are lying, and also I like to see if they owe money to other landlords or apartment complexes.
One other question–what about using things that I also use for my personal house/life and also use for rentals. For example I use my personal cell phone number when screening tenants and I have a portable alarm system that I use either at my own house or at a rental when the rental is vacant. The bills for both of these items are in my personal name. (If it matters, I don’t claim either as tax deductions since I also use them for non-business uses. )
Is this something I have to worry about in terms of the corporate veil? I’m not sure how I would be able to quantify my usage and submit an expense report for these type of things (especially for the alarm).
I’m usually a little more agressive than some tax pros on here (Dave being one) and I think that if you use your cell phone and alarm system for the business, you should deduct it.
My cell phone is on my business cards and letterhead. It’s a business phone. The fact that I make and receive some personal calls on it is irrelevant. It is the sole telephonic means that my clients can use to communicate with me. So I don’t get into the whole “allocation” thing. It’s a business expense.
Dave would probably tell you to let the company reimburse you 50% or whatever %age is appropriate. Same with the alarm service: let the company reimburse you for whatever months you have it installed at a rental.
What will get you into trouble with comingling is using company funds to pay personal bills (house payment, utilities, car payment, etc). If you need money, have the company write you a check that you deposit into your personal account to pay your personal bills. Likewise, if you spend personal money on company expenses, submit an expense report and get reimbursed. Don’t just write a company check to the personal credit card company and “call it even.” Keep good records and treat the company money like it’s not “yours.” Business is business and everything else is something else.