Frequently Asked Questions
Clear answers to common questions about LLCs, real estate investing, property management, and how we operate.
The questions below reflect real questions we receive about LLC structures, real estate investing, and property management. These are common topics for anyone building a portfolio or organizing a family's business interests — whether you are just getting started or refining an existing structure.
About LLCs and Entity Structure
What is an LLC and why do real estate investors use them?
An LLC, or limited liability company, is a legal business structure that provides its owners (called members) with personal liability protection while offering flexible tax treatment. Real estate investors use LLCs because they separate the investor's personal assets from the risks associated with property ownership — if a tenant is injured at a property held inside an LLC, the investor's personal savings, home, and other assets are generally protected.
Why does Succession Holding LLC exist as a holding company?
Succession Holding LLC serves as the centralized entity for all real estate investments and subsidiary management. By consolidating real estate ownership under one holding company, it becomes easier to manage the portfolio consistently, bring in future partners or family members, and keep the real estate strategy organized separately from operating businesses.
What is the difference between a holding company and an operating company?
A holding company's primary purpose is to own other entities or assets — it holds the ownership stakes in operating companies, properties, or other investments. An operating company actively conducts business — providing services, producing goods, or generating revenue through operations. Succession Holding LLC holds real estate assets and ownership stakes; a company like Bacotti Inc. handles management and operating activities.
Why does each rental property have its own LLC instead of all properties in one?
Separating each property (or small group of properties) into its own LLC creates a firewall for liability. If a catastrophic event occurs at one property — a major lawsuit, a structural failure, an environmental issue — it is contained within that property's LLC. Without this separation, a loss at one property could threaten the equity in the entire portfolio. The holding company above these individual LLCs provides centralized management without exposing all assets to a single point of failure.
What are the tax advantages of owning real estate in an LLC?
LLCs are typically taxed as partnerships, meaning the entity itself does not pay income tax. Instead, profits and losses flow through to members' personal tax returns, avoiding the double taxation that corporations face. Additionally, real estate LLCs benefit from depreciation deductions on the building structure, which can significantly reduce taxable income from the property — even in years when the property is generating positive cash flow.
About Real Estate Investing
What is depreciation and why does it matter for real estate investors?
Depreciation is an IRS-permitted deduction that allows property owners to recover the cost of a building over its useful life — 27.5 years for residential rental property. The IRS treats the building as having a finite life and being consumed over time, even though the property may actually appreciate. This non-cash expense reduces taxable income without requiring an actual cash outlay, making it one of the most valuable tax advantages in real estate investing.
What is the most important thing to look for when buying a rental property?
Location is the most repeated — and still the most accurate — principle in real estate. A property in a desirable location with strong tenant demand, good schools, stable employment, and limited new construction will tend to hold its value and maintain rental income over time, even if it requires more upfront capital. The best deal that is in the wrong location is still the wrong investment.
What does geographic diversification mean in real estate?
Geographic diversification means owning properties in different regions, climates, and economic environments so that a downturn in any single market does not devastate your entire portfolio. Different areas have different economic drivers, housing supply constraints, and demographic trends. A property in Alaska and a property in the Southwest are unlikely to be affected by the same forces at the same time — and that independence is the value of diversification.
About Property Management
How do you manage a rental property from a distance?
Long-distance property management relies on a combination of professional property management and technology. A licensed property manager handles tenant screening, rent collection, maintenance requests, legal compliance, and routine inspections. Owner portals provide real-time financial visibility. The key is choosing a manager with local market expertise, clear communication protocols, and a documented process — because you cannot fix problems in person when they arise.
How do you screen tenants to reduce the risk of problems?
Comprehensive tenant screening includes a credit report to check for prior evictions or payment problems, a criminal background check, verification of employment and income, and direct contact with prior landlords. The most important guideline: rent should not exceed 30% of gross monthly income, and the prospective tenant should have a clean rental history. Never skip screening steps to fill a vacancy quickly — a bad tenant is almost always more expensive than a short vacancy.
What should be in a rental property lease agreement?
A thorough lease agreement should specify the monthly rent amount and due date, the security deposit amount and conditions for its return, tenant responsibilities for utilities and maintenance, landlord's right of entry conditions, occupancy limits, pet policies, rules about alterations or subletting, lease renewal and termination conditions, and procedures for reporting maintenance issues. A well-written lease prevents most landlord-tenant disputes by setting clear expectations upfront. Local landlord-tenant law varies significantly by state and city, so lease templates should be reviewed by a real estate attorney familiar with the local jurisdiction.
How much should you set aside each year for property maintenance?
A commonly cited guideline is 1–2% of the property's current value annually for maintenance and repairs. A $250,000 property would therefore budget $2,500–$5,000 per year. In practice, some years will have minimal expenses and others may require a major repair that consumes two or three years of contributions to the reserve fund. The key is consistency: building the reserve regularly so that large, unexpected repairs do not create a cash flow crisis.
Have More Questions?
We are happy to answer general questions about our investment approach, entity structure, or the properties in our portfolio. Reach out through our Contact page. You can also explore our Real Estate Education and Property Management Guide for more detailed content on these topics.
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