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Comment by _delirium | Hacker News Reader

> most rental real estate are tiny, unprofessional operations

The proportion of rental units owned by individuals used to be a large majority, but has been falling and recently dipped under 50%. As of the 2018 Rental Housing Finance Survey [1], there were 48 million rental units in the United States, with ownership breaking down as:

   41% individual
   37% LLP, LP, or LLC
    3% real estate corporation
    3% nonprofit organization
    2% general partnership
    2% trustee for estate
    2% real estate investment trust (REIT)
   10% other or unreported

The number DIY managed by the owner or owner's family/associates is similarly down, to 42%, with 54% of units now professionally managed (4% other/unknown).

I don't have numbers, but I'd imagine it looks even more skewed in the direction of professional landlords if you looked at major cities.

[1] https://www.census.gov/programs-surveys/rhfs.html

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> 41% individual

> 37% LLP, LP, or LLC

All of the individual real estate investors I know wrap their rental properties in an LLC. It's trivially easy to set up and manage an LLC these days.

Unless those numbers are somehow separating out individual LLCs, I would assume a lot of those LLCs are owned by singular individuals.

Many properties owned by LLCs are actually small-time investors, individuals, and families. LLCs only became a popular/viable way to own real estate in the last couple decades. Now they are the recommended structure for most rental property owners - whether individuals who own 1-5 properties, or huge institutional investors who own thousands.

I would bet that a good chunk of the trend you’re asserting is just small time rental property owners increasingly using LLCs to limit their liability.

The fact that only 42% are now self-managed (54% managed by paid professionals) leads me to believe that the trend is still against the kind of small-time recent immigrant landlords that the post I was replying to claimed to be the typical landlord. I agree some of the LLCs are investment vehicles for individuals, who buy a property, wrap it in an LLC, and pay a management company to rent it out, but that's a bit different (these are just passive investors buying into an asset class managed by professionals). It'd be interesting to know what percentage though. By number of units (vs. number of LLCs) my bet would still be towards most being larger-scale operations.

In fact, as of the time of that report, one of the largest real estate investors in the US, Blackstone Group, was organized as an LP and went in that category (they changed forms to a Corporation in 2019). A few large real-estate investors still organized in the LLC/LP/LLP form are the BH Companies, UBS Realty Investors, Harbor Group International, AEW Capital Management, and Invitation Homes.

> I agree some of the LLCs are investment vehicles for individuals, who buy a property, wrap it in an LLC, and pay a management company to rent it out, but that's a bit different (these are just passive investors buying into an asset class managed by professionals).

No, creating an LLC for your RE business does not require the use of a management service. The exact same individual landlords can own properties through LLC as without; the LLC just grants them some liability protection.

It doesn't require it, no. Nonetheless, the majority of properties are professionally managed, so it is simply false that most landlords are small-time individual owners doing it themselves. If everything under "individual" and "LLC/LC/LP" ownership were small-time individuals doing it themselves as a family business, we'd expect to see closer to 78% of properties be self-managed, not 42%.

The rate of increase of professional management is also pretty high: the 2015 survey had 43% of properties professionally managed, which had risen to 54% by 2018. I'd be willing to bet it's more like 60%+ now as there's been quite a bit of buying into the rental market by large investors.

A lot of small-time individual owners with single properties pay a management company a monthly fee to handle leases, maintenance calls, stuff like that. It saves a lot of headaches. Is that what you're considering "professionally managed"?

>I agree some of the LLCs are investment vehicles for individuals, who buy a property, wrap it in an LLC, and pay a management company to rent it out, but that's a bit different (these are just passive investors buying into an asset class managed by professionals)

None of this is correct. An LLC is just a legal structure you create for a few hundred bucks using a two page document online. They're not 'passive investors buying into an asset class'.... you can still be a mom & pop with an LLC. I'm sure most tiny retail businesses are an LLC too.

I didn't personally see the statistics about professional 'management' on the page that you linked, but that doesn't make one a large-scale investor either. Property management companies usually collect 5-10% of the monthly rent, which is a tiny amount of money, so they're incredibly small scale or shady fly-by-night operations. I suspect you saw a statistic that includes the guy that mows the grass and patches the roof, and thought that was 'professional management'.

I think a better/more focused stat would be to understand how many properties or units each investor owns, rather than continuing to misread this table about an industry you're not familiar with. If you own 1-2 small buildings, you meet my personal definition of 'mom & pop operation'

I suspect many immigrant landlords are renting to people from the same background, doing zero paperwork, and responding to no surveys.

Yes, as the other commenter mentioned, anyone can set up an LLC so that doesn't mean much. The fact that 41% of landlords have the property in their names & not an LLC just shows you how unprofessional and small-time these operations are

With landlords constantly legislated against, I wouldn’t be surprised if large landlords have increased. Only larger ones could navigate the bs rules

My landlord has set up an LLC where he is the only employee.

LLP, LLC, and SP don't necessarily mean it's not individual or small family business, either. For those numbers to be meaningful, you need to distinguish between small business investors and soulless corporate vampires. Using an LLC can be a prudent and wise move for a married couple or family team.

Seems like the net size of a corporation is an indicator of how little we as a society want it involved in our daily lives - the bigger they get, the more effectively they are exploiting a rent seeking niche, in this case literally.

Others have already commented appropriately, but I also wanted to point out that most investors set up separate LLCs for each property to self-contain risk, which could bias the ownership distribution you listed. A single individual may have 3 properties, each with their own LLC.

In Texas you can use a series LLC to separate risk between properties with a single LLC, but it is the only state I know of that offers it (*I may be misremembering based on a BiggerPockets podcast from a couple years ago).

And personally/family managed doesn't imply that a landlord is small. Some people with a considerable amount of property still manage it themselves.

Yup, I know a slumlord who owns 26 apartments just between him and his wife.

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