When property management becomes a business

Property management can be treated as a real business for tax purposes if certain conditions are met simultaneously:

• There is a market presence.
• At least one full-time position is dedicated to management, whether employed or outsourced.
• Rental income is at least twenty times higher than the usual management costs.

This is why someone who manages real estate on a large scale “slips” possibly from the category of “private individual with assets” to the category of “business” for tax purposes.

It does not matter whether the management is done internally or externally. Many landlords outsource such tasks to specialized management companies; this makes economic sense and does not change the fact that the rental is considered a business.

It is therefore important to note that a real estate company does not have to take on the management itself to be classified as a business. It is sufficient for someone, whether an employee or an external party, to carry out the management. The decisive factors are the rental income and market presence, not whether employees are directly employed by the company.