Hey all,
I was recently presented an opportunity to manage 2 buildings totaling 18 units in a somewhat nearby city. I do not have any direct property management experience, but do manage a long distance rental of my own, and have considered doing it on a larger level in the past. It looks like in almost all states a broker’s license is required to be a property manager (or at least have a real estate license and under a broker). I was also told that I could simply be an employee of the property owners, and paid as such to manage the properties. Can anyone further direct what is acceptable in most states and whether or not this is something I can/should pursue. Thanks.
These laws vary greatly by state, so what is legal in one state may not be legal in another.
Texas is quite like you described…to manage other people’s properties you must be a licensed agent or broker. However there are exemptions…if you own the property, if your company owns it - even if your share is 0.00001% of the company, or if you are a direct employee of a company - you can do it. There are a few other exemptions too.
Normally there are certain rules and laws that may or may not applicable from other states.
Some states require property managers and/or property management companies to be licensed real estate brokers or that they be licensed real estate salespersons working with licensed real estate brokers because it help to be more properly represented.
Ok, so if I become a licensed agent can I manage the properties myself, or do I have to turn them over to the broker? I live in CT, if any of you know state specific rules. I was told I should contact the Dept. of Consumer Protection for more information, I left a message with somebody but am not confident that I reached the right person or department. Any more thoughts or information is greatly appreciated :rolleyes
You need to tell which state. I am allowed to do what you are proposing in Kansas (and am doing that), but not in Missouri. I just don’t operate across state lines.
If you don’t want to get your real estate license, you can secure equitable interest in the property through either a master performance lease (or performance master lease) or a master lease/option. Better yet, a performance master lease/option. This makes you a principal party with the same, effective rights as the owner. However, you do not ‘pay rent’ you don’t collect. What you do collect, less your fees, is forwarded to the owner just like a standard management agreement.
The bottom line, you must be a principal party with an equitable interest in the property in order to legally manage property you do not have title to.
The risk of managing without a broker’s license is mostly to the owner, not you. Normally a ‘licensed’ manager maintains a bond in order to hold/handle money on behalf of the owner. However, with a master lease, you have rights to handle, collect (and keep) the rental income per the terms of the master lease without a bond.
With a master lease (or ownership) you also have legal standing in court to pursue an eviction, etc. Otherwise, without that legal standing, you would need to hope a deadbeat renter doesn’t know better and explain …to the judge …how you’re not the owner, and not a ‘real’ manager, and are just playing one in court…!
Meantime, a master lease (with a performance clause limiting your liability to only forwarding collected rent) solves the representation and bonding issues/problems.
All you need to do is become a employee and they can assign you to manage all their properties.
As a practical matter, what owner is prepared to set up an investor/buyer as an employee and start paying social security, unemployment, and state taxes, if not federal taxes, just so the buyer/investor doesn’t have to get a real estate license to manage his property?
This would make little sense, unless this was an absentee owner of something in the sticks with no local, professional management options.
Have you ever done this?
Great info. The current owners I know quite well, but now that you mention it javipa, I doubt they want to go through the expenses and hassle so that I can get around my brokers license. Since you seem to have a pretty good sense of the matter, if I were to get my realtor’s license, and hold my license with a local real estate company/broker, can I manage those properties separate of the real estate company? Again, I am referring to CT law.
That’s a good question. I have no idea about your state. However, some states require a property management certificate along with the real estate license… And then you need to be bonded for something like five or ten thousand dollars (or more).
Frankly, if you’re just doing one property…I would not mess with the license. Just master lease the property and include a performance clause. This way, you’re covered. However, if you’re going to make this into a business… you need to round out the legal-ness and get licensed and bonded.
That said, I know a man that owns and operates a management company under the license of a silent partner/broker. The broker does no work, but provides a shingle for the managing partner to operate under. The reason of course is that the managing partner doesn’t want extra government interference in his investing business.
I personally agree that having certificate or license in real estate will help you get qualified on property managing with experience of course. Laws regarding it may vary or differ depending on which state are living (check your state law/rules about it to make sure), for sure it will require you a license or certificate.