Getting a license to be a Property Manager?

Question

I had a relative ask me for help in renting out a few of her places. I tried giving her some advice and told her to get a property manager. Later I figured since I manage all my own properties I would manage hers also. Things were going well and a couple other friends wanted me to manage their properties. I didn't mean to start a business but it is growing into one so I am now forming an LLC for it. I'm thinking about also taking the class and test to get my realtor's license. I'm looking for any advise as to if it would be worth it or not. I'm not sure if I would have to work or be affiliated with a broker in order to use or keep the license or if there is much work to maintain the license such as annual fees, classes, affiliations with a broker etc.? Any advice is appreciated. Thanks in advance.

Dawn Brenengen · Answer

Yes, you should get a license, because it is illegal to rent homes for other people without a license.

Not sure about MI, but in NC, yes you would have to work under a broker.  There are continuing ed classes each year, you have to be affiliated with the Board of Realtors to gain MLS access.  It's likely the same in MI

Richard Ball · Answer

@Troy Young technically it is illegal to rent out other peoples houses for money but I've never heard of anyone being arrested for it. I took the class and passed the test a month or so ago. They were both easy just time consuming, you can do the test online or you can get a Groupon to take the class for like 100, I think they have classes some where on Hall Rd. The closest testing center is in Southfield though. You also have to renew your license every 3 years which costs money and you have to keep up with training which is like 18 hours every 3 years and I am sure that costs money. I went and talked with a bunch of brokers the last couple weeks and I can tell you there are costs associated with it. They all want you to join there local realtor group which costs money, the MLS costs money and most require you to be a part of 2 some 3. If you were going to become a Realtor to manage properties legally you would probably want to look into selling at least a couple houses a year to make up the costs associated with being licensed. Hope that helps, if you have any questions let me know.

Kirk R. · Answer

i just have not heard realtors going after unlicensed pm.   i have heard of them going after people for trying to sell other peoples property.

but i guess realtors really probably dont have to cause all it takes is 1 disgruntled tenant or 1 disgruntled property owner on the pm side.

Fred Heller · Answer

@Kirk R.Oh it definitely happens. Here in Texas unlicensed brokerage activity would subject you to serious financial penalties, to the tune of thousands of dollars per day of activity.

We probably have the strictest real estate law, education, and licensing requirements in the country, and the Texas Real Estate Commission is not shy about going after violators. In their monthly newsletter there is a page or two dedicated to "administrative actions" against violators of the real estate act. I've seen five-figure fines for things like operating under a DBA that hasn't been properly registered with TREC. For more egregious matters, they'll suspend or revoke your license. Operating without a license would definitely be at the top of their list.And, by the way, the license application specifically asks if you've ever practiced real estate without a license in this or any other state. If you have, and you answer truthfully, there's a good chance they won't approve your license, or give you a probationary one.

All it takes is a complaint from one disgruntled tenant or to have a competitor tip off the commission that you don't have a license, and you would find yourself in a very uncomfortable spot.

Kirk R. · Answer

@Fred Heller i agree you need a license.

i have never heard of anyone getting fined/ incarcerated for it though

Fred Heller · Answer

I'm sorry for the bluntness, but you need to extricate yourself from this situation yesterday. Most states require a real estate license for property managers, and someone who acts as a property manager without one can find themselves in a world of hurt.

Morry Eghbal · Answer

@Troy Young That is what happens when you do a fine good job for others. Never the less looking at all the posts, you know you need to have a license.

Mark Updegraff · Answer

If you're going to do it and have it become a business you want to get your broker's license.  To do that in NYS you need 2 years experience as REALTOR or equivalent points. Once you go through all that you can get your broker's license for your PM co LLC.

The work around for you now would be to deposit the monies directly into the owner's account.  Consult with attorney obviously as I'm not one nor do I live in your state.  That is what I did while I was in the process of getting my broker's license.

A PM company has lots of overhead.  I'll echo what has been said on podcasts and on the forum.  It takes a lot of units until the PM company gets to break even.  Think hundreds of units.  I have two women full time on payroll and I keep them very busy.  At 10% fee and payroll of say 50k you need to be grossing 500,000 in rental income.  At 1000 per unit that is 500 units.  Ouch!

Troy Young · Answer

Thanks for the wisdom and advice.

Jay Phillips · Answer

A lot of agencies will not allow you to hang your license with them for property management.   Make sure you're clear about what you want to do when you talk to some brokerages.  I'm guessing you'll fare better with smaller agencies especially ones where the broker is managing properties themselves.  The agency I hang my license with prohibits it.  The E&O insurance they carry doesn't cover PM activities.

Getting a license to be a Property Manager?

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