Property Managment without a broker or license

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Property Managment without a broker or license

Casey Gregersen
Rental Property Investor · Houston, TX · Member since 2016 · 20 posts · 5 votes

We have 11 units in #DFW and hoping to start to do Property Management for other investors in the area to help supplement our cashflow and scale our business.  Does anyone know of any legal work-arounds we can do this without being an agent or licensed broker?    

Would it be best to speak with a broker and ask if he will take a small cut to allow us operate under him even though I don't have my license?   

Do I first have to half my real estate license no matter what?

Do I network with another agent, and ask to run this all through them at a small fee?

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Greg H.Pro Member
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Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
7y

@Casey Gregersen

You have to be licensed to work under a Broker

In reality, very few brokers are going to allow an agent under them to do property management as the broker is responsible for the actions of their agent. Property Management is the biggest source of lawsuits in the real estate business. As a broker, I would not consider it for a second 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Karen Rittenhouse:

    @Costin I. I'm not sure if you need to be a BIC or simply an agent. Check with your local Realtor's Association and/or real estate attorney. It may also vary from state to state.

    the state statues are all on line this is so easy to find.. All an attorney is going to do is charge you to access the same information that is free..  and when it relates to licensed activities in real estate the laws are pretty clear they are not muddled.. it either will say you need a license to manage for others or its exempt.. one or the other.. :)  Realtor associations don't give legal advice .. you could talk to a long time broker they will know.  Just like the long time brokers who have responded here.. this is not a grey area its cut and dry and common knowledge.  now our state Oregon  if your a licensed agent we do have a free legal hot line were we can ask questions.. its a great service. but not open to the public you need to be a member of the board and in good standing.    

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Laura Sulak:

    Hi, @Casey Gregersen, you really did start something here! While your question is a great one, and quite valid, it really should be answered by someone from your state who has actual expertise in this subject. 

    And while it’s a good idea to ask a question here on BP, it’s best to do your homework first. A quick Google search will give you results like this, from the Texas Real Estate Commisson, specifically about property management in Texas: https://www.trec.texas.gov/taxonomy/faq-category/property-management

    ANY type of real estate investing (property management, buy and hold, flipping, wholesaling, notes...you get the picture) requires the investor to do lots and lots of research before making a decision. Sounds like that’s where you are with this next step. 

    I can only speak for myself, but I would never risk losing my professional status and any of those 11 units just to take a shortcut and bypass the legal system. 

    Wishing you the best of luck as you delve into this new venture! Please keep us posted as to how you decide to proceed. 

    there you go … question answered … and every state you can access the statues in the same manner..  

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  • Wendy Schultz
    Property Manager · Wisconsin and Florida · Member since 2017 · 346 posts · 227 votes
    7y
    Originally posted by @Mike V.:
    How does Airbnb get around these rules by offering co hosts? Does a co host not qualify as a property manager? If not, what activities are where the line is drawn? Collecting money? Coordinating with staff on behalf of the owner?

    I’ve always wondered where that line is drawn and I’ve assumed a company as large as Airbnb wouldn’t be breaking such an obvious law.

    Vacation property managers often don't need a license. It is my understanding that the line is drawn in the signing of a lease. Short term properties don't sign leases which is the point at which a broker's license is required. 

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  • Mike V.
    Rental Property Investor · Campbell, CA · Member since 2017 · 419 posts · 499 votes
    7y

    @Wendy Schultz, I very much hope you're correct but everything i've read this far points to the contrary. At least in my market, Kauai.  

    A real estate broker's license is required for any person or company that, for compensation, rents, or offers, attempts or agrees to the rental of any real property or who advertises or holds out to the public by any oral or printed solicitation or representation that she or her is engaged in the business of leasing or renting business enterprises or business opportunities or the real property of another, or leases, or who directs or assisting in the procuring of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a leasing of real property; and all persons who advertise rental property information or lists.

    http://cca.hawaii.gov/rico/files/2014/03/MARCH-201...

    You would be my new absolute best friend if you can show me something that contradicts this.   I've searched endlessly for their short term laws regarding this and this has been the best im able to find.

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  • Wendy Schultz
    Property Manager · Wisconsin and Florida · Member since 2017 · 346 posts · 227 votes
    7y

    @Mike V.

    Are there any exceptions to the requirement that a Wisconsin property manager hold a real estate broker's license?

    YES. For example, any custodian, janitor, employee or agent of the owner or manager of a residential building who exhibits a residential unit therein to prospective tenants, accepts applications for leases and furnishes such prospective tenants with information relative to the rental of such unit, terms and conditions of leases required by the owner or manager, and similar information, is exempt. 

    This is Wisconsin but HI may be different. I have understood this through talking with the state, that if you are an agent of the owner giving information to potential guests using  the owners rules and rates, then you are exempt. It's pretty gray for sure. 

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  • Mike V.
    Rental Property Investor · Campbell, CA · Member since 2017 · 419 posts · 499 votes
    7y

    @Wendy Schultz, Kauai has the same basic rule:

    Property owners have some options when renting or leasing their property in Hawaii: Self-manage the property Employ a custodian or caretaker, or Hire a licensed real estate professional.

    The only applicable portion to answer this question is this:

    Employ a Custodian or Caretaker As an alternative, a property owner can hire a custodian or caretaker to manage or care for his/her property(ies). A “custodian” or “caretaker” doesn’t need a real estate license, but must be employed by the owner, and can only work as a custodian or caretaker for a single owner. A custodian or caretaker can act as your on-island agent and/or the local contact, if one is required.

    The 'single owner' portion kills this as a viable option for scale.  

    I like the way you've worded it though...  an agent of the owner giving information...  

    In WI are you able to collect a fee or commission for these activities?

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  • Wendy Schultz
    Property Manager · Wisconsin and Florida · Member since 2017 · 346 posts · 227 votes
    7y

    Yes, single owner kills that for you. In Wisconsin, vacation rentals are treated more as hotels than as rentals. It's transient lodging defined as less than 30 day stays and they call them tourist rooming houses. Your best bet is to consult with an attorney. It's confusing for sure.

    Just found this same exception for CA too:  11. Anyone who solicits, arranges, or accepts reservations or money for transient occupancies (i.e. rentals of less than 30 days). (B & P § 10131.01(a)(2).)

    https://www.kts-law.com/property-management-company-licensing-in-california-2/

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Mike V.:

    @Wendy Schultz, I very much hope you're correct but everything i've read this far points to the contrary. At least in my market, Kauai.  

    A real estate broker's license is required for any person or company that, for compensation, rents, or offers, attempts or agrees to the rental of any real property or who advertises or holds out to the public by any oral or printed solicitation or representation that she or her is engaged in the business of leasing or renting business enterprises or business opportunities or the real property of another, or leases, or who directs or assisting in the procuring of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a leasing of real property; and all persons who advertise rental property information or lists.

    http://cca.hawaii.gov/rico/files/2014/03/MARCH-201...

    You would be my new absolute best friend if you can show me something that contradicts this.   I've searched endlessly for their short term laws regarding this and this has been the best im able to find.

    there is a lot of short term rentals on the ORegon coast.. ( tad colder than Kauai  :)  )  and all of those i can think of are handled by brokers so not sure in this state but yes i am sure state specific.

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Casey Gregersen:

    Thanks everyone for all the info.  Wow hot topic.  @Mark Fries I think you might be onto something there.  I'm guessing I would need to talk to a lawyer on that one.  Wondering what everyone else thinks about that work around?

    So if I go broker route, I would need to get my license, see if my broker would support me.  If not wait, what is it, 2 years to become a broker and do it on my own?

     Wow...The internet can be a dangerous place. 

    Fellas c'mon now. Ask yourselves if there was a legal way to do what you want without a license why is a license required at all?

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Greg H.:

    @Casey Gregersen

    You have to be licensed to work under a Broker

    In reality, very few brokers are going to allow an agent under them to do property management as the broker is responsible for the actions of their agent. Property Management is the biggest source of lawsuits in the real estate business. As a broker, I would not consider it for a second 

     I 2nd this. An owner/broker would have to be missing a few screws to consider allowing an agent to run a property management business under their umbrella. 

    That said it's not impossible. I had a broker let me start my property management business under his ERA umbrella back in 2013. He had originally said no due to the immense amount of risk involved. I then shopped another 10-15 brokerages before I found another taker. I gave notice to the 1st Broker given that I was already producing a nice chunk of sales income for him already he didn't want me to leave his brokerage & he changed his mind.

    At the end of the day it wasnt enough money for either of us. Margins are too thin to split that many ways. As soon as I was legally able to sit for the broker exam I did so & immediately opened up my own shop.

    2Reply
  • Fred Krauss
    Member since 2018 · 14 posts · 7 votes
    7y
    @Casey Gregersen You could have owner of property sign a document giving you power of attorney to allow you to manage the property.
    1Reply
  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    7y
    @Benjamin Zwiebel, property management in Wyoming requires either a realtors license or a law license. Same for wholesaling. I looked it up. I was also surprised as I was not aware of that.
    1Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Fred Krauss @Casey Gregersen You are exactly right. You could also have a joint bank account shared with the owner used just for this purpose. Say an owner has 30 units and wants your help, you could collect the rents etc. Since the account is joint and you have a power of attorney, this would work. Is it in the gray area, sure, but it would work.
    0Reply
  • Jerel Ehlert
    Attorney · Austin, TX · Member since 2014 · 888 posts · 759 votes
    7y

    @Fred Krauss & @Mark Fries, nice try but no cigar.  Check your local statutes.  In TX (where the original question concerned) the Texas Real Estate Licensing Act (TRELA) defines what activities require licensing.  If you do these listed activities for another, you are acting as a broker.  It will not matter if you have a PoA and/or joint account (a bad idea btw - each signor is joint and severally responsible for all overdraw fees).

    To answer the question re: brokers & agents.  Only brokers are licensed to do these acts.  Agents must work under the direction and supervision of a broker who holds the agent's license.  Agents cannot be licensed without a broker sponsorship.  The sponsoring broker is liable for the acts of their agents.  If an agent quits a broker, there are some other brokers who will "hold" the license and allow the agent to "park" it with their office until they find another broker they want to be the agent's sponsor.

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  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Jerel Ehlert @fred Krauss I think there's definitely a way to make it happen and I wouldn't want fear to stand in anybody's way. Structured correctly I don't think there would be any legal issues. I knew from my original post that all of the licensed property managers and brokers we're going to try to cry foul about my idea. This is what happened when Airbnb first started also...everyone cried foul... they found a way to make it work...
    1Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    7y
    Originally posted by @Mark Fries:
    @Fred Krauss @Casey Gregersen

    You are exactly right. You could also have a joint bank account shared with the owner used just for this purpose. Say an owner has 30 units and wants your help, you could collect the rents etc.

    Since the account is joint and you have a power of attorney, this would work.

    Is it in the gray area, sure, but it would work.

     That is your suggestion ?  Have a joint account with someone

    So, when they get sued your money is at stake

    So, if the decide to take all the money, there is nothing you can do as they are on the account so it is their money

    And on and on and on.  What is one person on the account dies ?  Oops tied up in the estate

    You keep saying, "I know the Brokers and such won't like this".  I am a Broker and have ZERO make that less than ZERO interest in doing property management so I have no dog in the fight.  My concern here is having someone be in violation of the law, have no insurance to protect them or their "client", all while having their funds and their "clients" funds at risk

    2Reply
  • Tim Thornton
    Colorado Springs and surrounding areas · Member since 2017 · 33 posts · 30 votes
    7y

    I’m surprised no one has mentioned master leasing. Look into the course David Tilney offers once in a while. He’s the real deal. No guru stuff or mentor upsell. Just tons of great information. 

    Become a student of your states landlord/tenant law and operate totally legally. The risks of doing something in a legal grey area outweighs the reward.

    0Reply
  • Stanley Bronstein
    Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes
    7y

    @Mark Fries @Fred Krauss @Casey Gregersen

    Tough love time here.

    I'm going to share some excellent advice I received from my favorite law school professor many years ago.

    He said don't spend your energy trying to skirt the laws.

    He said: Learn what the laws are and then figure out the best and easiest way to comply with them and to use them to your advantage.

    I think that applies here.

    If you need a real estate license, then go get one.

    End of story.

    5Reply
  • Daniel Campbell
    Lender · Detroit, MI · Member since 2017 · 36 posts · 30 votes
    7y
    @Casey Gregersen I’m running into this issue as well. There are a few things to note: 1) If a broker agrees to let you work under his license, you can’t just go start another management company. Only one license per company. So, the broker will have to pull a second license for you to work under your own management company. 2) If you own the property, you don’t need anything official to manage it. So, I set up my whole business plan to own a portion of every single house I manage. Investors bring money, I bring the deals, and we split it 65/35 to the investor. Now I chose option 2 because I do a lot of wholesaling and being an agent/broker pulls me out of the grey area and into a place where what I do is illegal. Period. Anyway, I’m not a lawyer, so at the end of the day, go spend the money now to not get sued for it later.
    0Reply
  • Eric Nurmi
    Specialist · IL · Member since 2018 · 47 posts · 42 votes
    7y
    @Casey Gregersen You can hold licenses in multiple states. I had a friend who owned the brokerage and only had his agent license. He did this by hiring a managing broker to run the office. Each state has their own regulations, but they are fairly similar within each state. Some states have reciprocal agreements where you don’t have to go through the licensing classes If you are lIcensed In a state they recognize, but just take the test and pay the free.
    0Reply
  • Irina Belkofer
    Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
    7y

    I think, people are confused when talking about being agent and hiring a broker.

    Agent works for a broker and all the contracts made between that broker and the client, not agent and client.

    When agent is leaving a brokerage, he doesn't take listings with him - they belong to his broker.

    Same with property management: the broker is responsible for all misconduct of the agent - it's broker escrow account has to comply with requirements of the State, not agent's......agents don't have the escrow account to keep the security deposits of Tenants.

    It's broker who get audited, and put his license on the line even if he totally unaware what his agent is doing.

    More of that, personal listings of the broker's agents must comply with all the laws which agents might be not aware of because they just work with clients and not with controlling instances.

    You can do whatever you feel like doing until someone complains - and Tenants or/and owners do it - to Division of RE. That's how you get all the fines and some jail time. Not knowing what you are doing won't make you less liable for your actions.

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  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    7y

    @Mark Frieslet me put this in plain language.  It is illegal to manage property in my state and most others for money without a license.  The most common exception is if you are employee of the owner or the owner.  Your advice is dead wrong and dangerous.  You can get a power of attorney, but it is still illegal.  I prosecute people for a living.  They would be convicted in my state and face jail and fines.  If you really have a basis in knowledge or fact I would love to discuss or debate this.

    2Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Jerry W. I'm going to stand by my advice. Which was that it could simply be rebranded as possibly a "concierge service". Structured completely different than what the legal parameters of a property management company are. My ideas are frightening to most.. because they try to enter new territory, maybe trailblaze a new concept, and I definitely anticipate feedback like this, which I compare to fear mongering and I don't want anybody to be held back because of a possible new idea. Rambling about prosecution means nothing to me, that's what defense attorneys are for... I promote entrepreneurship and new ideas, Even if they get negative feedback.
    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jerry W.:
    @Benjamin Zwiebel, property management in Wyoming requires either a realtors license or a law license. Same for wholesaling. I looked it up. I was also surprised as I was not aware of that.

    ya the ole wholesaling debate..  I asked my state to weigh in on the subject of wholesaling in Oregon .. basically duplicating exactly what a licensed agent does.. another words bring two people together for compensation..  advertise in public medians send out blast e mail etc etc.. So I sent a sample of one e mail i got from a wholesaler to the state and asked them to make a determination .. they have investigated and they will give me the results of their findings and I suspect a ruling on if in Oregon you can market property before you own it as a business scheme.  We all know the equitable interest theories the wholesalers hang their hat on.. and i get that but if your whole business scheme is to simply skirt the license  laws.. I am thinking that is not a viable business model and not legal. and probably not legal in any state like you found out in Wyoming..  Just depends on what states want to enforce the laws.

    However property management is quite a bit different. If we think about it.. the Broker is collecting in many cases hundreds of thousands of dollars in deposits and rents.. and why they need a trust account and why that trust account can be audited by the real estate commission at anytime.. there is huge money flowing through those companies and there needs to be over sight.. Without it BP would be flooded with Hey my non licensed PM wont answer the calls and my 6 months of rent are gone.

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  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Jay Hinrichs Thank you for your feedback Jay....always appreciated
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