Hire Employees for out of State Property Management in Texas?

[Scott Novak]

Greetings! I am a California beginning investor/developer building a portfolio of quarter to 3 quarter acre plots to lease to renters for placing their own mobile homes (I call it a distributed mobile home park) in a Texas rural neighborhood. I have partners in Texas that I am paying to manage contracts for development, and it is convenient that they live in this neighborhood. Unfortunately we realized they cannot be property managers without becoming real estate brokers, which would take four years.

The only other option seems to be that Texas law states I can make them W2 employees and then they can do management activities on my behalf. 

"A real estate license is not required for an individual employed by a business entity for the purpose of buying, selling, or leasing real property for the entity. An entity is considered to be an owner if it holds record title to the property or has an equitable title or right acquired by contract with the record title holder. An individual employed by a business entity means a person employed and directly compensated by the business entity. An independent contractor is not an employee".

https://www.trec.texas.gov/agency-information/rules-and-laws/trec-rules#top

Do you see this as a good option to stay on the right side of the law while having them undertake property management activities, or do you see big pitfalls here? Do I have any other options such as giving them a small ownership interest? I don't have an LLC.

Thanks for your thoughts!

-Scott Novak

[Greg H.]

In Texas, your are not required to be licensed if you are an owner or part of the ownership group

However, if you are not an owner and are compensated for collecting rents and renting properties you must be licensed. The exception is for onsite managers such as at an apartment complex