Becoming a Licensed Property Manager in Pennsylvania

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Becoming a Licensed Property Manager in Pennsylvania

Tim Porsche
Investor · Denver, PA · Member since 2015 · 193 posts · 55 votes

Hi All,

I've been managing my own rental properties (currently have 6 units) for the past 5 years with good success and lately have become interested in managing properties for others as a way to create an additional stream of income. My plan would be to start small (managing 10-20 units) and take on more clients once I get a better feel for the business and see how things are going after a year or so.

 As I understand it, in PA you either need to be a licensed broker to do this, or else have your real estate salesperson license and then work under a broker. My questions are...

1. Is it worthwhile to go through the whole process of becoming a broker just to manage others' properties?

2. If you go the route of getting your real estate agent license and work under a broker, what sort of monthly/annual fees is normal to pay the broker in order to engage in the property management business under them? 

3. If working under a broker, would you be able to set your own rates and policies and run your business as you choose? Or does the broker do all of that while you work more as an employee under them?

4. How much in annual fees would you need to pay as a broker? How much in annual fees if a licensed real estate agent?

Thanks in advance for any feedback!

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Will Fraser
Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
5y

Hi @Tim Porsche, the answers to your base question of "to get a license or not" really comes down to why you want to do any of this and what you want out of it.

If you're wanting to do this on the side as a hobby or a passive income stream then getting a license is going to be an exercise in futility.  As you've begun to see with managing your own units there is a complexity to it that grows un-linearly with growth.  To seek to add revenue streams through managing property makes good sense and it is a great business to be in and be skilled at, but it's not a passive income source, nor is it a good fit as a side-business IMO.

If you want to build a business around management then you'll need to have a broker's license or employ one.  Either way gets it done, but one is less costly than the other.  

Management is ALWAYS done in the name of a broker, so if you don't have a broker's license and have your own shop, then you'd need to be licensed as a sales agent under a broker that will allow you to manage other people's properties for profit.  In my limited experience here, it is less likely this will be the case with franchises than with boutique or local brokerages since the compensation structure of management doesn't port well well the franchises' billing methods.  I'm sure there is additional reasoning for this, but hopefully this gives some good guidance.

So, if you're going to get licensed, go the full nelly and work towards your broker's license.   If you want to manage properties for other people, this is the route to go, just be sure you want it and then go get it!

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  • Will Fraser
    Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
    5y

    Hi @Tim Porsche, the answers to your base question of "to get a license or not" really comes down to why you want to do any of this and what you want out of it.

    If you're wanting to do this on the side as a hobby or a passive income stream then getting a license is going to be an exercise in futility.  As you've begun to see with managing your own units there is a complexity to it that grows un-linearly with growth.  To seek to add revenue streams through managing property makes good sense and it is a great business to be in and be skilled at, but it's not a passive income source, nor is it a good fit as a side-business IMO.

    If you want to build a business around management then you'll need to have a broker's license or employ one.  Either way gets it done, but one is less costly than the other.  

    Management is ALWAYS done in the name of a broker, so if you don't have a broker's license and have your own shop, then you'd need to be licensed as a sales agent under a broker that will allow you to manage other people's properties for profit.  In my limited experience here, it is less likely this will be the case with franchises than with boutique or local brokerages since the compensation structure of management doesn't port well well the franchises' billing methods.  I'm sure there is additional reasoning for this, but hopefully this gives some good guidance.

    So, if you're going to get licensed, go the full nelly and work towards your broker's license.   If you want to manage properties for other people, this is the route to go, just be sure you want it and then go get it!

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    You must have a license and operate under a Broker. After you meet the time/education requirements, you can upgrade to a Broker license and work for yourself.

    There's no set answer regarding the cost of working under a Broker. Some of them will want a flat fee each month, some will ask for a split of your commission, some may ask for both. Some may require you to cover floor time and handle sales while others may allow you to work from home and never set foot in the office. The only way to know is to shop around and see what the Brokers offer.

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  • Greg WeikBusiness Member
    Property Manager · Denver, CO · Member since 2020 · 263 posts · 327 votes
    5y

    I would echo the comments of others on here, but also add that there is no real money in property management unless you're in with both feet and you can scale the operation.  

    It's a completely different world than anything else in real estate.  You have to have a mind for processes, efficiency, systems, and logistics.  If you don't, you will hate property management.  If you do, you will love it.  

    Good luck! 

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  • Tim Porsche
    OP
    Investor · Denver, PA · Member since 2015 · 193 posts · 55 votes
    5y

    @Will Fraser @Nathan Gesner Thanks so much for your feedback! Just to clarify, if I go this route it would be treated as a legitimate business and not a hobby. Ideally I'd like to manage around 100 - 150 units and work 30-40 hours a week doing it. I'm assuming each unit will take about 1 hour per month on average to manage...does this sound about right? That's what I've been seeing with my own rentals thus far. I have a fairly streamlined process and procedures set up for advertising, screening applicants, doing showings, onboarding and offboarding tenants, doing maintenance/repairs, etc. 

    I just have a few follow up questions I'd appreciate your input on...

    1. In your experience, will it be difficult to find a broker to work under as a property manager with a real estate license? Or is signing up to work with one pretty straightforward? I'm completely new to this so am not really sure how that works. 

    2. I know the cost of working on a broker will vary, but on average what should I expect to pay...for instance are we talking 5% of my commission or 50%? What's the norm (if there is one)? 

    3. To get my real estate salesperson license, and then eventually broker license, will I be required to sell any real estate? I read somewhere that you need to have a certain amount of transactions under your belt before you can become a licensed broker...but maybe entering into an agreement to manage a property or set of properties for a landlord qualifies as a transaction?

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  • Jim HoganPro Member
    Investor · Malvern, PA · Member since 2014 · 108 posts · 42 votes
    5y

    @Tim Porsche

    Do you have a realtor that you normally work with? If you do talk to your realtor on what he pays yearly to his broker. Tell the realtor your plan and that you would like to talk to their broker. After that talk to other local brokers and tell them what you would like to do and find out their fees. Basically go out and interview several brokers. Most will talk to you because they want to grow their business. A few may not want to get into the property management side of real estate.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y
    Originally posted by @Tim Porsche:

    @Will Fraser @Nathan Gesner Thanks so much for your feedback! Just to clarify, if I go this route it would be treated as a legitimate business and not a hobby. Ideally I'd like to manage around 100 - 150 units and work 30-40 hours a week doing it. I'm assuming each unit will take about 1 hour per month on average to manage...does this sound about right? That's what I've been seeing with my own rentals thus far. I have a fairly streamlined process and procedures set up for advertising, screening applicants, doing showings, onboarding and offboarding tenants, doing maintenance/repairs, etc. 

    I just have a few follow up questions I'd appreciate your input on...

    1. In your experience, will it be difficult to find a broker to work under as a property manager with a real estate license? Or is signing up to work with one pretty straightforward? I'm completely new to this so am not really sure how that works. 

    2. I know the cost of working on a broker will vary, but on average what should I expect to pay...for instance are we talking 5% of my commission or 50%? What's the norm (if there is one)? 

    3. To get my real estate salesperson license, and then eventually broker license, will I be required to sell any real estate? I read somewhere that you need to have a certain amount of transactions under your belt before you can become a licensed broker...but maybe entering into an agreement to manage a property or set of properties for a landlord qualifies as a transaction?

     The amount of time required depends on the quality of units and renters. I spend more time on 60 low-income apartments than I do on 150 single-family homes. That said, you can expect to work at least 40 hours a week to manage 100 homes. By the time I reached 150, I had my wife helping about ten hours a week with bookkeeping and I had a full-time office assistant. If you want to work alone, you should probably stay under 100 units. Once you get over, you'll probably need employees and that starts increasing overhead. I made more profit with 150 units than I did with 300. Now I'm at 400 and making a killing.

    Upgrading to a Broker license usually requires a certain number of years and a certain amount of education. It doesn't require you to sell a certain amount of properties. In my state, I could go two years without selling a single thing and still upgrade to a Broker license.

    it's harder to find a Broker that will take on Property Management, but it still shouldn't be a problem. Some of them understand the value and will be happy to work with you. Others will cry about liability or the quality of renters walking in the office (seriously).

    As for commission, the splits range from 50/50 to 100% with flat fees. You'll just have to shop around. I would plan to give away at least 30% of your commission. They may ask for more because you will be in the office every day using space and resources more than a typical agent.

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