Wheaton, IL · Member since 2012 · 55 posts · 2 votes
First Question: As an agent that wants to start a property management company, what is the usual split between the broker and agent, assuming the agent is doing the work and has more or less started the company with the broker's assistance?
Second Question: Theoretically is it possible to become a realtor and then market buy-hold properties to out-of-the-area investors and then, in turn, manage their properties? The rural town I live in has numerous investment property opportunities with alot of properties going for 20,000 to 60,000 that rent for 400-700 dollars a month. Investors would be interested in this, I'm sure. So the question is...will this strategy work?
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
13y
I'm not sure how the laws work in Illinois, but in Nevada you must have a real estate license to get a property management permit. The broker under which you hang your license must also have a property management permit. Just like real estate sales transactions, the properties being managed are under contract with the broker. The split will likely depend upon who's covering what costs. The broker will have additional book keeping, regulatory, and insurance costs that will need to be accounted for in some way.
Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
13y
I found having a property management department wasn't the great thing. I did have two agents, a husband and wife team that were great at it and it was worth it to me to give them 100% of the income generated from the property management.
Prospecting for deals while working the property management side provided the real income for the brokerage and them. And if someone is just interested in property management I would recommend they do it on a master lease method.
They will net more money then acting as a licensed property manager. Which is what I suggested to the husband and wife team and after running the numbers they jumped right into that business model.
Real Estate Investor · Woodbury, MN · Member since 2008 · 133 posts · 43 votes
13y
I recently signed with a broker at 50/50 of the monthly and 80/20 of any lease up fees I collect. They handle all rent collection, statements to owners, security deposits, tax forms required. I basically just find owners, fill vacancies, do quarterly inspections and coordinate repairs. Its just going to be a side gig for me right now. Ultimately I plan to get my brokers license and go on my own but mn requires 3 years as an agent first.
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
13y
Brian P
Would you go into more detail on the Master Lease method you mentioned? I've ran into a few people that have mentioned this, but have never talked to anyone that's actually done it.
Wheaton, IL · Member since 2012 · 55 posts · 2 votes
13y
Are you basically sub-leasing the property to another person? For example, if you lease a SFH for 500/month and you sublease the property to another person for 550/month, is this the concept?
SFR Investor · Lawton, OK · Member since 2012 · 16 posts · 2 votes
13y
John Jabson IMHO, there is little money to be made in property management-it is more about getting the listing down the road and keeping the property in good condition to command a high sales price.
Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
13y
Basically Master leasing is just having a lease with the owner giving you the right to sublease to others. You are a principle in the deal and do not need a license. You pay the landlord the amount you have worked out and keep the difference on what you collect from the party you rent to.
You can do this on any type of property, You can do this on single family homes or a single apartment or a forty story building. Some that do this like to add the option to buy into the deal. Others just do it for a long period on the master lease with no option.
I had my first experience 4o years ago when my brother bought a deeply discounted note on a 24 unit apartment building. The landlord had a lot of vacancies and deferred maintenance and really shouldn't have been managing his own property.
California law required a resident manager on 16 units or more and this guy had a useless brother in law in that spot. He didn't do anything but sleep there. So we made a deal to lease the entire complex for a set amount for 7 years.
Over the years we found some similar deals and master leased enough of the units to cover our note in full and make a profiit on the lease activity.
I had a single mother, husband died, that I mentioned this to and she was able to masterlease a 18 unit apartment house and became the resident manager and then she started adding single family homes in the town, she built up to about 50 homes at about $100 a month each net. She was able to get an option on the 18 units and eventually bought them.
Wheaton, IL · Member since 2012 · 55 posts · 2 votes
13y
Brian P-I assume it's hard to sell this to a property owner unless they're uninvolved in the property.
Theoretically it takes no money to do, correct? Why not just ask around (even door-to-door in rental areas) and find owners that will master lease to you for 2 years and then sublease?
Who is responsible for the vacancies, the owner or the master lease person? Is it possible to get the owner to take responsibility for that?
Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
13y
John
It really isn't a hard sell, owners that are directly involved in the management are not good candidates unless they are poor at it and basically fed up. Or in one of our cases wanted to get in the RV and travel and just get the rent check once a month from us put into their bank.
The master leasee is responsible for the vacancies, you allow for that in your rent for the master lease. However, it is possible to have a rent for the master lease based of a percentage of what you actually collect. I preferred run down with vacancies and below market rents with a set rent to the owner, thus I collected on the improvement in management and tenant selection.The owner was still responsible for the taxes, insurance, and other expenses, your basically just the collector of the rent. Your income is in the spread you get. I also liked the option to buy and if I couldn't get that, then right of first refusal.
Like any contract you can make sure it fits you, or take a walk. My couple would make many master lease offers and get turned down but many landlords would later call and say they would like to try it. It really isn't costing them any more then a management company would cost.
Wheaton, IL · Member since 2012 · 55 posts · 2 votes
13y
Brian, I live in a rural town with a TON of renters. Alot of 20,000-25,000 jobs around here with people who cannot buy houses themselves. Do you think it's a good idea to go door-to-door or basically network around town (the town is only about 14,000 people) to find owners that would want to master lease? I'm talking about SFH's here.
A few of the guys on here mentioned that there's no money in property management. It seems to me though that if I had 5 properties that profited 100 dollars per month that would be 500/month extra income. For some that's not worth the time and effort but I'm thinking that 500/month would be quite helpful for myself. Thoughts?
Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
13y
John,
To streamline your efforts, you should do some online search of property records to find the owners. Otherwise you're going to spend a ton of time with non-decision makers.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Originally posted by John Jabson:
I really would like to get info from somebody who does property managing on a normal basis. Anyone do this?
You're asking what could be confidential information, the split between an agent and a broker. I have seen small brokers basically give the rentals to an agent that aids in other office adminsitration and not collect a dime, I've seen others who want 50% just as with sales. This is something that will be negotiated in each office with each agent and broker.
When you get to a management company with a broker, an agent's participation may be limited, depends on state laws as to the adminstrative nature of assisting a broker might be. Generally anyone who negotiates a lease for others needs a license, but if all tenants are required to go into a central office to lease, one broker can write a ton of leases.
Residential Real Estate Broker · Pensacola, FL · Member since 2012 · 221 posts · 49 votes
13y
Lance H. John Jabson Folks I own a PM (property management) department that handles about 300 units. PM is a completely different animal than being a standard sales agent. The pay checks are tiny by comparison, but once you reach a large inventory it can become very profitable. If you're building a PM practice under a broker I recommend having an exit strategy in place. In Florida, as most states, the broker "owns" the client/business and can boot an agent at will barring a written contract that says otherwise.
Once you can become a broker and go solo, do it. You'll never look back. Try to get your broker to give you a written contract that if you ever leave, you get to take you PM portfolio with you. You can offer a "buy out" to for the privilege of taking the business with you.
This is a limitless business IMO and I love it. The thing I love about it is that I have an amazing team that runs it. It's nearly absentee owned, I pretty much just get a large income from it. I have to handle the rare toxic fire, but it's tiny compared to the crap we deal with in dealing with sellers.
When I get time I'll write a white paper on the PM business. Let me know if any questions.
Also, for Realtors out there, by all means do you own deals outside of brokering. But if you get into "bed" with a member of the public via a "master lease" which is a lease option, be sure the owner signs a hold harmless agreement with you. You must be very diligent in stating that your private deal does not involved your license or your Broker. Good Luck.
Wheaton, IL · Member since 2012 · 55 posts · 2 votes
13y
Sandy,
Do you get out of the area investors wanting to invest in your area, whereby you are the buying agent and then, after closing, become the property manager?
Real Estate Investor · Woodbury, MN · Member since 2008 · 133 posts · 43 votes
13y
Sandy Blanton,
Thanks for the tips! I started this with the sole goal of getting my brokers license to get out on my own. I love the scalablility of the business, not to mention when I'm ready to start buying more property of my own I will have built in leads from the PM business. If you ever write that paper let me know, I'd love to see it.