Property Management and Broker's Role
I know there's multiple other discussions about this topic, but I think this is a bit different and more specific.
A partner and I have a combined 30 properties in Michigan that we self manage and we're looking to start a property management company, but neither of us are a broker. In Michigan, you need to have a broker's license to be a property manager. We have another potential partner who is a broker, but doesn't necessarily want to be part of the management company. Does anyone on here know how we can use this person's license and make it a win win for everyone and still be legal by MI real estate laws? Do they need to be part of the property management LLC? If so, can we make them a passive member who doesn't need to be involved in the day to day operations? On a more basic level, does their license need to reflect our company name or can we just involve them personally and their license comes with them?
Thanks in advance and let me know if I'm asking these questions incorrectly.
Bruce
@Bruce Scannell I'm in NC, so take my words with a grain of salt, but the broker is responsible for the brokerage. If you screw something up under his license, he gets in trouble too. The broker's job is to oversee the agents under him, so he probably doesn't want to have the responsibility of managing you all, and if he doesn't manage you all, then that's a risky proposition for him.
@Bruce Scannell Dawn is right. Most brokers won't sign off on this, but if they trust you generally they just have to be a very small share owner for the business to pass. Look into your state laws but we can just add a super small ownership (on paper, not pay or equity) and do the same thing. All that said we have and still out source all our management.
Thanks for the comments @Erick Harbert and @Dawn Brenengen. I had that feeling, but wasn't sure. There is a good level of trust but I will have to bring this up.
Dawn and Erick are right. You put all the risk on the back of your broker friend.
He could manage properties under his own brokerage, if he so chose. But unless he has agents of his own, he would need to make you an agent.
In Michigan, you have to have a real estate license to handle any real estate transaction for a property that you do not own, including leasing and such, unless you are directly employed by the property owner.
A broker's license is needed or a salesperson's license whereby you contract with a broker. So, you'd have to connect with broker that is interested in this--unless you've done enough deals to qualify for a broker's license. That would be the best way to go even though you have to take a few classes, pass the test, etc. As an alternative, you might check with The Referral Company out of Grand Haven, MI--a different type of real estate broker relationship. There may be a special relationship/contract they use for managers I know a lot of managers that have their license with them.
@Bruce Scannell Where are you looking to start your property management company?
In Georgia, unlicensed "support staff" have limitations. I'm sure the Michigan Real Estate Commission has a list of what licensed and unlicensed support staff can handle while working for a broker. In Georgia unlicensed staff can only handle administrative duties. Basically you can't explain anything, negotiate anything or go out and prospect for new clients. If someone perceives you to be a licensed agent, you have crossed the line. I'd start with getting licensed for now. You then can interview multiple brokers who know and understand the rental world. Brokers who specialize in sales won't be much of a benefit for you. The sales and rentals worlds are tied together but speak different languages.
I appreciate all the responses everyone, thanks again. I think at this point we will set up the company and manage our own properties and work towards getting our own brokers license. I just wish it I didn't take so long and require you to be a sales agent. We have been involved in leasing for awhile, just not sales.
@Richard Ball, all of our properties are in southeast MI, Wayne county mostly.
@Bruce Scannell are we talking mostly Detroit?
Rather than operating as a broker, assuming that you're only working with people who know and trust you, have you considered operating under a specific power of attorney to fill the gap until you finalize your license and open up to a larger market?
@Richard Ball, currently none of our properties are in Detroit, but I'm not opposed to managing in Detroit, on an individual property basis.
I hadn't thought about that @Sam Bagwell, can you elaborate? We do have quite a few colleagues who would like us to help them out.
I'm not in California, and not in Michigan, but in Georgia, a property owner can have a property manager/broker manage their property for them, but they can also designate a trusted family member or friend to do that through a specific power of attorney for that purpose. While I haven't specifically worked with anyone who does this, I know who a few are. Most of them are working toward finishing the brokerage/licensing, so there will eventually be no question of their legitimacy, but most of them also have a very small inventory of properties in the meantime, so their exposure is relatively low. It seems like one of those squishy "gray areas" in Georgia, much like wholesaling, where compulsive and complete disclosure and explanation seem to be how they cover themselves. Everyone must know and acknowledge everything in writing ahead of time; nothing stays in the dark, and the client cannot, for any reason, believe that they are working with a real estate agent, "property manager," or broker.
Not all owners would be comfortable with this, so it will need to be someone who trusts you a lot, for sure.
You do not need a broker license to mange your own properties. If you and your partner own the management company then you can manage them yourself. Very common practice.
Now...you cannot manage properties that you do not own. So doing it for friends, family or anyone outside of the ownership of the management company is technically illegal