Sponsoring broker to start a property management company?

Question

Hi all,

I've recently passed my Illinois broker license exam and am shopping for sponsoring brokers. I'd like to start a small property management company. I already have an LLC, a sole proprietorship, and a small portfolio of commercial properties that I own and personally manage. I'd like to expand and market this LLC to offer management services that include leasing, accounting, capital projects, routine maintenance management, etc...

Am I required by law (Illinois law) to collect management fees through a sponsoring broker? Or do I only need to collect leasing fees through a sponsoring broker?

Thank you for any clarity/advice on this!

- Zak

Jonathan Klemm · Answer

@Zak Hood - Welcome to the Chicago BP forums! You'll find a ton of helpful local people.

You got some good and correct advice from @Nathan G., here in Illinois you do need to have your managing broker's license to technically own and operate a property management company. We have a small investor-focused brokerage and manage a handful of our properties. Maybe we have some synergy between what you are trying to do and what we have going on. If you are interested we should connect! Happy to help regardless.

Crystal Smith · Answer

Property management activities that involve general administration, like contracting for property maintenance (garbage pick-up, etc.) and paying general expenses (utilities, etc.), do NOT require a real estate license. Serving as an accountant for association dues also does not require a real estate license.

Property management activities that involve a conveyance of real estate by contract or lease require a real estate license which means you'll have to wait 2 years & then take the test to become a Managing Broker. Until then you'll have to do units for sale, leasing,... under a sponsoring broker.

Mark Ainley · Answer

Thanks @Jonathan Klemm and awesome to see what you want to do @Zak Hood. It is tough to find what you are looking for because what you want to do adds a lot of risk and very little reward to the managing broker. Everything of "your own" is still something that ties back to the managing broker. What you might have a better chance of doing is getting a broker to sponsor your management and leasing activities and then start a separate entity to handle the construction and maintenance. That doesn't have to be state licensed and takes a chunk of the risk off of the guy you need to host you.

Happy to jump on a call sometime so I will DM you and we also have a Property Manager networking group for best practices if you want to learn more on the topic. There are also some great podcasts for Property Management I can send you.

Zak Hood · Answer

Thanks for the advice, everyone!

My followup question is this...

Do you think I'll have any luck negotiating a deal with a sponsoring broker that will give me the autonomy to operate essentially as an independent property management business? For example, per the law, I still include the sponsoring broker's name alongside the name of my LLC in all advertisements, and all incoming management fees/security deposits pass through the sponsoring broker's accounts. However, I use all of my own documents, resources, and contacts. In exchange, I negotiate either a monthly "administrative fee" or a commission split percentage based on the monthly management income.

I've met already with one sponsoring broker who wasn't keen on this set up. He deals primarily in property management, so it wouldn't make sense for him to, I guess, enable the competition.

Any advice or direction on a broker who might be open to an arrangement like this?

Paul De Luca · Answer

As a property manager @Mark Ainley might have some advice for you.

Nathan Gesner · Answer

Welcome to BiggerPockets!

Yes, you need to operate under a Broker for a certain period of time. This includes the collection of sales commissions or property management fees.

Sponsoring broker to start a property management company?

Sponsoring broker to start a property management company?

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