How can I help other investors in TX legally without a license?

9 Replies

I live in Denton, TX (the north side of the Dallas / Fort Worth area). From recent podcasts (Show124 and Show125), I got the great idea of asking local investors if I could learn the ropes by being their property manager or an assistant. That is, if they're ok with me doing it part-time/as needed since I have a full-time job. I would offer to do it at a reduced rate, of course (hopefully not for free forever at least).

Mainly, I want to learn from an experienced investor and make a little money to build my capital for my own investing (and pay off debt to be honest). I've failed 4 times (2 HUD flips, 2 rentals) when trying to invest on my own so far so I need to take a different approach...plus those failures drained my self-directed IRA of pretty much all capital so I'm starting over - not unlike the student in The Richest Man in Babylon. (ah, the lessons learned from failure...)

Question 1 - What can an unlicensed person do as far as property management goes? I saw the TX Real Estate Commission guidelines for unlicensed assistants, but what activities would be helpful for investors that I could really do legally?

Question 2 - What are people paying for property management in DFW for SFR, multifamily, and small apartment buildings?

Question 3 - Are birddogging and wholesaling legal in Texas without a license?

Question 4 - Is it helpful if I go check out properties for other investors who are busy or out of area?  Not birddogging, but if they might want to offer on something and don't have time to drive there, take pictures, etc.

Primary goals - building capital, learning the smart way to invest from a master ( I already know stupid as Michael Gerber put it).  Any other ideas?

Geoffrey,

I will leave it to others to others to answer your questions. I would encourage someone like yourself to consider "house hacking." That is to purchase a duplex, triplex, or quadplex and live in one unit and rent the other units out. In addition to the obvious benefits of living rent free, and have others cover your mortgage costs; you can also purchase such properties as an owner occupant with many of the FHA, and state subsidized programs. A low down payment into a situation like this can be your springboard into becoming a real estate investor. Just something to consider if it is right for you.

1)    I don't know, as that's not one of my areas of expertise

2) Multifamily typically runs 3.5-5% of revenue, though that's w/ a track record. You'll have a hard time getting that starting fresh. SFR seems to run about 7-10%, though I admittedly have no direct experience there.

3) No license needed for wholesaling or bird dogging in TX.

4) Probably so, if you can successfully market and sell your services.

Hey Geoffrey, 

I'm definitely not the best person to answer #1 or #2, but on #3, @Chris S is right...no license needed..and on #4, I've been thinking of incorporating something JUST like that into my business.

I'm a pretty new investor, too...but I've done 15 wholesale props since March, and I just live right up the road in Oak Point. Love to hang out and get to know how we might join forces. 

Bob K

Originally posted by @Geoffrey W.:

I live in Denton, TX (the north side of the Dallas / Fort Worth area). From recent podcasts (Show124 and Show125), I got the great idea of asking local investors if I could learn the ropes by being their property manager or an assistant. That is, if they're ok with me doing it part-time/as needed since I have a full-time job. I would offer to do it at a reduced rate, of course (hopefully not for free forever at least).

Mainly, I want to learn from an experienced investor and make a little money to build my capital for my own investing (and pay off debt to be honest). I've failed 4 times (2 HUD flips, 2 rentals) when trying to invest on my own so far so I need to take a different approach...plus those failures drained my self-directed IRA of pretty much all capital so I'm starting over - not unlike the student in The Richest Man in Babylon. (ah, the lessons learned from failure...)

Question 1 - What can an unlicensed person do as far as property management goes? I saw the TX Real Estate Commission guidelines for unlicensed assistants, but what activities would be helpful for investors that I could really do legally?

Question 2 - What are people paying for property management in DFW for SFR, multifamily, and small apartment buildings?

Question 3 - Are birddogging and wholesaling legal in Texas without a license?

Question 4 - Is it helpful if I go check out properties for other investors who are busy or out of area? Not birddogging, but if they might want to offer on something and don't have time to drive there, take pictures, etc.

Primary goals - building capital, learning the smart way to invest from a master ( I already know stupid as Michael Gerber put it). Any other ideas?

Hi

I can try to answer some of these questions. I'll start with an a word of caution: "but someone told me it's OK on the forum" is not a viable legal defense!

You should take whatever advice you get for free online with a grain and remember that none of is will stand next to you in court if you get caught doing something illegal.

Having said that, the law is clear. You can do anything that doesn't require a license. The main 2 things I would consider violating this are:

A) Showing a property to a potential buyer (investor or otherwise) or engaging in any "selling" activity on behalf of the seller (as if you represent them).

B) representing a buyer when you engage a seller.

There are other things you shouldn't be doing but in my unprofessional opinion these are the two big ones.

Also, unlicensed assistant you mentioned is referred to in the context of a RE agent or broker. An investor assistant doesn't fall into that category.

Onto the other questions....

2) I've seen different pricing structures used by property managers. Some do fixed amount $50-$100/mo/unit), others do % of monthly rent (5%-10%). The important thing is really what you get for your money.

Many PMs don't do evictions. Some have their own maint. crew some just call in professionals and bill you and so on. So make sure you outline your scope of services and set the expectations with the owner.

3) see answer #1. Depends on what and how you engage the sellers/buyers.

4) helpful? Probably. Legal? See answer #3 (see a theme here?)

As for working for free/asking for pay, here are a couple of things to consider: most investors that have enough experience you could learn from will already have a PM.

Your offer to go inspect the property can be nice but I can get a drive by BPO done by a realtor with pictures and full CMA report for about $40-$50 so unless you go up in the attic, on the roof and into the house this might not be enough value for an investor.

Now that I gave you the ugly answers to the questions you asked, let's bring Mr. Sunshine back for a minute. What can you do that will be legal and useful? Analyze data!

There are so many potential leads all over the place that an avg. investor can't really analyze all of them fast enough. Craigslist, MLS, zillow, FSBO sites, street signs, newspapers, backpage....

Find some investors that will give you their preferences and start analyzing the data. You get a few things out of it:

1) it's way easier than climbing roofs and going into attics in August in Texas

2) you'll get to learn what the pros are looking for

3) you'll get good at finding deals

4) it's not illegal for you to accept payment for data analysis!

Sorry it came out so long, hope it was helpful.

Joe 

Wow, thanks for the great responses from each of you. 

@Presley Reeves , great idea on house hacking. I was interested, but my wife and I decided it wasn't for us with our 2 young girls. We just bought a single family home in Denton 2 months ago. Happy wife, happy life!

@Chris Soignier , I love the data analysis idea! I'm an IT business analyst by trade so gathering data and sorting it out sounds great to me! I will heed your advice in answer #1 as well.

@Geoffrey W.

Hate to always rain on parades, but;

When you go into any business, the first thing to do is to check if your business plans are compliant with laws, are the functions of that business regulated? In many areas dealing in RE, they are.

"Data Collection" that depends on what data you collect and if you are providing valuations for a fee, in any manner. Providing anyone with a property valuation is an appraisal. Appraisers are regulated, requires a license. Realtors are exempt from appraising requirements as part of their representation in providing services, a BPO is a "Broker's Price Opinion" not an appraisal and it requires a license.

"Home Inspections" giving anyone an opinion of property condition for a fee is what home inspectors do, again, regulated with license requirements.

You mentioned flips, I'm betting that in your area, like mine, a homeowner is limited to what they can repair or construct in a residential area, now we are talking Contractors. Regulated and license requirements. 

The "Handyman" depends on what you do, you can probably hang a new door, paint the place, hang ceiling fans, but you can't get into trades that are regulated, electrical, plumbing, major construction where permits may be needed......generally. My rule of thumb for the handyman is whatever a homeowner is permitted to do, a handyman can do.

"Employed Property Agents" an apartment owner or an investor owning rentals can hire with W-2 type compensation to perform on site management duties, without having a RE license. You can be employed by more than one entity, but if you begin offering management services to just anyone, then you cross the line as a property manager which requires a license. The key here is your employment status. Being employed by Bob on Monday then employed by Steve for the next three days won't cut it. 

Bird-dogging can be done as an employee or in a business entity, such as a partnership and you compensation can be whatever might be agreed to. Freelancing as a bird-dog for compensation is an agent function. Investors and RE operators need to crack open a basic business law text book and learn about different types of agency relationships, how they are formed, responsibilities to a principle and how holding yourself out to the public is determined to be practicing some professional service. 

Now, there is the law and there is some grey area in reality, however what I see investors trying to do is more about how to justify breaking some law (always asking how can I do this and circumvent this law). It is the spirit of the law that needs to be followed as well as the letter of the law. 

To find out what you can do, first need to understand what you can't do, then do anything else except what you shouldn't be doing, those services that require a license. Investors need to understand what other professions exist in the real estate arena and when you cross the line of practicing in a regulated profession.   

Frankly, when I have a question concerning a licensed activity, I certainly don't ask those who do that activity, I never met someone who says something like "oh, yes, I operate my business illegally, no big deal, I've never been caught!" Go to the "horses mouth" call the TREC and ask if they consider an activity a violation of law, they will tell you. But, when you ask make sure you fully explain how you intend on doing something, for example "I will take title" or " I will not be taking title". 

It really doesn't matter what the opinions are of other investors or dealers or operators, it may not even matter what your attorney's opinion might be, although they are the best to give legal advice, what really matters is the opinion of your real estate commission. They make the call as to charging you with a violation, they have administrative powers to levy fines in hearings, they can also have someone arrested and charged. See what they say, then weigh the consequences and decide what to do. :)  

You want to earn money in real estate by working with other investors.  Why not just get a license? Lots of opportunities for you to make money.

Indeed, @James Wise , I think getting an RE agent license sounds like a good idea.  More options to help people and no worries about the grey areas.  I know it doesn't allow me to be a property manager right away, though, but that's not the path I really want to take anyway.

Thanks for everyone's replies, even @Bill Gulley 's! I don't think you rained on my parade. I wanted good feedback and advice on whom to seek for guidance (TX REC in this case). Thank you!

Property Managers in Texas must be licensed, period. For SFR propertirs, hey are typically paid a % of the monthly rent. The oy way to legally function as an un-licensed PM in Texas is to be a salaried employee of the property owner, where your pay is not tied to the value of the income generated by the rentals.

Bird dogging non-listed properties does not require a license. 

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