Hi fellow biggerpockets team (especially realtors who are also investors)!
Here's the deal.
1. I started out as an investor. Bought 1 wholesale property, rehabbed it, rented it for 1 year, and sold it all for a profit of $25k. Great deal. Not a lot of headache because we did good repairs, screened the tenants, and hired a realtor to sell it.
2. I obtain my real estate license so I could have access to MLS, and basically build a foundation of commission by focusing on helping buyers and sellers complete transactions.Plus, if I were to buy foreclosures, fix them and sell them as a FSBO, I could cut out the 3-6% in commissions.(more on this snafoo later).
3. In the mean time, my father, who is a doctor and needs some major write-offs, liked the whole idea of investing and tax deductions (while I, of course, liked the idea of cashflow, and the ROI). So he was willing to fund the cash, while I found the deals (and with my real estate and investment knowledge it seemed like a great deal), so we formed an LLC.
4. We spoke with an accountant and, as I imagined, he explained that my business model of buying foreclosures to buy/hold/sell in a trending market was ideal for father to get tax breaks and for consistent cashflow. He would get a percentage of the ROI, but because I was finding the deals, hiring the contractor, and basically overseeing the project- my percentage of ROI would be greater.
5. Well, instead of funding cash on 2-4 foreclosures, he takes a mortgage out (in HIS name, not in the LLC) on a VERY nice, never rented before, no repairs needed to get it rent-ready, beach house.Initially, my parents wanted to hire a property management company to run everything to rent it out (which, as we investors know, would hurt the cash flow tremendously-would be lucky to break even, even if the renters didn't cause any damage).So, after speaking with other investors, renting the house VRBO seemed to be the best option, and father decided he wants me to run it.
**Here is where on real estate license snafoo comes into play.
** If I didn’t have my license, it would seem that I could help run the rentals for my parents by setting up the VRBO, using a restore-lock, hiring maid services, and basically making sure everything runs smoothly. But, because I have my license, I’m finding that there are certain legalities restraining my being able to help set this up and being compensated for it (my current broker does not do Property Management, and legally cannot call myself a property manager without my broker having the right credentials/license to do it (or so I have been told).
Question 1: Are there any Realtors out there who are also investors who help family members do VRBO without calling themselves a Property Manager?
Question 2: Are there any active Realtors out there who are also investors and owners of LLC who actively buy foreclosures, short sales, or any good deals for that matter, through their broker?Or if without their broker to buy/rent or flip them under their own LLC- how is this done legally being a licensed agent so that no liability falls into the lap of the broker?
(State is ALABAMA)
On question #1: you can help him run it as long as you are not compensated. Your other option would be to obtain partial ownership, and then as a principal you can get compensated.
Question #2: if you buy a listed property, your broker has no liability. You probably must disclose your licensed status in any purchase, sale or rental transaction. If you purchase one that is not listed, there is no liability to your broker that I am aware of. As a seller of real property you own, you are not required to list it through a broker but doing so will probably get you a lot better exposure to the market.
Your broker won't allow you to do property management because a) he/she doesn't want the added liability of property management and/or b) his/her E/O insurance does not have an endorsement for property management.
A lot of brokers don't want anything to do with property management because they perceive it as more risky than sales. In reality they're probably correct. I've read that 50% of the complaints TREC receives are over property management issues.