I am looking to invest in the Ohio market. Single Families.
A person I know there is willing to manage the properties we buy. She manages a 100 unit building, so she is pretty familiar with everything.
BUT, she is not a licensed Property Manager, what I think could mean for us some troubles in the future, if she has to show in court representing us, etc...On the other hand, if I was managing myself, I don't need a license, and she could be like our representative, empowered, and maybe she don't need a license...?
Does anyone has an idea how we can do this in a proper way?
First, the obligatory disclaimer: I am not an attorney and you should seek proper legal counsel for your area.
Okay, so what would I do?
Step 1: consider why does the state say you need a license professional? There are many possible reasons, but one that comes to mind is you don't want someone representing you breaking the law, because ultimately you are the "deep pockets" property owner who will get sued and end up paying if you lose and a money judgment is obtained against you. If you have a licensed property manager, at least you could claim that you acted according to sound business and legal principles and should therefore be somewhat or totally shielded from liability, or insist that the other person's liability insurance pay for it. If you hire your Aunt Betty, odds are the judge will throw the book at you if Betty violates Federal Fair Housing, refuses to allow ESAs, etc. It's like doing your own electrical work on a house without pulling a permit. Sure, you can get it done cheaper, but you take the risk & liability if you screw something up. Consider carefully whom you will have representing you. Your investment and possibly all of you assets are on the line if said person acts illegally or imprudently.
Step 2: if you choose to proceed, there are ways around the law that I think should work. Again, see the disclaimer. Here are two ideas:
1) Give her partial ownership interest in the property. It should work the same as co-owning any property in a normal partnership scenario, although you might have to draw up formal partnership documents in case it ever were to get challenged. It could be a trifle, maybe 1%. Then create an option contract to buy out her entire interest for $100 any time between tomorrow and X-years from now.
2) Lease the property to her then allow her to sub-lease. Aka "Master leasing".
To be abundantly clear, I have never tried either of these, nor have I run them past legal counsel. They may be total hogwash. I came up with them when trying to find ways I could extend my management talent to other people without actually buying more property myself or getting a real estate Broker's license. These are intended to stoke your creative juices, nothing more.
@erik W. These are good ideas to start thinking about it. Thak you!
@Erik W. These are good ideas to start thinking about it. Thank you!
@Daniel Fridrij to manage property in this state you have to hold an active real estate license...to have an active real estate license, you have to work under the supervision of a broker.... If this is her 100-unit building or she is not changing a fee she is golden...if not, she's exposed to some pretty bad outcomes if the regulatory authority catches wind she is managing without a license.
If she manages your property for free, you're cool....if money changes hands, it's illegal. It's referred to as "for a fee, for another"
All credible PM's in this state are licensed agents/brokers...this is a pretty intense business with a lot of accountability...that's why the regulations are in place...
@Brandon Sturgill Hi Brandon, I really wanted to hear your opinion. Really valuable as always. Thank you!
Eric is correct that a license is not needed for master leasing. There are a lot of great reasons to master lease as opposed to fee-based management, but getting around licensing laws, is probably the worse one.
I'm not saying this is the case here, but once in a while, someone will lose their real estate license for embezzling funds and pick up master leasing as a workaround.
Hi everybody, I want to share with you, what I´found out. As you all said, according to the law, a license is needed to be a PM. But the same law brings the exemptions. 1) The landlord 2) His ¨regular employ¨. And explicity says, that a 1099 contractor employ is not consider a regular employ.
Here is the law:
Licensure Exemption — Regular Employee of Owner :
A real estate broker’s license is required to manage property owned by another, for a fee or other valuable consideration. However, Ohio Revised Code Section 4735.01(I) provides an exception for an individual who qualifies as a “regular employee” of the owner of the property. The Division of Real Estate and Professional Licensing detailed in their Fall 1998 Newsletter (attached as EXHIBIT D) the factors that will be considered to determine if an individual is a regular employee of the owner. The article lists the following factors: The employee is paid via a W-2 versus a 1099 The employer pays all taxes The employer pays unemployment and worker’s compensation insurance The employer schedules the hours If an individual qualifies as a regular employee of the owner, the individual can manage property for that owner without holding a real estate license. Otherwise, a real estate license is required.