How To Starting Property Management in TN

Question

I'm growing my portfolio in the Middle TN area. I will soon have 20 properties in my portfolio, which isn't quite enough to justify quitting my fulltime job to self manage, but I would like to take on the properties of some of my friends who also own rentals and start marketing to take on more clients. However, after looking into it, it looks like there's a requirement to be real estate broker in TN, which would require a license and 3 years holding that license before you can manage other people's properties.

So my question is, does this sound correct? Can I not manage without a license? It did seem like maybe I could do much of the property management tasks except showing and negotiating properties, but coordinating payment, repairs, etc I could do. Can anyone confirm?

Also, I don't really have any desire to work as a realtor, is this something where I can just employee a realtor (broker) and that satisfy the requirement. I was really excited about starting this up, but as I started looking into it, there seems to be a lot of red tape.

Michael Hooper · Answer

@Drew Sygit Your comment feels very patronizing and combative. Of course I will hire an attorney once I go to spin up the business, but free fact finding is exactly what these forums are for.

McKenzie Perry · Answer

@Michael Hooper I'm beginning my research on beginning a property management company much like you were 10 months ago. Your questions confirmed what I was finding through my searching as well. Did you decide whether to move forward on attaining your broker's license and going toward the path of property management? Congratulations on having 20 properties! If you want to share how you moved forward, I'd really like to hear more. Thanks!

Dylan Thomas · Answer

Agree with @Brian Levredge, I would make sure that you are setting your expectations for how serious you are about becoming a PM very clearly. There is a certain fixed cost base to operating appropriately and legally, even at a small scale. Fortunately, those costs will become very manageable as you grow your operation but, in my opinion, your chances for success are much lower if you are not thoughtful and committed upfront.

Brian Levredge · Answer

A bit of advice for @Michael Hooper and @Amber Goins. I own a PM company in Chattanooga and have for the last seven years. Wanting to do it for other people is great in order to generate additional revenue but (and there are a million different ways to go about it) it becomes a lot of work at a certain level. Even staying small requires a fair amount of time, etc. You both may be able to find a friend or someone who you may know that could let you hang your license under their brokerage. There is considerable risk to them in doing this though. It can drastically increase their E&O insurance as one example. There is also a lot of liability and risk of audit if someone files a complaint against you. Your record keeping needs to be pristine as well and even doing all this, and operating inside the legal boundaries you will still get sued. At the end of the day, you could be trading one job for another. I'm not saying don't do it. It does have its own rewards as well. Just make sure you are taking in as much information as possible when making the decision. Spending the time and money getting the license, plus future MLS costs, etc. all adds up to quite a bit if you aren't really serious about doing it.

Michael Hooper · Answer

@Amber Goins I'm currently looking into getting my license. Its 90 hours of course work and a test. I buy and sell properties too, so it could make sense for me in the long run. I'll still have to find a broker to hang my license on though.

Amber Goins · Answer

I just started looking into this as well (I'm in Chattanooga, TN). I was very surprised at the length of time it takes to be able to property manage on your own. I'm not very interested in selling houses either so it's quite a bit just to get into property management for other people. What did you decide to do @Michael Hooper?

Drew Sygit · Answer

@Michael Hooper instead of asking for free, but highly questionable advice here on a forum, why don't you act like a businessman and hire an attorney to help you navigate the law correctly?

@Don Gouge requiring mechanics, electrcicans, plumbers, DOCTORS, stock brokers, etc. to be licensed also "tamps down" on competition. So, on what forums are you railing againt those licensing requirements?

Kim Meredith Hampton · Answer

@Michael Hooper yes, you must have a real estate license to manage for others for compensation. In addition, if you handle any money at all, collecting rents, security deposits, etc…. must have a real estate license.

You can get a license and work under a broker for several years, the. get your brokers license and go out on your own.

Don Gouge · Answer

Without looking it up I believe you can manage as an affiliate broker but then you are under a broker. Licensing laws exist not only to protect the consumer but also to tamp down competition.

How To Starting Property Management in TN

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