I have been asked to manage a property for someone?

18 Replies

I have been asked to manage a property for someone that is moving out of state. I was approaced by him because I have two rentals that are in the same neiborhood of his.  I manage my own properties but was wanting to know what kind of % per month would be appropriate or conditions of what kind to follow? 

In my areas, I typically see 1/2 month to a full month for tenant placement to cover your marketing and screening costs.  For ongoing management the fee ranges from 7-10%.

You may also want to research if you are required to hold a realtors license in order to manage properties for other people.

You are very likely required to be a realtor. However you could lease the property from the owner with the right to sublease subject to the existing lease. I typically charge a percentage of the rent I collect. But there are other ways. From that figure how much is worth for you to deal with the hassle. I do similar kinds of management. And i figure I am worth more than the typical manager that does not own property nor care for a property like their own.

 I have taken one persons property that was in a condition I would never allow my house to get into. Convinced the owner to put in some money over time, gotten good tenants that have performed some work such as painting and in the process increased rents and improved the property condition. And I have a happy owner.

Medium fulllogo 1 Tom Spaeth, Easal Properties | 303‑881‑6293 | http://www.WholesaleDenverDeals.com

You'd need to be a licensed realtor working under a broker to manage someone else's property in your state. Hardly seems worth it for one property (unless maybe you're already a realtor). 

Be very careful about managing for someone else and being paid unless you are licensed. While it is not an issue till it is an issue. It can be an issue of great magnitude and you have a lot to loose with two houses and the goal of more rentals!

Yes, depends on the state. In MA property managers and property owners do not need to be real estate salespersons in order to rent the apartments...but in many states you do.

Personally though, you couldn't pay me enough to deal with someone else's problems.

In NC, you do not need to be a [email protected] You do need to be licensed as a NC RE broker per state statute. Details are in Chapter 93A of the NCGS: http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/ByChapter/Chapter_93A.html

Shane that would be a big fat NO to managing.

If the person is moving out of state maybe they are selling cheap and you can buy it or get it under contract and assign it to another buyer.

Find another way to make money on it but not to manage it! lol

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

@Tom Spaeth  

Tom do you see a lot of that type of property management? I have thought about something like that but have not heard of anyone doing it until you mentioned it. My idea would be that someone wants me to be there property manager, we work out a price that is under market rent say a 800 a month house is rented to me for 700 and I sublet it and keep the difference. Price / details can vary depending on what the owner and I negotiate for example perhaps that 800 a month house is rented to me for 500 but I sign a lease not dependent on it being sublet so if I put a bad tenant in they still gets paid but I take a larger amount per month when rented. Obviously there is risks on both sides, me overestimating rent amounts or my ability to get a suitable tenant and the owner is risking that I default on multiple properties that I manage from them. But then again everything we do has risk.

The above could also be useful to get around not being a Realtor as you are technically subletting a property you are in control of and not managing a property for someone else. Obviously a lawyer should be contacted before making any decisions as I am not a lawyer and only provide the above information for pure entertainment. 

@Troy Young  

I can say from experience that typically the more CREATIVE you get with something and complex the GREATER it has a chance of falling apart down the road and blowing up in your face.

Not all the time but the simpler the deal the greater the chance of success. If you have to have A,B,C,D,E,F happen for a successful outcome instead of just A then more times not it doesn't work.

I just like simple deals with not a lot of "hair" on them. Hair means complexity and issues that muddy up a deal and you end up wasting time on. 

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

Thanks for the comments, I would love to buy the property but his payoff is a little much for me right now. I am sure he would settle for payoff. In a few years I may consider if he don't sale it. I was just looking at how to make some $ off of it and have him to be happy also. The more I think about the management the less I want to do it. I don’t mind my own but others for a few bucks a month hmmmmmmm. I may come up with some other ways to help him bc he is desperate to move asap. He was lucky enough to talk to me last week before my old evicted tenant tried to wiggle his way into his house. I intercepted that and nipped it off. Karma came quick for my old tenants. thanks again

Look into what is called a master lease. It's done more in commercial RE but I do it for residential. It gets you away from the agent/broker issues since you are actually leasing the property from the owner. Nice thing is that this limits the liability of the owner if you have the right paperwork in place for your subletters. 

You are correct there are two ways . 1: Take a flat percentage - Nice because there is little risk. 2: Agree to a lower fixed rent and charge a higher sublet rent. A little riskier but can make more money.

Either way works. - You just have to see if its worth the money. I like taking in $200/mo to do not much. But then I really work on making sure I get top tenants.

Medium fulllogo 1 Tom Spaeth, Easal Properties | 303‑881‑6293 | http://www.WholesaleDenverDeals.com

While I'm with some of the others that it isn't worth messing around with if you are violating licensing law or taking on someone else's headache there are things you can potentially do.

Both locally and for some out of state properties I have done a "boots on the ground" a la carte type arrangement with people.

Locally I have some places that are about 40min (no traffic) from my house that are close to where I grew up, and about 15min from where I used to work.  When I had that J.O.B. and no kids it wasn't a big deal to show those places and deal with some of the minor things.  Now it is totally unappealing to take 2+ hours out of my day to open a door.  I have some people up there that I pay to open said door when needed and if there is a decent tenant I give them the paperwork to collect signatures and checks and stuff like that.  They don't get a percentage they get a flat fee per time out to the apartment and a per hour rate after the first 30min.  Then a flat fee to deal with those logistics.  

In this case I was doing all the advertising (Which was 100% posting Craigslist ads) and did the initial intake calls/emails.  Each week I would ask for his availability and when talking with the potential tenants I would set the first appointment in one of his windows and steer everyone else to that and then the first 1 that couldn't do it set the 2nd time window (We agreed that even though he gave me 4-6 two hour time windows that I wouldn't do more than 2 without talking to him again).  It was something like $25/showing and like $40/hour after the 1st 30min in 15min chunks and $50 to do the paperwork.  This was a friend of mind so it was extra cheap, but I would have gladly paid double all these figures and since we found people pretty fast even at twice what I paid it would have been less than half a typical manager in this case (If they do enough showings they will make more so it is a crap shoot for both parties).

For the out of state they do more.  In this case I pay a flat advertising fee per month which includes them putting out a sign, posting ads in local stores and bulletin boards, posting on their own website and social media and doing the local Craigslist (If I want anything beyond free advertising I need to pay for it).  They charge $25/showing up to 15min and $50/hour after that in 15min chunks.  They are $120 to do the lease and they have the same one that I have since we use the same attorney, but otherwise I would supply my own lease if I didn't want to use the that one or the standard state one.  In this case they also do maintenance, turnovers and up to mid level rehabs, which is one of the main profit centers, and charge for those accordingly.  Works for them since as long as they don't gouge me why and I going to try to find another contractor to do the work right?

In this case they also will go over there when I need someone to, will post notices if I need that, will file court paperwork and actually attend the hearings for an eviction and arrange any of the other stuff if it comes up.  All of these things are a flat fee or hourly rate.  

We have no contract and I don't pay anything when they don't do anything.  So any individual incident can cost a lot since none of it is bundled into a management fee.  However for all those months with no issues and I just get mailbox money I don't pay anything for management so that is nice.

Sorry this got long winded but the point is if you want to be the point person you can charge a lot do to anything but not have to be responsible the rest of the time which can possibly work out well for everyone (and not really violate licensing law since you aren't REALLY a property manager).

Medium rre logo web rgb w motoShaun Reilly MBA, Reilly Real Estate, LLC | [email protected] | 1‑800‑774‑0737 | http://www.MassHomeSale.com | MA Agent # 9517670 | Podcast Guest on Show #43

Originally posted by @Shaun Reilly :

While I'm with some of the others that it isn't worth messing around with if you are violating licensing law or taking on someone else's headache there are things you can potentially do.

Both locally and for some out of state properties I have done a "boots on the ground" a la carte type arrangement with people.

Locally I have some places that are about 40min (no traffic) from my house that are close to where I grew up, and about 15min from where I used to work.  When I had that J.O.B. and no kids it wasn't a big deal to show those places and deal with some of the minor things.  Now it is totally unappealing to take 2+ hours out of my day to open a door.  I have some people up there that I pay to open said door when needed and if there is a decent tenant I give them the paperwork to collect signatures and checks and stuff like that.  They don't get a percentage they get a flat fee per time out to the apartment and a per hour rate after the first 30min.  Then a flat fee to deal with those logistics.  

In this case I was doing all the advertising (Which was 100% posting Craigslist ads) and did the initial intake calls/emails.  Each week I would ask for his availability and when talking with the potential tenants I would set the first appointment in one of his windows and steer everyone else to that and then the first 1 that couldn't do it set the 2nd time window (We agreed that even though he gave me 4-6 two hour time windows that I wouldn't do more than 2 without talking to him again).  It was something like $25/showing and like $40/hour after the 1st 30min in 15min chunks and $50 to do the paperwork.  This was a friend of mind so it was extra cheap, but I would have gladly paid double all these figures and since we found people pretty fast even at twice what I paid it would have been less than half a typical manager in this case (If they do enough showings they will make more so it is a crap shoot for both parties).

For the out of state they do more.  In this case I pay a flat advertising fee per month which includes them putting out a sign, posting ads in local stores and bulletin boards, posting on their own website and social media and doing the local Craigslist (If I want anything beyond free advertising I need to pay for it).  They charge $25/showing up to 15min and $50/hour after that in 15min chunks.  They are $120 to do the lease and they have the same one that I have since we use the same attorney, but otherwise I would supply my own lease if I didn't want to use the that one or the standard state one.  In this case they also do maintenance, turnovers and up to mid level rehabs, which is one of the main profit centers, and charge for those accordingly.  Works for them since as long as they don't gouge me why and I going to try to find another contractor to do the work right?

In this case they also will go over there when I need someone to, will post notices if I need that, will file court paperwork and actually attend the hearings for an eviction and arrange any of the other stuff if it comes up.  All of these things are a flat fee or hourly rate.  

We have no contract and I don't pay anything when they don't do anything.  So any individual incident can cost a lot since none of it is bundled into a management fee.  However for all those months with no issues and I just get mailbox money I don't pay anything for management so that is nice.

Sorry this got long winded but the point is if you want to be the point person you can charge a lot do to anything but not have to be responsible the rest of the time which can possibly work out well for everyone (and not really violate licensing law since you aren't REALLY a property manager).

sounds good but, who draws the line and what does'nt make you propoerty manager, and just someone helping?

The answer to "who draws the line between being a property manager and helping someone out" is the Real Estate Commission of North Carolina

I've seen enough posts to know that North Carolina requires a real estate license if you are managing/leasing property for a third party "for a fee." If you do not hold a real estate license then you cannot manage someone else's property for a fee.

If you are a real estate licensee, the standard rate for property management is in the 10% range of the gross monthly rent. There is also a leasing fee in the range of 75% to 100% of one month's rent when a new tenant is signed to a lease.

Originally posted by @Shane Waller :

Thanks for the comments, I would love to buy the property but his payoff is a little much for me right now. I am sure he would settle for payoff. In a few years I may consider if he don't sale it. I was just looking at how to make some $ off of it and have him to be happy also. The more I think about the management the less I want to do it. I don’t mind my own but others for a few bucks a month hmmmmmmm. I may come up with some other ways to help him bc he is desperate to move asap. He was lucky enough to talk to me last week before my old evicted tenant tried to wiggle his way into his house. I intercepted that and nipped it off. Karma came quick for my old tenants. thanks again

 Have you considered purchasing it through seller financing?  

Originally posted by @Fred Heller :

The answer to "who draws the line between being a property manager and helping someone out" is the Real Estate Commission of North Carolina

I've seen enough posts to know that North Carolina requires a real estate license if you are managing/leasing property for a third party "for a fee." If you do not hold a real estate license then you cannot manage someone else's property for a fee.

If you are a real estate licensee, the standard rate for property management is in the 10% range of the gross monthly rent. There is also a leasing fee in the range of 75% to 100% of one month's rent when a new tenant is signed to a lease.

I'm not sure where your "for a fee" quote comes from. For sure, self leasing and "self management" are okay. By NC statute, "Any individual owner who personally leases or sells the owner's own property" is exempt from needing a real estate license. So the owner is exempt if that owner "personally leases" the property.

Now Shane, on the other hand... it depends on if he is actually leasing and/or renting the property (meaning on NC Standard Form 410-T (or equivalent) is he identified as the Real Estate Management Firm or "Agent") or is he providing other services? The fact is the word "manage" or "management" is not in the NC definition (NCGS 93A) of "A real estate broker":

"A real estate broker within the meaning of this Chapter is any person, partnership, corporation, limited liability company, association, or other business entity who for a compensation or valuable consideration or promise thereof lists or offers to list, sells or offers to sell, buys or offers to buy, auctions or offers to auction (specifically not including a mere crier of sales), or negotiates the purchase or sale or exchange of real estate, or who leases or offers to lease, or who sells or offers to sell leases of whatever character, or rents or offers to rent any real estate or the improvement thereon, for others."

Expanding on the @Shaun Reilly   post, in NC you can provide some peripheral real estate services (but not the actual leasing) and not need a broker's license. The "line" is drawn by Chapter 93A, not the NC REC. NC REC implements the NCGS.

The reality is that as long as no one complains, there isn't going to be an issue.

If the properties are good ones, I would focus on an agreement to acquire them.  

Could he cover his mortgages for 60 to 70% of rent?  Maybe do seller financing with payments of that amount, with a balloon at the point the where you would be in a position to buy them.  Basically doing a subject to financing agreement.  Just make sure he is staying current on the mortgages.  In that arrangement, I would want any money down to be applied to his mortgage.

Another option might be for you to wholesale them for him.  If he is willing to sell for pretty much the pay-off there may be a fair amount of spread to work with.