Rental Property Investor · Gainesville, GA · Member since 2017 · 19 posts · 3 votes
My neighbor is moving and wants to rent his home that is across the street from my primary residence. I have three rental properties in the same area. He and I are in discussion on me acting as the property manager for his house because he will be about 3 hours away.
I would like to work out a deal with him because I would be finding the renters and basically handling everything as if it is another rental property of my own and I would make money of course.
what advice do you have to set this deal up the right way between my neighbor and I? I told him that I would need at least 175.00 a month or 10% for it to be worth my time. The house would probably rent for around 2200/month it is in great shape. Am I asking the right amount to manage the property?
Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
9y
We own and manage our own rental properties. But when a friend asked me to manage their house as a rental when they left the country for a couple of years, I had to look into the legalities of what I could do and what I couldn't do.
Some jurisdictions require a person who does property management for others to be properly licensed, bonded and insured. Some jurisdictions require less. In any case, you would do well to think this through and make sure you have appropriate documentation in place to act on the behalf of the other homeowner. As well as to protect yourself.
What we ultimately did in our situation was to write a contract between the homeowner and I whereby the homeowner functioned as the landlord and made the decisions, with me working in an advisory capacity. I was the "boots on the ground", but the rental contract was between the homeowner and the tenant. If something came up, I would assist in getting the work done for the homeowner and the tenant, but I did not function in the full capacity of a property manager. I merely charged a "trip charge" for anytime I had to go to the property to inspect the property or assist with anything. Other than that, I gladly shared my knowledge for free.... just as I do here. :-)
Sandpoint, ID · Member since 2015 · 68 posts · 37 votes
9y
Your request is in line with what most professional property management firms would ask. I also do property management as a favor to my parents (I own the house next door to their rental) and only charge them per hour for my time at $30/hr. This ended up being way cheaper for them than me taking 10% each month and I'm fine with that because they are my parents and I essentially get to choose my next door neighbors.
Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
9y
We own and manage our own rental properties. But when a friend asked me to manage their house as a rental when they left the country for a couple of years, I had to look into the legalities of what I could do and what I couldn't do.
Some jurisdictions require a person who does property management for others to be properly licensed, bonded and insured. Some jurisdictions require less. In any case, you would do well to think this through and make sure you have appropriate documentation in place to act on the behalf of the other homeowner. As well as to protect yourself.
What we ultimately did in our situation was to write a contract between the homeowner and I whereby the homeowner functioned as the landlord and made the decisions, with me working in an advisory capacity. I was the "boots on the ground", but the rental contract was between the homeowner and the tenant. If something came up, I would assist in getting the work done for the homeowner and the tenant, but I did not function in the full capacity of a property manager. I merely charged a "trip charge" for anytime I had to go to the property to inspect the property or assist with anything. Other than that, I gladly shared my knowledge for free.... just as I do here. :-)
Residential Real Estate Broker · Saint Louis, MO · Member since 2014 · 1k+ posts · 567 votes
9y
@Derek Clark Are you a licensed real estate agent? That's the first question. If you self manage your own properties, that's one thing, but managing someone else's property (acting as their agent) requires that you are actually a real estate agent in the proper sense.
You didn't make that clear in your post, so stop there if the answer is no as you won't be legally able to manage without a license.
Rental Property Investor · Gainesville, GA · Member since 2017 · 19 posts · 3 votes
9y
@Marcia Maynard thanks for your advice. I think I would want to do something very similar to what you did in your example. By having the tenant and landlord agreement between the tenant and the home owner that would add protection on my end. then the home owner and I would work out another agreement that says he pays me to basically be the boots on the ground, so to speak.
Sandpoint, ID · Member since 2015 · 68 posts · 37 votes
9y
Every state is different. In Idaho, where I live, you do not need a license to manage property but you may be better off taking an advisory role like Marcia did since Georgia does require you to have a real estate license to manage property.
Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
9y
@Derek Clark Sometimes it gets down to specific tasks that only a homeowner, real estate broker, or property management company can do. Assisting a homeowner to manage their own property will not run you afoul of the law, if you don't engage in certain activities. Some states/municipalities allow unlicensed assistants to do more than others, so be sure you know what you can and can't do in your jurisdiction.
Although our state law allows people assisting other homeowners with their rentals greater latitude than other states, there are a few areas that are best to stay out of.
1. Don't assume responsibility for making sure the rental meets the habitability standards for your area. The homeowner, as landlord, needs to make sure the property is habitable and also covered appropriately by insurance.
2. Don't engage in marketing the rental or showing the rental, unless your state allows you to do this as an unlicensed assistant to the homeowner. [In our state, a homeowner can select a designee to assist with marketing and showing their properties to potential renters, but in some states this may not be allowed, so check it out.]
3. Don't make yourself a party to the rental agreement with the tenant. [In our case, we shared our standard rental agreement with the homeowner and they modified it to fit their needs. The homeowner negotiated the terms of their agreement with the tenant.]
4. Don't handle financial transactions between the homeowner and the tenant. [In our case, the tenant paid their rent directly to the homeowner, via direct deposit. I didn't even know how much rent the tenant was paying. The security deposit too was paid directly to the homeowner and held by them for the duration of the tenancy.]
-----
Take a look at this general advice from a lawyer, for homeowners who are thinking about renting out their own home. It touches on some key points that might be helpful to share with your neighbor.
Also, if the homeowner is going to assume the role of landlord, with you as their advisor and/or unlicensed assistant, make sure they understand the landlord-tenant laws for their jurisdiction. Here is a link to the state regulations.
Suwanee, GA · Member since 2016 · 16 posts · 7 votes
9y
Hi Derek,
As you live in Georgia, only a licensed broker can practice property management in our state. Of course, there are also many other variables to understand when your managing a property. There are trust account requirements when you're managing a property for others. There are the proper insurance requirements, both vacancy or landlord policies to protect your client from any major losses. There are proper maintenance procedures (the most litigated area of management) that you need to consider once you have a tenant in the property. You must follow the proper move-in/move-out procedures to ensure any adjustment you make when you return a tenant's security deposit can hold up in court. Of course, there's also compliance issues... the IRS will require you to report an annual 1099 reflecting the gross income your client earned for the year.
Many of these requirements (and there are quite a few more) are waived if you're managing your own properties AND have less then 10 properties, so you have to weigh the risk/liability versus the reward.
Being in property management, I'm a bit biased, but I feel that investors should use a professional, licensed property manager to manage rental property for the same reason we choose to use a CPA to prepare our taxes or a lawyer to represent us on legal issues. Yes, we can do it ourselves, but it's always safer to trust those better trained to ensure it's done right.
Suwanee, GA · Member since 2016 · 16 posts · 7 votes
9y
Good question, the law actually states:
Code Sections 44-7-31, 44-7-32, 44-7-33, and 44-7-35 shall not apply to rental units which are owned by a natural person if such natural person, his or her spouse, and his or her minor children collectively own ten or fewer rental units
So, it doesn't really define what they mean by "rental units". My understanding over the years has been that is referring to "doors". This makes sense because the code is written to protect consumers. Also, should probably state that the sections are specifically covering how to handle the tenant's security deposit and the proper steps required to withhold any funds from the return of the security deposit.
That being said, if anyone can find cases that support a different definition I'd like to know!