Property Managment without a broker or license

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Property Managment without a broker or license

Casey Gregersen
Rental Property Investor · Houston, TX · Member since 2016 · 20 posts · 5 votes

We have 11 units in #DFW and hoping to start to do Property Management for other investors in the area to help supplement our cashflow and scale our business.  Does anyone know of any legal work-arounds we can do this without being an agent or licensed broker?    

Would it be best to speak with a broker and ask if he will take a small cut to allow us operate under him even though I don't have my license?   

Do I first have to half my real estate license no matter what?

Do I network with another agent, and ask to run this all through them at a small fee?

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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
7y

@Casey Gregersen

You have to be licensed to work under a Broker

In reality, very few brokers are going to allow an agent under them to do property management as the broker is responsible for the actions of their agent. Property Management is the biggest source of lawsuits in the real estate business. As a broker, I would not consider it for a second 

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    You must be licensed to manage property for others in Texas and you will need to either work under a Broker or become a Broker yourself (takes a couple years). The only other legal way to do it is to become an attorney.

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  • Casey Gregersen
    OP
    Rental Property Investor · Houston, TX · Member since 2016 · 20 posts · 5 votes
    7y

    Thank you Nathan, that is super helpful.   I assume rules are same in Wyoming? I also have property up there as was hoping to do the same thing.  

    Would I be able to work under a broker if I don't have my real estate license?  Maybe just pay them a flat fee?

    Again, I'm thinking I'm not the first one who has ever tried to manage other people's properties and didn't have a license so trying to figure out the best option, or maybe getting my license is my only option?  

    And third question, if I want to manage property in Wyoming and Texas, how would I go about that? Get licensed in both states and find 2 different brokers, or is there an easier way>

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    7y

    @Casey Gregersen

    You have to be licensed to work under a Broker

    In reality, very few brokers are going to allow an agent under them to do property management as the broker is responsible for the actions of their agent. Property Management is the biggest source of lawsuits in the real estate business. As a broker, I would not consider it for a second 

    9Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Greg H.:

    @Casey Gregersen

    You have to be licensed to work under a Broker

    In reality, very few brokers are going to allow an agent under them to do property management as the broker is responsible for the actions of their agent. Property Management is the biggest source of lawsuits in the real estate business. As a broker, I would not consider it for a second 

     Amen Greg,  PM to be worth your time you need a good number of doors.. to put up with the general business dynamic  once you get up to a lot of doors north of 1000 you then have a pretty valuable business that can be sold.. 

    the only state I am aware that does not require a license is Maryland which is surprising thinking of all the money PM's handle on a monthly basis if they have any size of a business.. 

    In Oregon you need brokers license AND the PM modal on top of it.. its the hardest license to get.. ( by hard meaning the most test you have to take)

    Trust fund violations are the number one reason agents lose their licesnes and PM is all about trust funds and accounts.

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  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    7y

    Simply it is illegal. Realtors can not even manage properties because of stiff equal housing law and most RE brokers do not carry property insurance.


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  • Benjamin Zwiebel
    Douglas, WY · Member since 2018 · 28 posts · 14 votes
    7y

    I am going to preface this with the caveat that I dont actually know, I'm only speaking anecdotally. However, I am fairly certain that no license is required in the state of Wyoming to do property management. It is a rural state with sparce population density. I know many property managers here from my job as a police officer and all of them work for the property owner (as opposed to a broker) and there is no way some of them even posses a high school diploma, let alone a license.

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    If you manage properties for others, you must be licensed. The exception is if you are an employee of one owner. 

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  • Karen Rittenhouse
    Flipper/Rehabber · Greensboro, NC · Member since 2010 · 623 posts · 615 votes
    7y

    @Casey Gregersen You can't manage any property you don't own. You must be on the title or have a real estate license to manage if you're not. 

    The way around getting your own license is to hire a broker-in-charge to be a part of your property management company. They must be a part owner - it is not enough that they simply work for you. In our company, the BIC was a 10 percent owner.

    Be sure to check with your local real estate attorney to make sure you are set up properly.

    Good luck!

    2Reply
  • Mike V.
    Rental Property Investor · Campbell, CA · Member since 2017 · 419 posts · 499 votes
    7y
    How does Airbnb get around these rules by offering co hosts? Does a co host not qualify as a property manager? If not, what activities are where the line is drawn? Collecting money? Coordinating with staff on behalf of the owner? I’ve always wondered where that line is drawn and I’ve assumed a company as large as Airbnb wouldn’t be breaking such an obvious law.
    2Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Casey Gregersen I think you could simply start up a "property liaison business" and just kind of serve as a concierge. "Northwest Assistance Inc"...something like that.. Just have disclaimers that you are not a licensed property manager and are not acting in the capacity of one...you should be fine.. Property managers are not gonna like this idea but at the end of the day I highly doubt that it is illegal...
    1Reply
  • Casey Gregersen
    OP
    Rental Property Investor · Houston, TX · Member since 2016 · 20 posts · 5 votes
    7y

    Thanks everyone for all the info.  Wow hot topic.  @Mark Fries I think you might be onto something there.  I'm guessing I would need to talk to a lawyer on that one.  Wondering what everyone else thinks about that work around?

    So if I go broker route, I would need to get my license, see if my broker would support me.  If not wait, what is it, 2 years to become a broker and do it on my own?

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  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Casey Gregersen It's definitely legal if done correctly. Remember all these licensed property managers are going to be crying foul about this idea but you just need to remember that risk equals reward...
    2Reply
  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y
    Originally posted by @Casey Gregersen:

    Thanks everyone for all the info.  Wow hot topic.  @Mark Fries I think you might be onto something there.  I'm guessing I would need to talk to a lawyer on that one.  Wondering what everyone else thinks about that work around?

    So if I go broker route, I would need to get my license, see if my broker would support me.  If not wait, what is it, 2 years to become a broker and do it on my own?

     Get your license, work under a broker for two years, get your brokers license and then you can work on your own.

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  • Greg H.Pro Member
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    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    7y

    @Mark Fries

    Do you have anything to back up your assertion ?  Do you have experience with this in Texas as I assume you are aware that laws differ in each state?  In some states, you do not have to be licensed 

    This would not fly with the Texas Real Estate Commission. Calling it something different does not change the fact that you would be collecting a fee. You would also not be able to obtain E&O insurance without a license.

    @Casey Gregersen You need to be an agent for 4 years in Texas to obtain a Broker's license

    3Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Greg H. There is always a different way to skin a cat... Just sayin...done correctly the idea WOULD work....is it risky?...for sure... Doesnt mean it cannot happen..
    0Reply
  • Greg H.Pro Member
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    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    7y

    @Mark Fries

    Every scheme works........until you get caught

    My comments assume that each person has something to lose.  One lawsuit(more likely than not as a PM) or Fair Housing complaint exposes one's assets and potentially freedom. So if those are of no value....go for it

    3Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Greg H. Agree 100% Just depends if it's worth the risk... Similar to the 500,000 flippers and rehabbers nationwide acting as a contractor without a license....running subcontractors and jobs doing various construction tasks... Was simply stating it can be done...
    1Reply
  • Costin I.
    Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
    7y

    @Nathan Gesner & @Karen Rittenhouse - are you guys saying is not enough to get a REA license, but you also need to work under a broker? Or involve a broker in the PM company?

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y
    Originally posted by @Costin I.:

    @Nathan Gesner & @Karen Rittenhouse - are you guys saying is not enough to get a REA license, but you also need to work under a broker? Or involve a broker in the PM company?

     Yes! A new real estate agent MUST work under a Broker. This is true whether they are selling real estate or managing real estate.

    After two years, they can complete additional requirements, apply for a Broker license, and then work on their own.

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  • Stanley Bronstein
    Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes
    7y

    State Specific Rules - All of these matters discussed above are state specific. Virtually every state is different. They each have different rules and those need to be followed. My recommendation is that you take everything mentioned above with a grain of salt AND that you contact a knowledgeable attorney in your specific state to help you ascertain the rules and regulations.

    Once you know the rules and regulations, then you can come up with a game plan to meet your specific needs and to comply with the rules and regulations of your specific state.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Greg H.:

    @Mark Fries

    Every scheme works........until you get caught

    My comments assume that each person has something to lose.  One lawsuit(more likely than not as a PM) or Fair Housing complaint exposes one's assets and potentially freedom. So if those are of no value....go for it

     I have seen two people put into prison in Mississippi for illegal NON licensed property manager schemes..  If the state requires a license then there is simply no work around.. Period.. unless you own the asset  and not just 1% to get around the laws.  Or your employee of the owner of the asset .. and in some states you still need the license even if your an employee of the owner. 

    How anyone would do this and break the law especially in a start up phase for the minor amount of income they would make ,, to me that would be the height of foolishness.. 

    but we do see non licensed mom and pops all over the country thats for sure.   And like Greg says its fine until you get in a snit with your owner or tenant and they realize your not licensed and file a complaint.. you toast then

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Mike V.:
    How does Airbnb get around these rules by offering co hosts? Does a co host not qualify as a property manager? If not, what activities are where the line is drawn? Collecting money? Coordinating with staff on behalf of the owner?

    I’ve always wondered where that line is drawn and I’ve assumed a company as large as Airbnb wouldn’t be breaking such an obvious law.

     I suspect they have license agreements with brokers in each state.  Much like the crowdfunders who wanted to make loans in states were licenses were required  they got local brokers or MLO's  for instance i have been approached by 2 crowdfunders to be their sponsor MLO in Oregon were licensure is required.. but they can go to Washington and no license required..

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  • Pat HeidingsfelderBusiness Member
    Real Estate Broker · Biloxi, MS · Member since 2016 · 169 posts · 92 votes
    7y

    @Jay Hinrichs 

    That’s pretty incredible about MS. 

    Do you know when or where this was? I’d be interested in reading more about it. 

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  • Karen Rittenhouse
    Flipper/Rehabber · Greensboro, NC · Member since 2010 · 623 posts · 615 votes
    7y

    @Costin I. I'm not sure if you need to be a BIC or simply an agent. Check with your local Realtor's Association and/or real estate attorney. It may also vary from state to state.

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  • Laura Sulak
    Investor · Temple, TX · Member since 2015 · 111 posts · 80 votes
    7y

    Hi, @Casey Gregersen, you really did start something here! While your question is a great one, and quite valid, it really should be answered by someone from your state who has actual expertise in this subject. 

    And while it’s a good idea to ask a question here on BP, it’s best to do your homework first. A quick Google search will give you results like this, from the Texas Real Estate Commisson, specifically about property management in Texas: https://www.trec.texas.gov/taxonomy/faq-category/property-management

    ANY type of real estate investing (property management, buy and hold, flipping, wholesaling, notes...you get the picture) requires the investor to do lots and lots of research before making a decision. Sounds like that’s where you are with this next step. 

    I can only speak for myself, but I would never risk losing my professional status and any of those 11 units just to take a shortcut and bypass the legal system. 

    Wishing you the best of luck as you delve into this new venture! Please keep us posted as to how you decide to proceed. 

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