Property management question

9 Replies

Can the owner of a home, a rental home, hire out his friends and FAMILY to be his property manager?

Originally posted by @Charlie Moore :

Can the owner of a home, a rental home, hire out his friends and FAMILY to be his property manager?

 I assume so that he can claim it as an expense? Don't think I'd want to try to survive an audit that way. If you mean because he genuinely needs a property manager, almost all the states require you to be licensed to act as a full property manager, but there may be functions they can perform with or without pay. 

In most states, the short answer is no.

An owner does not need to be licensed and an employee of a property owner may perform limited work on behalf of the owner.

Agreed, in most cases this is a no. In Oregon, you have to be a licensed Broker or a licensed Property Manager if you are not the owner of the property or an employee of a privately owned property within a corporation. That being said, it's always tricky having a friend or family member managing investments for you. It definitely adds a level of complexity that can be difficult to navigate.

Check your state laws, but generally you must be licensed to manage property for someone else. That being said, its usually certain activities that qualify you as a property manager. The owner of a house could (generally) be free to hire anyone he wants to do tasks for the property. You are likely safe as long as the owner is the one signing leases, taking rent and deposits, etc. If that's the path you take, make sure you review your local laws.

Originally posted by @Charlie Moore :

Can the owner of a home, a rental home, hire out his friends and FAMILY to be his property manager?

 You can do this in most states, but there are considerations. They will likely need to be licensed. Requirements vary by state, but it usually involves paid classes and testing. If your goal is to get the tax write off, keep in mind that they will need to pay taxes on the income. You will need to report the money you pay them under 1099 to the IRS, so the IRS will be aware they made the money. Of course the other thing to consider is whether hiring friends and family is really a good idea at all. Mixing business and personal if often trouble.

@Charlie Moore , as most already indicated, check the local laws.

However, research what the actual tasks that requirement a license.  In Arizona, you need a license to discuss rate and terms.  But if the landlord/owner handles rate and terms, then everything required doesn't need a license.  Assuming the landlord uses a rent collection software, then at that point the family member is more of a maintenance coordinator.

It's not uncommon for property management companies to use unlicensed assistants to call for late notices, handle scheduling for contractor, etc.  My understanding is the primary usage of the license is for the leasing tasks more so than managing the facilities.