I was wondering if you have to have a real estate license in order to do lease options in Missouri? ( I have been told that you must have a Broker's license to manage other peoples properties in MIssouri.)
I am unfamiliar with how to manage other peoples property. I would also like to know if this is true.
I am unable to render legal advice. However, my opinion that as long as you initially lease the property either personally or an entity you control (LLC, c-corp) and then assign your interest 100% legit.
The real question is how viable is your tenant buyer? The lease option is a good strategy in my opinion but imho the quality of the person you end up putting in the property is crucial. To do this ethically.
The second question is absolutely you need to have a broker license to manage property for someone for a fee. I think subleasing under a master lease is 100% legit without a broker license.
@Douglas Dowell Thanks for the advice. I really appreciate your input.
You bet @Sandy Uhlmann . Got to look out for my Missouri peeps. (I am a UCM grad..spent 20 years in KC.)
@Sandy Uhlmann Hi!
You need a license in Mo. if you manage or facilitate any sale or lease for an owner.
If you own the property you will not need a license.
Mo. is not really agreeable to the equitable interest angle, doing one deal will slide by, doing 20 deals you will be seen as being in the business and doing contract to circumvent law.
All RE is local, you really need to look at what is customary in your area before leaning on strategies passed out on forums.
Sandy, you are in Jeff City, the state regulators are just down the street, I'd pay real close attention as to what is expected in the neighborhood.
I suggest you ask a local attorney as they will certainly know how such is viewed in that jurisdiction. :)
@Bill Gulley I am very interested in your experience in this arena Bill. It seems to me whether they like it or not the principal is sound. Have you seen any case law to the contrary?
In understand the license folks may not like it...but not liking it is not the same is saying its not legal.
Whats the difference between a master lease and doing it in a residential setting?
I agree if you want certainty you should consult local counsel.
When a state regulatory agency issues a cease and desist order, small investors usually comply, they don't run to court, so case law may be hard to locate, in reality, it may also be a board action which may or not be public. In my experience I have found that most violations don't get to court, fines may be levied, orders issued and compliance required.
You may be an attorney, if you are you would be in a unique position to defend your actions, most aren't so error on the side of caution is prudent business.
There should be case law on the unauthorized practice of RE but I don't know of the specifics if they were dealing in leasing or options.
"Being in the business of" is usually defined by the degree of income derived by some activity vs investing. If most or all of your income comes from an activity and you actively participate in the activity, you are probably in business. Look to IRS findings as the basis. An investor who derives all or most of their income from activities is viewed by the amount of income in relation to their net worth and such activities being customary for someone at that level.
RE investors who don't address the "being in the business of" aspect really opens themselves up to other issues, business license infractions, insurance issues, local and state tax matters and perhaps IRS issues as well as professional license issues.
Regulators with the dept of finance here in Mo. take the position of "if it quacks like a duck and walks like a duck, it's a duck". There isn't a real estate brokerage in this are who hasn't been gigged for something, most object and usually they lose. I can't see the matter being different with an individual, just suffer the consequences, change and move on, IMO.
A master lease can certainly be done in residential. It may become an issue when you are seen as being in the business of leasing properties owned by others and using agreements to circumvent the intent of the law.
As I have mentioned before, you can describe your business activity and point ot the areas where you feel that exempt you from oversight and request a letter of determination from that regulatory agency. I have found that they are very fair, they really don't want to supervise some odd ball near miss type business strategy if they don't feel the need to. Professional license issues are really about protecting the public as the first concern, yes, there is money involved, but compliance is not about the money, it's about the public good and will be a consideration of any judge I'm sure.
You might bring these aspects up with a local attorney and see what their opinion might be. :)
I appreciate that view point @Bill Gulley
It seems even for me with a different war chest educationally and experience wise: velocity matters. Getting mired in an administrative law fight does not sound like a good time and def. not a formula for higher return on investment.
I think maybe commercial master leases are less prone to scrutiny because of the different perception of the need to protect the public. Sure, in residential much more consumer protection needed where in commercial we are rightly or wrongly perceived as big boys and girls who can protect ourselves.
Its great to hear your perspective on this stuff.
And I totally agree, commercial is a different world! I'd say you can still have the business issues as to ones operations, but certainly there is a different perception. :)
You just hit the nail on the head "Managing other people's properties." You don't need to manage anything, the reason I started investing in real estate is because I did not want to have a job. If you manage properties it is a job, as an investor doing lease options I don't have to manage anything and I get paid immediately, I get paid a monthly income and I get paid future profit without doing all the work. That is what investing is all about. If you are acting as an investor and not managing properties why would you need a license?
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