Posted by Mark (SDCA) on February 04, 2011 at 17:26:06:
No… I dont think so. He IS legal as long as his license is with a broker. Just like he can SELL houses. His broker is OFC responsible from him… as a PM or as a house salesman.
Property Management Issue - Posted by D
Posted by D on February 03, 2011 at 09:31:08:
I am interested in creating a small property management company. I currently have my New Jersey Real Estate Sales License, but not my brokers. NJ law states that to own this type of company one must obtain a brokers license, this is not currently possible due to the fact that I will never become a full time sales person for the mandated 3 consecutive years. I am an accountant by trade.
Now after doing some prelim research it seems that as long as my license is hanging with a broker I can perform all duties of a property manager. All of my tenant advertising/leases/tenant placement will have to be funneled through my brokerage office and obviously they would receive their regular commission cut.
Now it doesn?t seem that there are any laws restricting all other duties of a PM. You don?t need any licensing to pick up the phone and call contractors or do bookkeeping for the owners.
My questions are that if you were a property owner, would this somewhat different way of conducting business perturb you from allowing me to manage your property? Will there be any legal ramifications on my broker if an eviction attempt goes awry and to court? Has anyone ever heard of a property management company being run this way?
I have played devils advocate for a while over this and I feel there could be some issues, but nothing that seems too insurmountable.
Any feedback is appreciated.
Dom
Re: Property Management Issue - Posted by Natalie-VA
Posted by Natalie-VA on February 07, 2011 at 11:01:05:
Property Managers only make any real money if they do high volume. I wouldn’t rule out the possibility that you won’t ever qualify to become a broker. I’m not sure what their definition of “full time” is.
Also, it might be feasible to open your own company as an agent and then hire a principal broker. Do their rules say that the owner has to be a broker, or just that someone has to be a broker?
–Natalie
Re: Property Management Issue - Posted by Dave T
Posted by Dave T on February 05, 2011 at 17:12:33:
Here in the coastal SC area where I live, it is standard practice for real estate agencies to have a property management arm. The property manager is often a sales agent (or former agent) who works under the broker in charge.
Re: Property Management Issue - Posted by arlan
Posted by arlan on February 04, 2011 at 08:42:05:
In some states, Oklahoma for example, you can obtain a brokers licence without the 2 year RE agent experience if you meet other qualifications. They have a point system, like the following:
Points for:
College graduate
Owning rentals
buying houses for your own account
selling houses for your own account
Add up the points, pass the test and you are a RE Broker.
I don’t know about your state.
Re: Property Management Issue - Posted by jimi
Posted by jimi on February 04, 2011 at 07:53:25:
If you want a different different way of setting this up you can use a “sandwich lease”. You lease directly from the owner, and then sub-lease to the occupant tenant. You can do this on an agreed upon monthly rent or on a performance basis, i.e. a pass-through amount of say 90% of whatever you collect each month. This is very common in commercial real estate, rare for residential. You are a principal in the transaction, so no licensing is required. The owners are agreeable to this arrangement, particularly when you point out that they remain an “active manager” from an IRS perspective and that “agency” contracts are typically very one-sided in favor of the Realtors.
Re: Property Management Issue - Posted by Frank Chin
Posted by Frank Chin on February 04, 2011 at 07:27:23:
D:
I researched the laws in my state, NY, and it’s pretty similar to others. The laws states “you must be a licensed RE broker to collect fees to collect rent for others”.
What does this actually mean??
Normally, PM’s would have checks made payable to his management company. He would deposit the collected rents, turn around, take his fee off the top, and then remit the balance to the landlord.
I am not an RE broker, and I researched this when I set up a “C Corp” as a management company to manage properties I owned so I’ll be able to take certain tax deductions. In the application form for the corp. entity, it mentioned in certain cases, licenses are required, and must be submitted with the application, or the application would be denied.
What did I do as I don’t have a brokers’s license??
I applied as a “business service company” rather than as a “real estate management company”. As a business services company, I simply have tenants make the checks payable to the landlord, I bring the checks down to the bank to deposit the funds. As I am a merely a messenger service, I am not “collecting fees for others for a fee”, by “depositing rents for others …”
The same holds for negotiating leases. You would advertise, show a store or apartment, prepare the leases, but then have the landlord agree on the final rent, and sign the lease. This way, the landlord has a final say on the lease, so you are not “negotiating leases for a fee”.
Other than that, you don’t need a license to shovel snow, clean the sidewalks, call the plumbers, do the books, or show the rentals.
As to the technicality of “collecting rent for others for a fee”, I can have tenants of the properties I own pay the management company directly if I wish, because in this case, I am not “managing for others”, but for “myself”. On the same token, my wife and I had managed properties for elderly relatives, did not charge a fee, collected rent for them, but it’s considered legal as we did not do it “for a fee”.
Only if you did it for others for a fee would you need a license and you also have to be bonded.
My CPA asked me if he was violating the law as he started doing the books for the landlord of a local strip mall. Then the landlord had him follow up on past due rents, and had the tenants drop the rents off to his nearby office.
I asked him if the checks are made payable to the “landlord”, and not him. He said it’s for the landlord. I told him technically, he is only providing a messenger service for depositing the rents, as he is not technically “collecting rents for other for a fee”.
Re: Property Management Issue - Posted by Mark (SDCA)
Posted by Mark (SDCA) on February 03, 2011 at 16:45:58:
Yes, I have worked with agents who were PMs but NOT brokers. It’s no big deal. I cant imagine an owner having a problem with this.
Trust me, with all the OTHER problems with PMs, this would not even be on the radar.
Re: Property Management Issue - Posted by Dom
Posted by Dom on February 07, 2011 at 12:20:15:
I believe the rule is that there just has to be a broker in the company and they are responsible for my license, I should still be the principle of the company. I have considered this but I haven’t done too much research on it. Is this common practice? Do the “silent” brokers usually tend to ask for absurd compensation due to the leverage that they would have over me?
Thanks,
Dom
Re: Property Management Issue - Posted by arlanj
Posted by arlanj on February 04, 2011 at 08:38:06:
You would be under the radar until a local legal property manager finds out, or a disgruntled RE agent, or your brother in law. When they turn you in, you would be smack in the middle of your states radar.
Re: Property Management Issue - Posted by Natalie-VA
Posted by Natalie-VA on February 07, 2011 at 15:13:59:
Hi Dom,
Personally, as a Broker, I wouldn’t do it for any amount of money, but I’m sure there are those who will. Sorry I can’t offer more insight. Just trying to come up with ideas.
–Natalie