Hiring a broker for your property management company. What's going on,
YouTube? It's Matt Faircloth. Thank you for watching this YouTube channel. My name is
Matt and my company is called The DeRosa Group and we're a real estate investment
company that has this program called Mentorship Monday. That's what this is. If you guys have a
real estate question, all you got to do is send in an email to HelpMe@DeRosaGroup.com,
that is HelpMe@DeRosaGroup.com, and I will answer right here on this YouTube
channel for you and everybody else to learn from. And I'll even give you a shout out,
so make sure you send that over. Today's question comes from Ron. Thank you,
Ron, for your question. Ron's question is about property management. Now, before I even get into
reading his question, I need to explain something to you guys. So if you have a legitimate property
management company do you need to have a broker's license? You have to have your broker's license,
but your management company needs to have a broker's license somewhere hanging as a
part of its own staff, right? So someone with a broker's license needs to be working with the
company as the broker of record. And that's simply because if you're a property management company,
you are practicing real estate in receiving rents for people on behalf of owners,
in marketing properties on behalf of owners, you're practicing real estate. And so your
agents for your PM company need to be licensed, and you need to have a broker's license that
those agents fall under that, that broker with the license is really who's responsible for the
property management company's compliance with real estate law, okay? Aside from being an attorney,
they are the educated professional that are there to represent those agents, okay?
So putting that aside, let's get to Ron's question, okay? "First, thanks for all the great
videos on YouTube." You're welcome, Ron. "I'm in the process of setting up a property management
company, we only have a realtor's license. We are in Central Alabama. Based your experience,
what would a typical compensation scheme be for a broker to fulfill the legal requirements set
by the state? Also, what would be the broker's relationship with the company, i.e., employee,
director, partner, or simply a contractor?" Okay. So here's the deal, Ron. Now, I know one property
management company that simply leases that broker's license from the broker of record,
meaning they just pay a fee to use that broker's license. I don't think that's the way you want
to do it. I think that the real estate commission could not like that because the broker of record
is supposed to be sitting in the office, they're supposed to have office hours, they're supposed
to be there, right? So I don't think that you just renting that license is the right way to do it.
Now, the Real Estate Commission, as I understand it, now I'm not an attorney and I'm not a member
of their Real Estate Commission so this is what I had seen, the broker's role can be of a couple
of different things. The property management company that runs a lot of my properties in New
Jersey and Pennsylvania, that broker of record is really not a very active person with the company.
They have office hours, but they typically spend most of their time going out selling real estate,
trying to generate more leads for their real estate portfolio, or maybe just building their
real estate business, and just generating buyers, and sellers, and that kind of thing. They don't
have to have an active hands-on role in the property management company. They don't have to
collect rents themselves or anything like that. So the broker can be as active or as hands-off
as you need them to be, but they need to have physical presence in the office so if the real
estate commission if they come in, they can see that the broker has office hours there,
and they have a presence, and there is a broker on site, whether they're there or not. So to your
question is there is no hard and fast rule that I know of that for where a real estate broker
falls in this type of arrangement. Now there's no regulation on that,
but I here's what I've seen work, the best, Ron. In that if someone's got their broker's license,
they likely have some contacts, they likely have some resources, and they likely had to go
to school for a little while to get that broker's license, meaning they're well-educated and they're
probably connected. So I would not shun the broker, I would not push them off into the sunset,
I would actually bring them into the company and cause some sort of win-win. So maybe the
broker makes some extra money, if they sell real estate that ends up getting managed by
the property management company, maybe they get some sort of financial override or a
commission. These are all you're allowed to do, you're allowed to compensate for people's time
if you're a broker, or if you're compensate for sales, and commissions, and things like that.
So I would incentivize the broker for helping you grow the business. Maybe not give them ownership,
but they're going to be connected, they're going to be educated. So leverage that,
leverage their education and their contacts by helping you build your business. So I would
bring them in and make them maybe one of your best sales people. And that's what I recommend you do,
but there was no regulation that I know of that says that they have to be involved or that they
have to own the company, or whatever it is. You just have to have a broker of record on staff
that's in the office a certain amount of time. So strongly recommend you guys check out your
local state real estate commissions because that defines exactly what the rules are for brokers
of records in that. So those are my thoughts on that, but I do commend you Ron and I think Central
Alabama is a area that's growing really quickly. So I wish you guys the best of luck there. Again,
HelpMe@DeRosaGroup.com is the email address for Mentorship Monday questions. Look forward
to hearing from you guys. Thank you for watching and have a very profitable week.