Rent a Wreck? How About Rent a Broker?

Photo by adamr from
Photo by adamr from

You are building your rental portfolio of turn-key cash flowing rentals, either locally or from afar.  One of the key players on your team needs to be your property manager to keep the true cash flowing properties cash flowing and to take those fixer uppers and turn them into a cash flowing rental.

So how can you spot a good property manager?  One question you should ask is are the licensed as Real Estate Agents and do they have an Active Broker or are they renting their broker.

First for being a licensed company.  In the state of Missouri and many other states across the country, having a Real Estate License to help procure buyers, sellers AND tenants for other people requires a Real Estate License.  In the state of Kansas, however, you can manage rental properties for a 3rd party with out a license.  (you can get around the licensing if you own your own rentals and hire a person to work for you or your company as an employee – then by extension, they are you and don’t need a license).

In the Kansas City metro, finding that good property management company can be a daunting task because there are so many bad ones, but starting with that one question – do you have a real estate license – can weed out most of the bad companies.

The next question would be, is your broker active?

We see all too many small property management companies that could not manage properties through their traditional real estate brokerage and were asked to go get their own license and to be their own broker, but they take the easy way out and go hire a broker.

Now hiring a broker, in and of itself, is not illegal or even bad.  It’s when the broker, who has all the extra training and knows all the rules, does not really have any hands on management of the day to day business of the property manager company that things can go bad.

Here’s an example.   You have a classroom full of 8 year olds to be managed and taught their ABC’s and 123’s.  Would you want the teacher to be the person who went out and learned how to be a teacher, has hours of training and student teaching with an experienced educator and then took it to the next step to get their teaching certificate?  Or would having a school of just out of people just out of high school managing all the classrooms, with that experienced teacher coming by once a month to say hello and have a cup of coffee?

If your eight year old was in one of the classrooms, you would want the hands on trained teacher, not the high school graduate that is managed by a hands off principal who does not care how the students are taught or if they learn anything as long as they get their pay check once a month.  Having a property management company that is managed by a hands on manager, usually the owner, is going to do a much better job than a bunch of people or a few people even who don’t really know the rules out there representing your interest. recently posted an article “Keep your real estate broker license safe by avoiding ‘rent-a-broker’ scenarios.”  Inman states “if a broker is unaware of business finances or has no access to the trust account, trust account records or even the office, that’s a problem. Legal action can be taken if the broker has no or very little say in the business as a whole and does not supervise the staff of real estate agents. Whether a complaint is filed or a random audit takes place, these stipulations can be detrimental to a real estate business.”

So if you already have a property manager, ask them if they are licensed and if they have an hands on broker.  If you are seeking a property manager, keep this HUGE question in mind.