Questions

If I have an online process that helps apartments lease their units, should I have a real estate license to accept the referral fees?

I've read that federal law requires a person receiving a referral fee to have a real estate license. My process will simply match people to specific apartments for free and be listed as the referring entity. I know other companies do this already, but I’m not sure what rules they follow. I''m in Ga...

4answers

I'm a licensed real estate agent and multifamily unit rental property investor in Georgia, as well as an internet entrepreneur. You're correct; you must hold a real estate license to collect a referral fee. However, this isn't the only way to monetize your website. You could select from a wide variety of monetization methods, such as CPM or CPC advertising, charge a flat fee per listing, or use the site as a lead generator for webinars, seminars or premium material. In short, there are many ways to create revenue streams from your site that go beyond simply collecting a referral fee. (Bear in mind also that referral fees on rentals work differently than referral fees on buy/sell arrangements). If you'd like to discuss these ideas in greater detail, I'd be happy to speak with you by phone. Thanks!


Answered 6 years ago

Great question and so there is the legal answer and the practical answer.

The legal answer is that unless it is your own property, you must be a licensed agent to receive compensation for acting as a leasing agent if you are doing it as your own business. i.e., if you are calling landlords and telling them you can fill their apartment vacancies and you would receive a fee each time you find a qualified candidate who ends up renting, then you do have to be licensed from the legal perspective. If you are on the payroll of a leasing company however, then you are paid as an hourly employee with commission based compensation.

The practical part of this as you know is that real estate agents & associations only care about Listings, Buyers, and Sellers of Property because that is where the largest commissions are. You will likely be able to be paid under the table for every vacancy you fill in an apartment and no one would ever know. You will want to avoid dealing with any realtors or agents (unless you know them to be cool) and essentially build your business by finding "Supply", i.e., landlords who have a lot of apartments to rent.

Once you have the supply, you then simply list them on Craiglist and your phone will ring off the hook.

Prior to my current business, I ran my own property management and leasing company and rented 85 apartments in a year, so I know this business well and rentals are simply not high up on the list of areas where local associations or government agencies try to crack down on, unless of course people are getting ripped off by people flat out lying about their connection with properties and getting their security deposits stolen.

In other words, if you act with integrity, you can make a good business renting apartments. If you want to schedule a call with me as well, I can give you my business model in a consultation if you want pointed advice.


Answered 6 years ago

Every state has different rules and regulations. Typically were the line is blurred is if you actually engage in the showing, promoting , leasing or doing any work for the landlord that would require a license

If you are exclusively going to do marketing than do not call it a referral, but a simple marketing fee that would be due only if the marketing you launched ended in the unit being rented.

The minute you start executing services that would require a real estate license, such as drawing up contract, taking applications, showing units etc., then you are in RE Agent territory.

Keep it simple and keep it clear and draw a very strict line on what you offer and you should be ok.


Answered 6 years ago

Looks like you have some good replies and some gray answers on this thread. If you have a business model that will fill vacancies as an app or website then pricing can be structured to not violate state laws.

However if you're trying to be the leasing agent then yes you might have some issues. I will warn you that property management and leasing are very much on the radar of state regulators in California. So understanding your services and how you will be paid is critical.

I am the CEO of a large residential property management company in Southern California. I have extensive experience in this space and would be more than happy to share my experience. Best of luck!


Answered 5 years ago

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