Investing with a license?

I’ve been reading this forum and the articles on the site for a while. You guys are great at giving advice.

My name is Marc, and I started in real estate in '05 buying a duplex to live in while I went to college. I acquired a couple other places over the next couple years, and am now in the middle of my first rehab.

My question is this: What are the pro’s and con’s of having a Realtor’s license when buying and rehabbing homes?

for you to actually have the sales license?

there really isn’t one, other than you’ll get a portion of the commission back from your brokerage.

there are many disadvantages depending on what state you’re in. in new york, it can be a murky swamp to stay on the straight and narrow road, legally speaking, because of fiduciary responsibilities.

FULL DISCLOSURE is an absolute and get it in WRITING. you talk to someone and buy their property without telling them you’re a realtor and look out - not good. heck even if you start talking with them and don’t disclose pretty much right away and THEN decide to buy or do whatever, that can get you in trouble too.

another advantage is you’ll have DIRECT access to the local MLS and alot of market information you won’t readily have yourself. i mean, when i got my license, it really opened my eyes to what’s going on in the market. even with a realtor “on my team” can’t give me what i have now. i get to see it with my own eyes.

if you want to be an investor, stick to that. you can check out craig proctor as well. he’s got something going on with like buying listings and selling them and what not. i know next to nothing about it, but you can check it out. google him.

My wife got her real estate license at the beginning of the year and it has helped tremendously! We save a ton on commissions on the selling end and even get a little on when we buy. We don’t deal with distressed homeowners so disclosure has yet to be a big deal.

I forgot to mention that I’m currently working in Indiana if there are any laws specific to the area.

I have a partner who is planning on getting his, so I was thinking it might be best to let him do that part, and use his MLS access, but go after the properties myself to avoid scaring people away with the disclosure.

Thanks guys.

Where at in Indiana? I am in Fort Wayne.

I am from Indianapolis and hope to invest in that area in the future. My rentals and my current flip are in Vincennes. (Halfway between Terre Haute and Evansville)

Jtt -

first, you’re not going to scare anyone away with disclosure. all it means is you’re telling the sellers that you (or your partner) are a real estate agent.

most just shake their head and say okay. (they’re not interested in the details - all they want to know about is the money/deal).

people want to sell their properties, especially “distressed” people.

now if your friend is a member of your LLC or shareholder in your corp, or is your partner in a GP - then the two of you are one in the same - he reps the business.

if he’s not, then he simply works FOR YOU, the buyer. every state is different, call your local board of realtors to find out the specifics on the laws pertaining to disclosure, etc.

not hard to find out.

let’s say your friend gets his license. his license is on the line if it is not disclosed that he is a real estate agent. it’s shady for him to “keep it a secret”.

really in the end, there’s very few reasons to “keep it a secret”.

honesty/integrity go A LONG way.

omiting the fact that you or your partner is a real estate agent is concealing the fact that you or he may have an advantage in negotiating due to access to pertinent info and expertise.

just be honest and don’t worry about all those particulars. if it’s a deal and you present a good offer for them and company, then it’s a win-win.

Licensed or not you ALWAYS need FULL DISCLOSURE the only difference between being licensed and not disclosing is you can lose your license! Real Estate agents are NEVER supposed to fill out the disclosure form. The owner of the property is the ONLY person that can fill it out.

Actually gypsy I don’t think anybody is talking about the “sellers disclosure form”, which is filled out by the home owner, but are talking about disclosing to distressed sellers that you are a real estate agent.

The disclosure can be simple as, “I’m a real estate agent”?

I saw an offer made by a RE agent, and it reads “Joe Blow, a licensed NY real estate agent”.

I suppose that’s disclosure.

I always put “Seller understands that buyer is a real estate agent purchasing the property for the purpase of making a profit”

FWIW, I studied the “books” to become a licensed agent and intentionally never took the final test. I didn’t want to have to disclose. I still find all the deals I want.

But no one has yet mentioned the IRS-effect. It’s tough enough to remain an investor-status with the IRS. As a Realtor, you almost assurredly become a “dealer” target. Once the IRS classifys you as a dealer, you lose all the tax benefits of RI. You also pay ordinary income taxes on what otherwise would have been LTCG. Then there are the self-employment taxes, etc.

Why dont you want to disclose?

Is it really that much of a hassle to be an REI with a license?