As a RE Investor, what are the Pros and Cons of getting a Real Estate License? Also, the same question for a Brokers License.
Thanks
Do a search on this site it has been debated many times on many threads.
I have searched for “real estate license”, “realty license”, “re license” and I am not find anything of any value. I remember reading similar post in the past but am unable to locate them.
http://www.reiclub.com/forums/index.php?board=29;action=display;threadid=6600
This is one topic you will get many different opinions on. Here is one of the many threads you can find in the forums. There are plenty more, just go ahead and look. It might be the most hotly debated topic here.
Many have said that having a real estate lisence in bad because sellers will feel you can take advantage of them.
In my experience, seller’s have had more confidence the sale will go through because I am an agent.
People have said that you have to disclose that you are an agent for every transaction. So what!
I have had great experience having my license. I laso made 10k additional income last year just moving my own properties. Would have been double that if I was a broker.
I am also affiliated with a broker who does not require me to do floor time or take on clients unless I choose to.
I reccommend getting the license. It has had many rewards.
JeffInCT
You have a much higher degree of liability if you are a real estate professional. Then again, you can use your commission as leverage in any deal you do.
I think getting a license is worth it. Which is the main reason that Im taking a RE course right now. I hope to have my license in mid May. Think about it…you get full access to MLS, Lock box codes, and you dont have to line up apointments with realtors to go see a listed property you can just go when you want, you learn the little things about real estate, and you can earn extra cash in commisions as JeffinCT mentioned! Its a no brainer in my honest opinion!
People can sue you even if you do nothing wrong. It typically costs money to sue people though so if you do nothing wrong, you have nothing to worry about. I was an investor first, then I got my license. Plus they say if you’re going to be in the business for a while, you mind as well get a license. The big part is that you get to earn your own commission which is like cash back at closing. I’ve seen a few listings where they mention they won’t deal with realtors as a buyer, but the listings I’ve looked at where I disclosed I was an agent, the sellers never had a problem. They’re still interested in selling the house no matter who the buyer is. In a buyer’s market, sellers can’t be too picky.
As someone else said, it’ll probably cost about $1000-$1200 in fees. Realtor fees, MLS fees, lockbox fees plus your own overhead. But if you’re in an area where the houses are priced in the $300k and up, one deal a year makes up for all that.
I was a real estate agent for a while - gave it up because I felt the competition was fierce and my broker provided zero support and wanted my money before I earned it.
While I was an agent, all I could think was how much better it would be if I owned the property and had more control over it’s sale and if it didn’t sell, I could rent or refinance. - As an agent, it was all about self promotion, cold calling to get buyers and preferably sellers, and more cold calling. At the end of the day, I felt I could spend a lot of time and money promoting myself, and still have nothing to show for it.
Also, the original question asked about Brokers. In my state (CT) you have to be an agent for 2 years before studying/applying for a brokers license. Then, you have more expense, and responsibility for any agents you have in your “house”.
Disclosure is critical to any transaction you may become involved in.
You may want to consider becoming a “referral agent”. Which would mean any property you own, you would refer, for a fee to an active agent. (Usually, you get 25% of the agent’s commission.) You may be able to work out a deal that you are able to use their MLS password to look at properties listed when you stop into the office.
Finally, many many years ago, I attended a weekend seminar with Robert Allen, Nothing Down. During the seminar, we were cautioned NOT to become a Realtor. Reason: as an investor, you are charged tax on capital gains made through a real estate sale. If you are a Realtor, those capital gains MIGHT be considered ordinary income by the IRS.
Mtnwizard: Can you please explain the heightened liability thing to me? What is the huge risk that outweighs the benefits?
Every deal has potential risks and liability. Other than the cost of the fees and affiliations, having my license has been no detriment whatsoever.
Vicky: Interesting point but here’s the out. My tax consultant explained to me that realtors who are active participants in the operation of their properties do not fall under the income limitations of absentee owner/realtors. It is my understanding there is a cap on how much they can profit at the lower tax rate.
P.S. You are so right about the fierce competetion. I was fortunate to affiliate with a small firm, just a place to hang my licence where I can work on my own stuff.
JeffInCt
Well, here’s a topic that everybody seems to have an opinion.
Bottomline, as REOconsultants is fond of saying, if you’re an agent and it’s working, great. If you’re not, and it’s working great. If it’s not working then change it. I know that that wasn’t as poetic as REO puts it, but it’ll do.
As always, my thoughts on the subject are simple. The pros and cons of having (or not having) your RE license change greatly depending on WHAT type of RE investing that you are (or plan to be) doing. Your state laws concerning RE agents will make a big difference as well.
JeffCT, to answer your question about heightened liability, generally speaking, a licensed RE agent is viewed as a professional in the business and is, again generally speaking, held to a ‘higher’ standard by the courts than a layperson would be. That is true even if the RE agent (the professional) has been in business for a day and the layperson (a non-licensed investor) has been buying and selling property for 20 years. So, yes, you do have an increased liability as an RE agent, and probaby more so as a REALTOR, due to their own set of ‘higher standards.’ Now, whether or not the increased liability is really a factor depends on the above (your investing strategy and state laws) mentioned, but to simply blow it off and ignore it is unwise.
And you simply cannot be good at both being an investor and being a RE agent. You’ll have to pick which one that you want to focus on the most. If you pick investor, then you’ll have to search for a company that won’t care if you make them any money or not. That’s a tough search, and if you find them, would you really want to work for them? If you choose RE agent, then to be successful, your time will be limited to what you can accomplish as an investor.
Raj
I don’t think it has to be one or the other. You can be a part-time realtor and also be an investor at the same time. One of the reasons I decided to become a realtor was that you can get your own side of the commission which acts as a nice cash back. It just needs to be disclosed to the seller that you’re also the buyer. Very few sellers have a problem with it, those that do, you just find another property.
It also easy to find companys that will let you affiliate with them on a part time basis, it doesn’t really cost them anything for you to work for them because you’re typically a 1099. No sale, no cost, especially if they’re a virtual operation (working out of their home). Also when you take the test, you get mailings from other real estate firms looking for people and I had several that had high commission splits with no other fees involved.
Raj, are you a realtor?
In Connecticut it is almost mandatory. Here’s the thread: School; Broker sponsorship; test; license; then pay fees to everybody including the National Association of Realtors which gives your the Realtor distinction and little blue pin.
I work at a law firm. A multi-state real estate broker is one of our clients. (A name you might know.) We have a number of matters pending with their dissatisfied clients. Some of the claims are absolutely outrageous. Including one, where the “injured party” has taken their claim from the state court, to the federal district court and now to the Supreme Court.
As to being a good Realtor or Investor - hmmm. Both need to know Real Estate Procedures, Laws and Financing. Both have to be good salesmen. I don’t see much difference other than the investor probably cares about the property he is selling and the other only cares about the commission!
I don’t think it has to be one or the other
I never said that it had to be one or the other. I said that you can’t be really good at both at the same time. If you’re a part-time agent, then you’ll never be a really good agent. You simply won’t have the time in, or the experience, to compete with other agents that are fulltime and full career.
Am I a REALTOR? Does it really matter?
To answer the question, no I am not a RE agent or a REALTOR. However, I do have a somewhat unique perspective on the subject since I’ve been a RE investor for some time now that has worked closely with REALTORs and I also own a real estate agency. Vicky, what is almost mandatory in CT, that you have to be a RE agent? To invest in RE? As you’ve pointed out in your post, RE agents tend to get sued for minor things that a ‘non-professional’ would not, or at least not make it to court over.
Henry, you say that it’s ‘easy’ to find companies to work for as an agent. Well, that’s probably true, but my original question still stands. If you find a company that will hire you after you tell them that you only want to work part-time, that you only want to buy and sell your own stuff, and that you want a 70% or higher commission split on that stuff and they hire you, do you really want to work for that company? Doesn’t sound like a solid business plan model to me. I know that I would hire you. And btw, the ‘no sale, no cost’ is a false. There are always costs involved when you employ people, both monetarily and legally.
Raj
Raj,
What is almost mandatory in Connecticut is a real estate agent becoming a member of NAR and thus receiving the “Realtor” distinction.
I was a Realtor for a short time in Connecticut a couple of years ago. EVERYONE wants your money before you make any. The entire time, I was a realtor, I was thinking how much better it would be to own or control what I was selling. Which is why I joined my local REI! What I see as the advantage of being and investor and Realtor at the same time is that you have full access to the mls and can determine property values with a greater degree of accuracy based on past sales.
As to the law suits: the person I referred to who has taken her case to the Supreme Court of the United States because she didn’t like the decision handed down by the two lower courts. I have a life long career that has skirted Real Estate investing. I also managed a Real Estate Owned department for a bank. I know that when it comes to the largest investment most people will ever make (their home) emotions and tension can run very high. It is dealing with the emotion factor that, I believe, is where the Realtor/Agent oftentimes earns their money.
Raj,
There are several smaller RE agencies that welcome the part time agent to hang their license as it gives the appearance of a larger agency. When competing with the big nationally know firms, it’s nice to show 15 agent photos in your ads instead of 4. There is no shortage of these opportunities.
Sure there are the fierce cometeitors that require agents work floor time, make quotas or pay office expenses. We’re not talking about them.
As far as being good at both??? That’s just your opinion. In cases other than mine, I might even agree with you. 
Jeff
There are several smaller RE agencies that welcome the part time agent… Jeff, that is true. In fact, I personally love part-time AGENTS as they tend to be more active than the full-time (trying to get to full-time statis in most cases). Of course, I didn’t say anything about a part-time agent. My comment was part-time agent that ONLY wants to list and buy their OWN properties AND they want a high commission structure to boot. Often times, these demands are given by newly licensed agents that also haven’t bought their first properties. So again, how smart, in a business sense, would it be for a company to hire such a person? And how smart, in a career sense, would it be for someone to work for a company with that kind of business sense? :-\
As to being good at both, yes, it’s my opinion, as all posts are of the poster. However, it is an opinion backed by facts. Of course, everybody’s definition of “being good” or “successful” may differ as well. If you believe that buying one or two investment properties a year is good, or that helping one or two clients (besides yourself) a year makes a successful agent, then I’d have to agree that it would be easy to be good at both. 
Vicky, I believe that it’s practically mandatory for RE agents EVERYWHERE to become a REALTOR if they are going to be successful in the business. Without MLS access, they aren’t any better than the layperson. In fact, the term REALTOR has become basically one and the same as RE agent to the layperson (just look at posts on these forums).
Let me point out some things if I may. Many (many) people say something to the effect, “I’m getting my RE license so that I can learn to be a RE investor.” That’s like saying, “I’m getting my plumber’s license so that I can be a carpenter!” About the only thing in common is that you need them both to build a house. A RE investor and a RE agent are two different trades. You can’t learn one by becoming the other.
I’ve also heard things like, “I’m getting a RE license so that I can get access to the MLS,” and “so I can get a commission on what I buy,” or “to pull comps” or “to be the first to know about the deal.”
Well, I had MLS access long before I started a RE agency, and I still haven’t had to become a REALTOR. I’m still better at comp’ing properties than most of my agents, with or without MLS access. As for “knowing about the deals;” the best listed deals hit the MLS only AFTER they have been put under contract. The listing agent has a few investors that get the first look at their deals before they’re listed to the public (if at all). You still won’t get those simply by being a RE agent. In fact, it will hamper any efforts to get them because you’ll want your have of the commission, which brings us to that topic. Henry, sorry to say, but (at least in NC) many foreclosure companies won’t pay a commission at all if the the buyer IS the RE agent. And the amount of that ‘cash back’ is usually not nearly as much as newbies think it will be because they don’t figure in the split (company/company, then agent/company), not to mention the taxes due on that commission (plus dues, license fees, etc for having a RE license).
Raj