BiggerPockets

So I got sick of those calls where they didnt have enough equity for me to buy but they still needed to sell. I guess after the 20th one or so, I thought hey why am I throwing this money away and ending the calls with " what you need is a realtor, let me give you the number of XXX. - good luck!" . So I decided if I can't buy it, I can stil sell it. Can't hurt right?

So - I've talked to a few brokers. I really just need a place to hang a license so I can go about doing my own thing legally. I've taken the classes and test and am all set. I've found a broker that I like.

Before I do this, I guess I'm looking for some last minute advice. Is there any reason (besides disclosure, which I understand and don't see as a major setback), that I should not do this? Is there some way being licensed could harm my goal of investing? Has anyone done this and regretted it? Anyone that did not, and wishes they did?

I am licensed and my license hangs with a realtor. The main thing about being licensed is disclosure. The other factors are the costs involved, you have licensing fees, MLS fees (but also access), Errors & Omissions insurance, membership fees to your local Realtors association etc. These fees can add up to be a lot of money. The reason that I chose to get licensed was because I kept coming across a lot of deals and I was just passing them on to agents that I knew (sound familiar?). Since I wasn't looking to sell houses I did things a little differently, I am set up as a referral agent. This means that I can only refer business and collect a referral fee (typically 25% of earned commissions). I am not required to have E&O insurance, pay association fees or pay for the MLS. It works out well for me since my only cost is for the license itself and a small fee to the agency I am affiliated with. I don't know if your state allows for a referral only license but it is worth checking out.

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I've heard the negatives and passed them along to others, too. I've spoken with investors who had their licenses and acknowledged it was troublesome. I've also spoken to an investor who said we (there were three of us talking at the REIA) were nuts for not getting licensed. So, opinions vary widely.

Since others have pointed out the downsides, here are the upsides, as pointed out by the guy I spoke to.

1) Access to the MLS.
2) The buyer's agent commission. He did condo conversions in small buildings. He said being able to collect the buyer's agent side commission himself often let him make a slighter higher offer in a competitive situation.

Personally, I still lean away from getting licensed. I work full time, though, and it would be a big time commitment to get licensed. And the costs Rehab points out are a consideration, too.

Jon

Minna if you are a Realtor® any advertising you do must have the name of your broker and the fair housing emblem on it otherwise you are opening yourself up to potential problems. It has gone as far as my signature on this forum for the identification that you should make.

Legally you are the same person (investor and licensed agent) so you can not operate two distinct entities.

Being smooth on the phone is not enough. In some states you pretty much have to declare you are an agent in about 10 words or less from when the call starts.[list] Hello. This is Minna. I am an agent. [/list:u]

A license is a tool. It allows you do operate a specific type of business. If you have a second business that is in conflict avoid the tool or get out of the other business.

Sort of like getting married. You are saying yes to one but no to everyone else. Some forks in the road really are forks.

If you just want to pass on referrals consider a compensation plan that is legal in your state. Some states allow up to $25 being paid to an unlicensed person. Others are more flexible or will allow cross promotions. Or you just build up good karma and expect that you will get a deal on property management, listing fees and referrals back to you when a listing agent can not solve the problem. Just do not tie the karma to any specific deal closing.

John Corey

The above is correct. It just can turn out that the judge does not agree with where you think the line is and what constitutes clear communication. Even more so if the seller can argue that they were under financial pressure because of a pending foreclosure or similar.

Then there are the brokers who you hang your license with. They might have had their fingers burned by an aggressive agent in the past. They likely have house rules that state they have to approve all advertising and all RE transactions in which you are involved.

Finding a RE broker who is willing to have you put their license and reputation at risk so you can do your creative deals is tough. Mostly because if they really understand the deals they would have little incentive to manage a group of traditional RE agents. A few brokers are savvy investors. Most are not and they do not want 'odd' deals connected to agents in their office. Check your broker carefully when you are thinking of being an investor with a license. Or just be your own broker.

I have meet many newer agents who were also new investors. The restrictions that they had to operate under were pretty strong.

One last thing. Beachbum said that disclosure should be in writing and mostly handled at contract time. I know of states in the west where you better be very clear with the disclosure long before there is a piece of paper being signed. The other party can sue if there was a reasonable expectation of agency even if nothing had been signed. Info they disclose to you when they are expecting agency can be considered private and not really something you should be using to decide if you wholesale vs. retail the deal. Flipping and being an agent can be very tough. In CA all ads for lending money, offering a property for rent. advertising that you buy for cash and other similar ads dealing with RE have to have the word agent in the ad if you hold a license. Using a different phone number or other things does not exempt you.

A licensed agent is a hired gun. You can not conceal that you have such a status in most states. When and how you disclose it could vary but that will vary by state law, by house rules for a brokerage and by the decision of the judge when they decide if you broke the law.

Having a licenses comes with benefits and with costs. Oil is not water. Water is not oil. Choose wisely.

John Corey

Think of it this way.

Why would you care about concealing if you were an agent on your bandit signs, on the phone and at other times? The only reason I can think of is people will react differently if they know you are an agent. If you know they will act differently then the judge will believe that you should be up front as to your legal status. To conceal your status so you can do deals you would otherwise not have a shot at becomes the issue.

Minna,

I think that getting your license would be an excellent solution to your problems. You could make some extra money by working as a realtor and you could still invest for yourself. I know a couple of successful investors that are agents and they do just fine. I also think Beachbum is right about the advertising issue.

Finally, there are a lot of advantages to being an agent. You will make a lot of contacts and quickly learn who the good attorneys; title agents; and banks are, and you will build relationships with these people. In addition, you will receive a lot of inside information and will find out about a lot of deals before they come on the market.

In short, I think getting your license is a great idea!

Good Luck,

Mike

John,

No, I am not a real estate agent, but I have a couple of relatives that are realtors and a couple of the local successful investors are realtors.

Mike

As you are rather successful and do not have a license other investors should be able to do the same (no license, investment success) if they follow what you do.

John,

That is right, but Minna is in a different situation. As I recall, her job was eliminated in a downsizing and she is in an expensive court battle with her ex. That means that she needs cash to keep things going while she is starting her investing business. It is very difficult to start a business with no job and no free cash, especially if you're trying to get loans. My point is that a real estate license could give her another source of income; would let her set her own hours; will help her make contacts; and keep her working in real estate.

Mike

There is one other aspect to getting licensed in order to generate some cash, how long does it take to get licensed? Here in Nevada it took 6-8 months when the market was flying high. Of course that was because every cab driver, bartender and hairdresser was getting licensed to do real estate on the side because it was so easy. Now that there are far fewer people looking to get licensed it still takes 3-4 months because of the background checks that they are required to do here. How long will it take in CT? The other thing is that even after you get licensed it still takes a long time before you see a paycheck. If you are lucky enough to sell a house on your very first day you still don't get paid until the deal is done, maybe 30-60 days later.

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