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Is a Real Estate License Necessary?

by Ben Leybovich on February 11, 2014 · 78 comments

  
Is a Real Estate License Necessary

This question comes up on the forums with utmost regularity – like every other week.

Investors to be want to know if having a license gives them a leg up on competition.

I don’t know that there is a definitive answer to this question – it’s a personal thing on many levels.

But, surprise – surprise, I have an opinion

How I Became a Licensee

Patrisha_My BeautyThis is actually somewhat amusing.  Meet my wife, the love of my life, the mother of my children Patrisha Leybovich. That’s her on the right, and I am sorry about the quality of the photo – phone camera.  This was taken a few a year ago when Patrisha took me to Cincinnati to listen to Gil Shaham, whom I’ve known for ages ever since the long-forgotten Aspen Festival days, play the Brahms Violin Concerto.

We rented a room in a little Chateau across the alley from the concert hall for a day.  Gil was Gil, and that says it all.  The food at the Chateau was 5-star.  The room was small, but believe me when I say – I did not notice…

What you need to know is that the 103-pound gorgeous little thing in this picture packs the energy of a 230-pound ice hockey player coming at you at a speed of 20 miles per hour – it hurts on impact, and most people wisely step out of the way.  In this way, I am not unlike most people and step out of the way more often than not…

Anyhow, Patrisha and I made a deal about 7 years ago – she takes care of today, and I take care of tomorrow, financially speaking.  She has been on board with my endeavors in real estate ever since she figured out that I don’t suck at it.  So, she let me run wild doing my creative finance bit for about 5 years, which brings us to how I became a Realtor.

At Dinner

About a year and a half ago, she took me out to dinner.  The stake was good, and so was the wine – she was softening me up, and I should have known but I am not too sharp that way.  You need to know that by this point in time I’d assembled 18 units which were cash flowing nicely under 100% leverage (you knew I’d throw that in).

It was apparent to both of us that even if I did nothing more but meticulously take care of the property and allow tenants to pay down the mortgage, over time Patrisha and I would be just fine.

You also know, if you’ve been reading my articles for a while, that I average one deal per year; it is always a multi-family, but it’s never more than one.  The size of the deal gets bigger each year, currently I am working on my first syndicated deal, but it’s always just one per year.

However, what it looks like to my wife is that I am busy for about 4 – 5 months out of the year while I stabilize the project, and then I just take life easy – while she goes to work.  See the problem…?

Well – Patrisha saw the problem.  She was happy with the “we’ll be just fine” part of what I’d accomplished, but not so happy with the “over time” part, and having softened me up she said to me:

“Honey – I love you, and I think you are hot (she didn’t actually say that last thing, but I think it works in this context – don’t you?).   You’ve been doing very well on keeping your end of the bargain taking care of our retirement, and I agree that we will be just fine.  But, if you think that I am going to schlep my ass to work for the next 15 years while you sit at home in you underwear (that actually happened), you got another thing coming…do something – go get a license!”

I Got a License

It was the easiest thing to do to comply with my wife’s wishes of being more busy.  I tried to tell her that I’d be no good at showing people pretty pink bathrooms, but I conceded that if nothing else, having a license would add to my education and put me in the flow of information.

Has it had any positive impact, and will it in your case?

Yes – having a license has had some impact, though it has been marginal.  Having a license and being known in my town as a Realtor has added some clout, but not with the general public – with the other Realtors.

The 10-unit I talked about here was brought to me by a colleague and I have to believe that being there at the right time, which was a function of having a license, was the driver in that deal.  Also, I did sell a few things to tenants that were ready to move on, and investor friends.

But, That’s It…

By and large, in terms of making money with my license – I don’t.  Being a real estate agent is very hard work indeed, and nobody should believe anything different.  I certainly don’t want to work that hard for that little.  There are flat out easier ways to make money.  I sell a course online and in one year it generated almost as much revenue as an average real estate agent earns in my state in the first year – most quit after the first year…

And I didn’t have to leave my house to do it.  And did I mention the cash flow from the 28 units I now own which takes on average of 5 hours per month of my time?  (I am about to change all that with this syndicate, but that’s different…)

Furthermore, some people say that a license allows you to save money at the front and back doors on your own deals.  Here’s the thing guys; if all you want to do is chase REOs and other MLS stuff, then perhaps you can use your license.  Personally, I go for the OFF-MARKET stuff where having a license means nothing.

Besides, if a Realtor brings me a deal, do you think I am going to nickel and dime them – of course not.  First of all, I know how hard they had to work to find the off-market deal.  Secondly, they didn’t have to bring it to me, but they did – they can keep the commission.   That’s how they make a living; it’s not how I do it…  Makes sense?

Conclusion

So – should you get a license?  I don’t know.  What does your wife think?
Photo Credit: afagen

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{ 78 comments… read them below or add one }

Dave Tanner February 11, 2014 at 5:46 am

Ok, someone is going to say it…. Ben, you married up, well done. Also the article was good. I’ve gone round and round on getting licensed, my wife and I just talked about it last wk. Would you mind speaking to the cost to get licensed, what percentage an agent (not a broker) actually gets a check for on a deal. Do you pay for your signs, etc. Thanks in advance.
Dave T.

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Ben Leybovich February 11, 2014 at 6:09 am

Waaaaaay up! lol

David – all of the questions you asked need to be asked to a broker. Each office is different. Some things are negotiable while others are not. Is the broker a franchise or a small individual brokerage?

As to costs, these are different state to state, city to city. The cost of MLS access is much higher in large metro areas, and so are other costs. I would go speak to several brokers, and make sure you ask them about training and lead generation.

The difficulty about making money as an agent is two-fold: generating leads takes being well0-connected in the community and takes a lot of time; and actually servicing those leads takes a lot of time and running. In high-priced markets it makes sense for a newbie, but in most of America it does not in my opinion unless you are extremely well connected…

Thanks for your comment David and hopefully this helps!

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Tom Phelan February 11, 2014 at 6:15 am

My wife holds the license, I do not but my expertise is 1031 Exchanging and how an IRA can buy real estate. I am certified by the state of Florida to teach both as CE Credit Courses.

We have made a lot of money wholesaling, fix and flipping and occasionally holding.

One big disadvantage I see holding a license is it makes you extremely vulnerable. One little
thing goes wrong and guess what, yep, blame it on the Realtor® after all he/she holds a license that can be censured or revoked and also he/she has EO Insurance.

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Ben Leybovich February 11, 2014 at 6:20 am

Yep – you are so smart and educated; you should have known better.

I don’t wholesale or fix and flip because both take too much time. But, I agree that a license is handy if this is what one’s preferred activity in REI is.

Thanks so much Tom!

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Anthony Yeoman February 11, 2014 at 7:15 am

Another great post Ben. I got my license when I first began my real estate journey. I figured it would be a good way to get education and a few transactions under my belt without taking on the risks of being a principle. It served those purposes, but I never made much money from it (nor did I expect to). I would caution new investors thinking about being licensed to make sure you know who you are (investor or Realtor). If you market yourself as a Realtor, people will treat you as such and you will find yourself receiving a lot of calls from people looking for a new home. If you are an investor, present yourself that way, but still disclosed that you are licensed (most states require this disclosure if you are licensed).

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Ben Leybovich February 11, 2014 at 10:32 am

Anthony – agreed!

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page February 11, 2014 at 7:20 am

OK, someone is going to say it so it should be me–I’m the wife, And the soon-to-be-agent.

Here’s what I say to getting a license: yes.

The husband thinks its a good idea, mainly because, while I’m not in the least bit shy about taking risks,I always do my homework before jumping into an endeavor that’s going to take discipline, time and money. In addition to my regular job, I work part-time for an agent and will have my license by late spring. The primary reasons I’ve decided to take this route is:

1. Learning from other agents–amazing what you can pick up listening at the office.
2. The ability to gain leads from other Realtors on off-market properties they know about.
3. The ability to access information on mls and reo properties faster and more efficiently. Not just for your deals, but learning the ropes is worth a lot towards making any deal successful.
4. Access to industry seminars and other educational offerings.

You echoed the one piece of advice I’ve heard before on Bigger Pockets–give the other agent your commission if they brought you the deal, as you’re making money on the deal, not through the commission. This was the one thing I couldn’t wrap my head around before–why would another agent want to work with me? Well, if they know I’m a serious investor, AND they can get the entire commission, why wouldn’t they?

It’s not for everyone, but I’m giving it a shot.

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Ben Leybovich February 11, 2014 at 10:31 am

Page – thank you for a detailed post! A couple of thoughts:

This is Benism: Education is important, but the wright kind of education is necessary.
All of those wonderful benefits on your list are indeed benefits if you want to become a successful real estate agent. But, they are neither useful nor necessary if investing is of primary concern.

The establishment speaks their language – we speak ours. None of those classes, courses, or seminars are helpful to us :(

You can access all of the information through establishing a relationship with an agent – you don’t need a license. In the mean time, there are only 24 hours in a day, and license costs money. You should know that by allocating time to activities of a licensee, you are steeling time from Page the investor. Think it through very carefully indeed…

Thanks so much for a great comment!

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Cory Binsfield February 11, 2014 at 8:02 am

Great post Ben. Sometimes I flirt with getting a license and then think what a pain in the butt it would be with the continuing education, licensing fees, broker fees and dealing with first time home buyers ruining my weekends and weeknights.

I’m in a small market (about 80,000 population) and find there aren’t enough deals out there to wholesale or renovate and flip. This is one of the main reasons in my opinion to consider a license. By having the license, you can list your own deals and save 1/2 the commission.

Yet, wholesaling and flipping defeats the purpose of my real estate goal-direct deposits to my bank account via online rent payments from tenants.

It’s fun watching the rent checks hit my bank account on the 1st of the month without having to worry about my next deal.

I’d like to point out that the many listing agents will become your investor advocate when they present your offer to a buyer knowing they will get the entire commission. By going straight to the listing agent without a realtor representing you, it’s amazing how your deal suddenly becomes the best offer as long as it’s reasonable. Plus, you get to negotiate directly with the realtor versus having your realtor going back and forth with the other realtor.

This is how I got my feet wet when my goal was buy and hold ten duplexes in ten years and it worked great.

Today, I’m mainly interested in off market deals and try to go direct to the seller before they list. If I had my license, I’d have to disclose the fair market value of the property to the seller and the fact that my low ball offer is not in their best interests. Yet another reason not to get a license.

If your a buy-hold-cash flow investor, you might want to avoid getting a license. Especially if you have no need to access MLS or pre-market deals.

Better yet, if you build a network of listing agents and have a reputation of closing on time with no hassles, these agents will call you before they input the property on MLS.

Realtors are only human and want the whole commission versus splitting it with a buyer agent.

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Ben Leybovich February 11, 2014 at 10:22 am

“It’s fun watching the rent checks hit my bank account without having to worry about my next deal…” Yes! Flipping requires re-inventing the wheel at every step. I flat out don’t like real estate that much…

And the deal with my syndicate now is that instead of seeing 28 checks hit my account, I want to see 500 in a few years – it’s as simple as that! We diversify risk by having more investors, and we are able to significantly expand out income streams. But, at the end of the day it’s all about checks hitting the bank account without having to re-invent the wheel :)

Thanks for reading Cory!

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page February 11, 2014 at 8:11 am

Great points Cory, thanks for sharing, especially:

This is how I got my feet wet when my goal was buy and hold ten duplexes in ten years and it worked great.

That’s another way to look at the option of getting a license–do it for 5-10 years to learn the ropes, then move in another direction.

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Ben Leybovich February 11, 2014 at 10:15 am

Except that you can learn the ropes and get the deals for a lot less commitment of time and money :)

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Toshia Booker-Blakeley February 11, 2014 at 8:59 am

Great article! As a licensed professional it doesn’t necessarily give you a leg up in the investing world at all. I think the only thing that comes in handy would be the MLS.

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Ben Leybovich February 11, 2014 at 10:14 am

Yep – thanks so much for reading Toshia!

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Adrian Tilley February 11, 2014 at 9:20 am

Good article that addresss an often debated question. Certainly if you are not buying properties on the MLS, that accesss isn’t worth much. However, it may help with comps – maybe not in your case with larger properties.

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Ben Leybovich February 11, 2014 at 10:11 am

I pay for property what I am willing to pay – this is a function of the ROI. There are many people chasing yield right now who are paying stupid prices; so what… I pay what makes sense to me and license has nothing to do with that.

So – I agree with you, and I stated as such in the article, unless all you know to do is chase REOs and short-sales, for which a license has some value, it is rather useless to me as an investor. Just clout and some connections…

Thanks Adrian!

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Jason R February 11, 2014 at 9:30 am

I think this needs to be said…

Ben, the whole reason you wrote this article is to show off your smokin’ hot wife!

There, I said it. Congrats on your real estate and your life. You have no doubt earned it. :)

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Ben Leybovich February 11, 2014 at 10:06 am

YES!!! Thank you Jason :)

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James Pratt February 11, 2014 at 9:40 am

I had a realtor license for around 30 years, did learn stuff that one wouldn’t have normally. All it gave me was some clout and inside information that the average person couldn’t get. Selling property was a breeze, cold calling and floor time wasn’t. A realtor has to sell at least 3-4 properties a year to keep up with all the expenses of being a license realtor.

In short, go to school to learn about being a license realtor and forget about getting a license.

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Ben Leybovich February 11, 2014 at 10:06 am

BOOM!

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Douglas Dowell February 11, 2014 at 10:56 am

Ben….you are a wise wise man. “if moma aint happy aint nobody happy” Proverbs 21:21 :))

I agree that its okay to have a license but I think our focus is a choice. To preform the real estate investor function and real estate sales function to the level of excellece has always seemed to me mutually exclusive.

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Ben Leybovich February 11, 2014 at 12:09 pm

Touche Doug!

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page February 11, 2014 at 11:04 am

Aaha, the wise men (and women) commeth forward with opinions.

Benism: All of those wonderful benefits on your list are indeed benefits if you want to become a successful real estate agent. But, they are neither useful nor necessary if investing is of primary concern.

Jameism: In short, go to school to learn about being a license realtor and forget about getting a license.

Douglasism: To preform the real estate investor function and real estate sales function to the level of excellence has always seemed to me mutually exclusive.

Therein my conflict lies. Having a true love for all things real estate, but limited time for everything in the span of a 24-hour day, sounds like some head scratching is in order. One humbling thought I’d like to share–boy did I think I knew a lot about real estate before I started working for an agent. Having owned some investment properties, written contracts, handled inspections, repairs and multiple financing scenarios, I know more than the average bear. But immersing myself in it every day (and with a paycheck) has taught me what it would probably take five years to learn.

Does all of it pertain to investing? Likely not, but a heck of a lot sure does. Now, to figure out my next move.

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Ben Leybovich February 11, 2014 at 12:11 pm

Hey – what is your next move?

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Jeff Brown February 11, 2014 at 11:06 am

Investors having a license is, in my personal view, THE most overrated thing I’ve seen promoted. In the last decade doin’ business outa my hometown market/state, the vast majority of sales have never been on any MLS, anywhere. In the last 6+ years that figure is virtually 100%.

On the other hand, assuming CA isn’t the Lone Ranger state on disclosure, any written contractual offer you make as a licensee must include the fact you’re a licensed real estate agent or broker. Immediately the seller then thinks you probably know something they don’t. That’s not usually true, as most RE licensees are clueless when investment property is the topic, but I digress. (Though in your case, if the seller knows your track record, your goose may be cooked.)

You need not explain marriage to me, Ben. :) But, given your experience today vs when you started, she, and I agree if it’s true, might suspect you can now likely find and close more than one deal a year. If you do that this year, Mama will be happy, and all the talk about sittin’ around in your underwear will cease. :) I got your back, Jack.

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Ben Leybovich February 11, 2014 at 12:17 pm

Paragraph 1: With you.

Paragraph 2: With you again. May standard disclaimeris “Sorry folks – I am educated. If you wanna deal with idiots, go find another investor…” lol Fortunately, I make it a business model to deal exclusively with sophisticated people. Translation – no owner occupant at the front door or the back door. So, this issue does not come up as people enjoy the notion that I’m educated.

Paragraph 3: I pondered for a long time what I could write that Jeff Brown would not already know. – so, I decided to write about marriage hahaha

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Joel Somerset February 12, 2014 at 10:47 am

I’ve been doing the same mental gymanstics about getting a license. My strategy is long term buy and hold for cashflow. Ben – can you expand a little more about paragraph 2? No owner occupant at the front or back door?

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Ben Leybovich February 13, 2014 at 12:57 pm

Joel,

Owner occupants are what? Answer – unsophisticated! The drag of having to disclose licensure resides in the fact that people will be cautions as they assume (often wrongfully since most licensed agents are clueless relative to investment property) that you are so well educated allowing you to take advantage of them…

On the other hand, sophisticated people view it as a plus that you have a license. To them it simply adds tools to your bag and means that you know the law, etc.

As such, I build my business around dealing with sophisticated people – other investors and business people. I don’t do SFR Sub2, leas/options, or any of that jazz for this reason. I play in the commercial space where I don’t have to apologize for having a license and being educated… Makes sense?

Sara Cunningham February 11, 2014 at 11:35 am

I personally did what James suggested, took all the classes, but never sat the exam. I also made friends with a great group of realtors to keep up with anything I needed to. In fact I’ve found that I actually have been giving them an education of some aspects of investing.

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Ben Leybovich February 11, 2014 at 12:22 pm

You should be too busy to educate them – that’s a problem. Don’t waste your time. Anyone who is concerned about a commission check as the main source of income is not your huckleberry – they will never speak the language you speak Sara. Harsh, but true…

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Sara Cunningham February 11, 2014 at 4:14 pm

Haha so true Ben, each to their own as they say!

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Ben Leybovich February 13, 2014 at 12:58 pm

:)

page February 11, 2014 at 11:44 am

Seems like a lot of the advice here is 20/20 hindsight from some successful, seasoned investors. But, would the advice be slightly different for a newbie starting out that didn’t already have deals or knowledge under their belt, and perhaps needed to make some coin while learning.? That is a slightly different question.

This is a very big distinction, as not everyone can spend their time finding deals and funding them, without working a day job. So I’ll pose it.

If one must work a day job while becoming an investor, is being an agent a good option? If you disagree, what’s your job of choice for the newbie? Or am I getting off topic?

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Ben Leybovich February 11, 2014 at 12:29 pm

Page –

Again – if you spend your time studying and practicing real estate sales, you may get good at it. But this has nothing to do with investing. Do you really think that funding will come to you cause you know how to earn commission checks? Money doesn’t care about that. Money cares about your knowledge base and track record as an investor, and being an agent, even a good agent, does not lend itself to either.

I cant tell you what to do – you must figure it out. But, I will tell you that what determines who we are is our actions on a daily basis, not what we dream of or say we want. So, your actions must have at least a reasonable capacity to lead you to that which you want – makes sense?

I am telling you that if what you want is to be an investor, license is not the thing to do. I was an investor for a long time before I got a license, and I certainly did not expect my license to build my investment business for me…

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Cory Binsfield February 11, 2014 at 1:00 pm

“If one must work a day job while becoming an investor, is being an agent a good option? If you disagree, what’s your job of choice for the newbie? Or am I getting off topic?”

Page, becoming an agent is not a magic fix. In fact, very few agents own investment properties. Isn’t that bizarre?

I continue to work a day job and started out with one when I bought my first property-a dumpy triplex that had to be sold with seller financing since no bank in their right mind would allow a loan on it.

I lived in one unit and rented out the other two after fixing them up and having no clue what I was doing. Bottom line, I was working 2 jobs (day job plus investor job) 24/7. It was hard work but worth it.

Thereafter, I moved into a nicer investment property and did it again while holding the first property. As my portfolio grew, my options followed.

Here’s the important part. Banks love W-2 income for loan qualification. A realtor is broke for the first few years if not first 5 years. It’s easier to get a loan with a W-2 income than with self-employed income.

If I were you, I would land a decent job first and then invest in bread and butter buy and holds second.

The ideal job would be decent salary with flexible schedule. That way you can scout out deals while your working. Best job would be one where you are constantly driving in your target market while providing tremendous value to your employer. This allows you to find off market deals and learn the “hood.” You become an expert in one area and can rattle off rents, property values and recent sales in the blink of an eye.

Next, save up for the down pmt, owner occupy the investment property, and then repeat until rich.

After you have ten properties that are cash flowing an average of $300/mo you have $3,000/mo tax free. Stop, reasses your business and decided if you want to take it to the next level. Worse case, 10 properties held for 30 years make you a millionaire. Best case, you tell your boss to shove it and create your dream job with $3,000/mo and a bunch of equity to fall back on.

Good luck!

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Mike February 12, 2014 at 9:53 am

How are you getting $3k/month tax free?

Jason R February 13, 2014 at 11:32 am

Depreciation offsets much (all?) of cash flow.

Now, lets talk about that tax bill when depreciation ends during your retirement….ah, screw it! I’m a millionaire!

Ben Leybovich February 13, 2014 at 12:59 pm

Ha screw it- I’m a MULTI-millionaire…

Love it!

Cory Binsfield February 13, 2014 at 9:02 pm

Depreciation plus interest on mortgages AND being classified as a real estate professional allows you to write off virtually all the cash flow.

Better yet, you can run your lifestyle expenses through your LlC. Ie auto, gas, insurances, meals, etc.

Here’s a simple example. 10 houses at $100,000 each (excluding land value since you can’t deprecate dirt) is a cool 1 million. Depreciation schedule on residential income property is 27.5 years. Take the million and divide by 27.5 and you can write off $36,363/ year to offset any form of income. Add in your interest expense and you are running at a loss like I do for income tax purposes.

Plus, this is PASSIVE INCOME not EARNED INCOME. This means better tax rate and no FICA or self employment tax.

If your a flipper or wholesaler, you get crushed via the self employment tax, short term capital gain tax and your considered a dealer and thus subject to the dealer tax.

Here’s the best part. Just like Warren Buffet, my full time assistant pays more taxes than I do since she is a W-2 wage earner.

My real estate allows me to show virtually no income even though my income would be considered above average and the write offs offset all my income from my other job.

Once your depreciation runs out, exchange the property tax free into a bigger and better one and start another depreciation schedule. Thus, you never have to worry about taxes.

Once you die, the real estate steps to the value at your death and your heirs completely avoid any capital gain taxes.

Real estate is the most tax favored investment out there!

Ben Leybovich February 11, 2014 at 1:35 pm

Page – while I do not completely agree with Cory, I would like to know what you make of his suggestion…

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Mark Ferguson February 11, 2014 at 1:39 pm

I saved over $70,000 last year by being an agent and saving commissions. Yes I do a lot of deals and most of them through mls. That’s the beauty of having a license. It gives you an advantage in mls. Not only can I find deals quicker, I can pay more because I save money on commissions. That $70,000 doesn’t include profits from deals I did that I wouldn’t have gotten without my license.

If you want to make big money in this world, you have to start a business. Being a realtor is one of the easiest businesses to start with low overhead. Yes you have to work hard and yes you have to plan and no it may not happen in one year. I know many agents that make over a million a year. The great thing is you can hire other agents to do all the work for you once you reach a certain point. The main reason most agents aren’t successful is they don’t plan, they don’t market and they feel business will just come to them.

Being in real estate is awesome an I love very day of it.

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Ben Leybovich February 11, 2014 at 1:46 pm

Haha – Mark you are one of a kind, sir. Good for you!

Personally, I couldn’t care less about making big money. In fact, I don’t really want to “Make” money at all – it costs too much relative to taxes. I would rather money make itself :) But, I guess I’ll be making some via the syndicate…tough, but someone has to do it.

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Mark Ferguson February 11, 2014 at 2:02 pm

Hmmm, I don’t understand this huge aversion to paying taxes. I pay a lot of taxes, but that’s because I make much more money. The sign of paying a lot of taxes shows that your are making much more than that. I would much rather pay more taxes on more income than pay less taxes on less income. Sure there are things you can do to defer or pay fewer taxes, but the bottom line is more more taxes equals more money in my pocket.

Why not invest and make big money, that is what I am trying to do.

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Ben Leybovich February 11, 2014 at 2:11 pm

Mark – as you know there is a big difference between big money and big wealth. Big money doesn’t interest me, but big wealth certainly does. Big money buys attributes of wealth – “bling-bling” things. I don’t know why, but I never developed an affinity for this. I don’t need fancy – I like simple, down to Earth.

Fortunately, it is not necessary to go through the obstacle of big money in order to get to big wealth, and that’s my game :) This may not be an option for those who value the bling as that certainly takes big money. For me, though, simple and frugal is best. I don’t see success in terms of money, but in terms of free time. I am just not willing to work that hard for money…Thoughts Mark?

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page February 11, 2014 at 3:22 pm

Ben,

Hard for me to say I agree or disagree with Cory, as I’ve either already been down the road with several of the suggestions, or some simply don’t apply.

My first property was a triplex where we lived in one and rented the others, many years ago when the first investing light bulb went off, but we were too young to know how to keep the bulb lit, other than making a huge profit on the property when it sold. Life circumstances also dictated selling the cash cow–we do what we need to when we need to sometimes. I already have the flexible yet decent (but not big $$) paying job as a landscape architect (I work for myself). Problem is, none of what I have going for me right now is getting me to a point where I can fund deals I find, either on the MLS or on my own. And I do find them, that is not the problem.

So, I started working for an agent part-time, which brings in some extra money and helps me learn the ropes. My thought was–since I’m sitting in this here real estate office, why not be licensed and utilize my network and make more than an hourly? Always the opportunist. Problem is, this part-time gig is swallowing up all my time, leaving little for my main job. I also see that the agent world doesn’t take too kindly to those who dabble. I don’t want to be a full-time agent, that was never the plan, am smart enough to know that plodding along waiting for a lottery win or even going full-time as an agent isn’t the way to get where I want to go with investing.

This thread has been an eye-opener for me, and now I’m scratching my little pointed head again.

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Ben Leybovich February 11, 2014 at 3:39 pm

Page – it sounds like you have choices to make. Allow me to share some with you some perspective that should figure into your decision-making process:

In the world of investing, we have opposing methodologies – diversification vs. focus. Focus suggests patiently waiting for the right opportunity and when one comes through taking action on it to the fullest extent possible. This method requires a lot of knowledge because while winning means winning big, loosing means loosing big – a lot was invested.

On the other hand there is diversification, which involves spreading our resources across a gamut of investments so that if some disappoint the others outperform – thus keeping balance. This seems like the safer alternative, but it does not lend itself to outstanding success by design.

Now – these 2 principals are equally applicable to time management. You, at the moment, are stuck in the cycle of diversifying your time. And yet, it is very difficult to become exceptionally good at anything this way – see the problem?

You need to make some choices Page! Good Luck :)

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Bryan February 11, 2014 at 6:27 pm

Thanks for the post Ben. I got my license last year, after working for developer clients of mine for year. My mentor, who is a developer, sat me down and said “GO GET YOUR LICENSE”. He went on to tell me if I had my license I would have been paid more than $20k for the deal I had just helped him put together. HAHA. It cost about $500 for my licensing class and test, which seems like a small investment.

You’re right the risks are real though. I’m not using it to buy or sell houses. That just seems like a great way to get your butt sued off. Better collect a small referral fee and concentrate on your own projects.
-Bryan

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Ben Leybovich February 11, 2014 at 7:17 pm

Thanks for reading Bryan!

Sounds like you found a niche – keep doing what works!

Thanks a lot for your comment.

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Jane G February 11, 2014 at 9:54 pm

I’m studying for my license right now, if only to get access to the MLS for comps. Texas is a no disclosure state and depending on my realtor contacts to get the info I need in a timely manner is rather hard when they have so much other work to do, even if a listing could benefit them down the road, which, I really don’t want to do anyway. I’ll sell it, no commission. Just making a profit on the flip will be my pay. All disclosed to the buyer, of course.

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Ben Leybovich February 12, 2014 at 1:05 pm

Whatever works Jane :)

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page February 12, 2014 at 9:27 am

Thanks, everyone, for the schooling on this decision. Hope it is helpful to others doing the same pondering.

My main goal is investing (and making $$ from real estate) and I may have gotten off track with the idea of using the commissions from buying and selling houses as an agent to apply towards investing. The comments on this post have led me to believe that there are much better, more time efficient ways to do that.

I call it “the Magpie effect”–going after something right in front of you that appears shiny and available. It was an opportunity, so I took it. We’ll see what happens over the next month as I finalize my goals.

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Ben Leybovich February 12, 2014 at 1:06 pm

Please keep us posted Page, and good luck!

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Jordan February 12, 2014 at 10:19 am

I kind of agree what page said, for instance I am a newbie and trying to get my first rental.I hate my job and want to leave, I know its not roses at the end of some roses but getting a license is astep up or a strategy to leave. I do have goals and I see myself as an investor. Im college educated with a degree but the job market is not what we know, so for me to get out of my situation I decided to get my license, plus in the near future I would like to start a property managrment company, I cant open a property management company unlesss Im a broker. So I think the advice is different depending on your situation.I will be honest but I got kind of sad after reading the advice. To me I feel at this moment to get out this rat race I need to get my license, If I can find some people to partner up on a first deal that will be great but I want to leave my place of employment soon

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Jordan February 12, 2014 at 10:24 am

However Im going to buy a four plex to get the ball rolling.

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Jordan February 12, 2014 at 10:35 am

Cory advice does makes the most sense to me and this is what I wanted to do intially, but I can tell you I have been on the job market for three years trying to find a better job then my current position. I found opportunities but was most were not willing to pay me what I was worth, and some try to low ball me becauae of the way the job market is.The job market is very competive. I have a double major in marketing and business management. So at this moment Im looking for work maybe as a property manager. Anything I just want to be free. Now I am on the fence about this 😞 If I am going to be stress out, I rather be stress out about my own business or real estate investments. How should I move forward since becoming a real estate agent is frown upon in this article.

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Jason R February 13, 2014 at 11:40 am

Jordan: I don’t think you’re reading the comments correctly.

Investor = no license
Other real estate activities (like managing properties) = license

Clear enough?

You talk about starting a management company. Which of the two groups are you in from above? Act accordingly.

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Jeff Brown February 12, 2014 at 10:35 am

Something many should consider when thinkin’ about gettin’ their real estate license. If you’re an experienced investor, it likely becomes a local decision as to the benefit. However, if you’re just beginning or not even close to being a seasoned investment veteran, your efforts should be focused primarily on finding a mentor. Don’t mean to be harsh, but saving a few bucks when when you likely know just 20% of what you’ll eventually learn, is not only a waste of time, but dangerous to you.

Take this test. How many times in just the last month or so have you read something here you didn’t know about? Yet you wanna be licensed? Keep your eye on the ball, which is learning, learning, learning as well and as quickly as possible. There’s nothin’ about that license that will help you become a better, more informed and knowledgeable investor.

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Ben Leybovich February 12, 2014 at 1:11 pm

Jeff cuts through the bull shit with about as much finesse as anyone I’ve ever met – listen to him!

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Nick February 12, 2014 at 10:50 am

Great post Ben and I remember you showing me that same picture of your wife when we met up last year! lol

I took my class and passed the licensing test a while back but one thing that really shocked me when I interviewed at a brokerage was how expensive it is just to be active. You have your office fees, your fees to join the board the be an official Realtor, your MLS access fees, fees to buy any advertising material you need or want, not to mention the cost of driving your personal car all over creation for clients. Plus you only get 60-70% of your commissions and then STILL have to pay all of your earned income, self employment tax out of that.

When I broke it down, I really didn’t think it was worth it for me personally.

I give a ton of credit to agents who are very successful and stick with it long term.

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Ben Leybovich February 12, 2014 at 1:13 pm

She is even better-looking and more charming now than when you first saw the picture – can you believe this?

So – shoot me an email. If not the brokerage, then what are you up to now Nick?

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Mark Ferguson February 12, 2014 at 11:21 am

For everyone thinking of becoming an agent, here is my article I wrote for BP on why I think it is a good idea. http://www.biggerpockets.com/renewsblog/2013/07/27/how-being-a-real-estate-agent-gets-me-more-deals/

I think it is a huge advantage for investors and for those thinking of making a career of it, it has been awesome for me. Yes, it takes work just like any job, but you are your own boss and are running your own business. I’ll run down the advantages I see for both investors and as a career. I have been licensed since 2001, I do fix and flips, I have 8 long term rentals and I now run a team of 8. None of this would have been possible if I had a regular day job and was not a Realtor.

Benefits to an investor:

1. MLS access. You have access to sold comps and get much more accurate values. You see new listings very quickly and can set up alerts to let you know when new listings pop up.
2. Save money on commissions. I save a ton of money on commissions for properties I buy and sell. When I buy off MLS I save about 3% per buy and 3% per sell! That is $5,000 to $15,000 per transaction on my fix and flips.
3. I get more deals. I can act quicker than an investor which is huge on short sales and fair market sales in MLS. I know I have gotten deals because I sent an offer in 2 hours after a home was listed. No way I could do that without my license. I also can offer more money on deals than other investors because I can cut my own commission as the buyer. If I can offer 3% more than another investor to make a flip work, that is a huge advantage!
4. I network with people in the real estate community all the time. If people have questions on buying or selling they ask me. This has gotten me deals before. I also can ask my colleagues in the real estate industry to refer contractors, property managers and other professionals to me.

Benefits as a career

1. You are your own boss. You put in the work and planning and you reap the rewards, not your boss or company you work for. If you want to make it big in life you have to start your own business. You can’t work for someone else and make them money. You need to be the one hiring people and making money off of them. Becoming a real estate agent is on one of the best ways to start your own business.
2. You don’t have to start off on your own. There are many successful agents who will hire new agents, train them and even pay some of their expenses. I have five agents on my team. I get a split of everything they sell and in turn give them leads and help pay their expenses.
3. There are many options for working with a broker. Some will charge high commissions splits and offer many services and training. Others will charge a flat fee per closing and offer nothing.
4. There are many ways to get started making money even if you don’t sell a lot of homes. You can start as an assistant for an office or team. You can complete BPOs in most states for $50 to $75 bucks a pop.
5. The biggest benefit is once you get established, leads will start coming to you. Then you have the opportunity to hire your own agents and let them make money for you. This won’t happen right away, but it can happen and many agents get very rich off other agents working for them.
6. Don’t be scared by the number of real estate agents and the average salary numbers. Many agents are part time and don’t work much at all. many full time agents think being a real estate agent will make them money without doing any work. If you want to become an agent you have to work hard, plan, set goals and market.

One common theme I have seen from these comments from people who did not do well with their license; I didn’t think I would sell anything and I didn’t. This is the worst attitude you could have if you want to be successful and sell houses. Almost everyone who thinks they are going to fail at something before they start is going to fail. Don’t be discouraged if your dream is to get out of the rat race and make your own life and money. It is possible and real estate is a great way to do it.

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Ben Leybovich February 12, 2014 at 1:16 pm

Thanks Mark!

We agree on a lot of stuff, but I think we will need to agree to disagree on this :)

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Jordan February 12, 2014 at 11:58 am

Thank you Mark for your input. It all boils down to working hard.

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Ben Leybovich February 12, 2014 at 1:24 pm

Thanks for reading Jordan!

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Brad Gustafson February 13, 2014 at 7:43 pm

Thank you Ben,
I really appreciate this post as I was considering studying for the license as an additional way to get educated and involved in the industry. I always questioned the value of this and now know that it is not for me. Many comments here have been helpful. Are you an investor or a realtor. I am choosing investor. Your online class is becoming more attractive.
Thanks again,
Brad

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Ben Leybovich February 13, 2014 at 8:38 pm

I am glad this was helpful Brad. I respect successful agents because I know the labor and sacrifice that goes into becoming one. But, for me, even just on a very basic intellectual level, why bother working that hard for a commission when I can have the whole deal – you know…?

Thanks Bard!

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Jordan February 14, 2014 at 8:01 am

@Ben I’m curious if Real Estate License is not necessary in investing, why did your wife become one? If you didn’t have her expertise, will you still be doing what your doing? Can she just quit being a real estate agent instead of working so hard as she mention before, since everything is nice and comfortable for you two? Your thoughts .

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Ben Leybovich February 14, 2014 at 8:08 am

I don’t think ever said my wife is an agent – not at all and never has been one. I think you misunderstood…

Personally, with her brains and her looks she would kill it, but no – I am the only one in the business. She runs the non-profit music school that we set up a decade ago.

I am sorry if I said something that was confusing Jordan:)

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Josh February 14, 2014 at 7:21 pm

As a flipper that relies on about 15 deals a year for a steady income stream in Ventura County, having our realtor license is crucial in everything we do. It not only allows us to save the listing agent fee of 2.5%, but every once in a while we get to double end a property. It keeps us competitive, and allows for an increase in income along the way through the potential of double ending a transaction. There was also an article written about how being an investor and a realtor is extremely valuable to many buyers, which I have seen as well to be the case. Many investors are in the business of making money, not investing money, and having a realtor’s license gives you just another avenue with another option.

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Ben Leybovich February 15, 2014 at 6:49 am

Josh – absolutely. For you it makes sense.

But, you are not an investor – you are a trader. As such, you operate in the Earned Income environment to begin with and a license represents another avenue for earned income generation.

I am a fundamental investor. You couldn’t get me to flip or wholesale if you put a gun to my head – too much work and too much tax liability. As such, a license is not nearly as useful to me as it is to you. I suppose I needed to make this clearer – you’ve just given me the subject for my next post :)

Thanks so much for reading and commenting!

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page February 14, 2014 at 7:37 pm

*Like*

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Gary Parker February 14, 2014 at 9:36 pm

I am reading the article on valentines because my wife’s flight got cancelled. I actually spent 2 hours putting together a bunch of flowers I bought at Costco and filling all the vases in the house. And just so you know 2 hours is a long time in man time. I hope she likes them…tomorrow. Oh ya loved the article.

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Ben Leybovich February 15, 2014 at 6:50 am

Thanks so much Gary, and I’m sure she will love the flowers!\

Ben

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Shaun February 16, 2014 at 11:36 am

A license will be of more use to some than to others depending on what your strategy is.
Ben you probably have about the least use for a license dealing with off market commercial multifamilies that you buy with creative financing.
It is much more useful for those doing 1-4 unit rentals.
It is extremely useful for those that are doing rehabs and wholesales.

I have mine and I use if a lot for my investing. The MLS access is more than worth whatever silly little costs I incur. Besides that I do make money on my buys and do occasionally save money on my sells (I mostly list stuff with other agents though since, frankly, I suck at it :) ). It is also nice to be able to go see the places when I want and not have to coordinate. I also put in THOUSANDS of offers on listed properties and get around 0.5% being accepted and purchased. Try to find an agent that will do that for you!

BTW I do almost nothing in the realm of being an agent that isn’t for my own investing.
I don’t get this crap about investors not wanting to get their license because they don’t want to work with first time homebuyers. Ahhh… Then DON’T! Do you think the local real estate board is going to kidnap your family until you show some overly entitled 26year old jerk 150 houses to find their dream home?

I have yet to make any money with my license on a deal I was not a principle in. I SHOULD make one listing commission this spring or summer (My parents house) and one buyer commission in the same timeframe into the fall (My parents buying a new place). In these cases I was going to be involved anyway so might as well get the commission. I also should get my first referral commission on a first time homebuyer that was an acquaintance of mine. I could have gotten the whole thing or I could refer it out to someone that was better at it and not have to do anything and still get >$1000 for it (BTW only legal if you have a license).

Different strokes for different folks but I will guess that I would not have bought a single property the last 4 years if I did not have my license.

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Ben Leybovich February 16, 2014 at 2:05 pm

Shaun,

You are right, and I love the bit about the 26-year old jerk.

Thanks so much for a thoughtful post!

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Jordan February 16, 2014 at 6:44 pm

Wow Shaun, I love your response! Different strokes for different folks. You need to know what works for you. To be successful there are many ways to get there, and one is not better than the other. You need to know what works for you and your goals.Everyone’s strategy is different

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Greg Jackson February 24, 2014 at 5:57 pm

Ben,

Funny, entertaining, educational post! One of my favorites. Enjoyed all the commentary as well.

For those interested in a real-estate career (in addition to being an agent), check out Brandon Turner’s suggestions here:

http://www.biggerpockets.com/renewsblog/2012/09/02/top-ways-to-make-money-real-estate/

Cheers, Greg

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Ben Leybovich February 24, 2014 at 6:13 pm

Thanks Greg :)

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