They say you shouldn’t eat at least an hour before you go swimming. They also say that two wrongs don’t make a right, that you get what you pay for, you can’t win them all, nobody ever said life was fair, what you don’t know won’t hurt you and there’s no such thing as a free lunch.
So who are they? I’ve gone swimming immediately following a big dinner and managed to avoid drowning. And, last week I did get a free lunch paid for by the marketing rep from my title company. I think they are all full of bull fertilizer.
Chances are if you are a real estate investor or are considering getting into real estate investing you’ve wondered whether or not you should get your real estate license. What do they say about that? When I first started investing in real estate in 2001 I talked to several attorneys and they all advised against it. Why? Two reasons – disclosure and agency.
As a Realtor you are held to a higher standard and therefore open yourself up to potential problems if a real estate deal goes bad. That’s why you must disclose that you are a Realtor upon initial contact and later in writing with an agency agreement that states you do not represent the seller of the property. Most importantly, it must be clear that your intent is to make a profit from the transaction.
Contrary to what they said I decided to get my real estate license in 2007 after operating a successful real estate investment business for six years (my business imploded at the end of 2006 but that’s a topic for another day.) Why did I do this? Three reasons:
- Access to the Multiple Listing Service (MLS)
- Increased visibility in the local real estate community.
- Additional revenue streams.
From 2003-2006 it was laughable to think that bargains could be had on the MLS. Then, three years ago this little thing called the real estate bubble burst and ever since the MLS has been overflowing with REO and short sale deals. I wanted access to this database. For the past 18 months I’ve been scouring the MLS almost every day searching for and finding good margins. I also use the MLS to comp houses we buy at trustee’s sales. I spend about 3-5 hours a day on the MLS and it would be unrealistic to ask a fellow Realtor to do this for me (or use their MLS login info – this is frowned upon by most local Realtor associations.)
Increased Visibility in the Local Real Estate Community
Let’s face it, most Realtors know very little about real estate investing and it’s not their fault. The training they get is designed to help them generate business with retail buyers and sellers. That’s where I come in. Realtors like to refer deals to me because I’m one of them and I have real estate investing experience. There are other perks too. I teach a continuing education class for Realtors at a local real estate school that has helped me grow my database of coaching clients and investor/partners.
Additional Revenue Streams
I do not list the properties we flip. I can’t stand working with retail buyers or their agents. However, I do write offers on the REO and short sales I find on the MLS and collect commissions to do it. Occasionally, I have a friend or family member that wants to buy a home and I can refer them to a buyer’s agent for a fee. This income isn’t too consistent and it doesn’t put food on the table. However, it does make my wife happy – especially if I spend the money on her.
So are there risks in having your real estate license if you are investing? Of course! There are all kinds of risks associated with real estate investing. But, as I’ve outlined here the rewards are much greater. As long as you are careful with your paperwork then those risks are drastically reduced. Just remember if you do end up in court because of a deal gone bad then you will be held to a higher standard. And I say what’s wrong with that? I didn’t become a real estate investor to be held to a lower standard.
Maybe becoming a Realtor isn’t for you. Fine. I still recommend you enroll in the licensing classes in your state. Why? Because you know what they say – you learn something new every day.