Real Estate Investing Basics

The Case for Being a Realtor and Investor

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110 Articles Written
investor realtor

As he took his place at the front of the packed auditorium the instructor began by telling a story.  “I was once a real estate broker” he announced.  “Years later, I became a real estate attorney.”  He said “I did this so I could kill my own deals.”

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The speaker’s name was William Kozub and I took his class in 2004.  I asked him once what he thought about me becoming a Realtor.  He advised against it.

At the time, I was buying homes in foreclosure directly from distressed sellers.  There weren’t a lot of short sales being done from 2001-2006.  No, the sellers I was buying from had equity in their homes.  You remember what equity is right?

William Kozub threw the word “fiduciary responsibility” at me.  Boy, attorneys sure do love big words.  He explained that as a licensed real estate professional I would have a fiduciary responsibility to the unrepresented sellers I was buying houses from.  Furthermore, with a real estate license the law would consider me a “professional”.  As a “professional” I would have an unfair advantage over the poor unsuspecting homeowner in foreclosure.

Thus, it would be a bad idea for me to be a Realtor – too much liability.

So I operated my investment business for six years without a real estate license.  That is, until a funny thing happened on my way to building a vast real estate empire.

In 2007, the real estate market here in Phoenix crashed and I had to figure out a new way to make money.  It occurred to me that there were some pretty good deals to be found on the multiple listing service and as a Realtor I could:

  1. Find these great deals for myself and others.
  2. Write offers for me and others on these great deals.
  3. Get paid for putting these deals together.

The other obvious perk is unfiltered and legal access the local multiple listing service.  When I started fixing and flipping houses in 2009 this was an absolute must.  How could I expect a Realtor to comp 20-40 houses a day for me?

Of course, my business model is much different today than it was in 2003.  I don’t deal directly with homeowners in foreclosure anymore.  I buy at the auction, from banks, or short sales when the seller is represented by another Realtor.  This drastically limits my liability.

Regardless, I believe the pros outweigh the cons when it comes to being a Realtor and real estate investor.  If you’re dealing with an unrepresented seller just be sure to disclose that you aren’t representing them in the transaction and that you intend to make a profit.

Image: Stuart Miles / FreeDigitalPhotos.net

    Jay Castillo
    Replied over 7 years ago
    Hi Marty, the 3 things you can do as a realtor on your article makes perfect sense, and are also some of the reasons why I myself chose to become a licensed real estate broker five years ago when I wanted to get my feet wet with real estate investing. I’ve had no problems because I follow a full disclosure policy.
    Jay Castillo
    Replied over 7 years ago
    Hi Marty, the 3 things you can do as a realtor on your article makes perfect sense, and are also some of the reasons why I myself chose to become a licensed real estate broker five years ago when I wanted to get my feet wet with real estate investing. I’ve had no problems because I follow a full disclosure policy.
    Marty Boardman
    Replied over 7 years ago
    Jay, another nice thing about becoming a Realtor is the inexpensive education. After being an investor here in Arizona for 7 years without a license I felt like I knew a lot already. However, I learned a ton about Arizona real estate by taking the 90 hours of licensing requirements (which cost just $400).
    Marty Boardman
    Replied over 7 years ago
    Jay, another nice thing about becoming a Realtor is the inexpensive education. After being an investor here in Arizona for 7 years without a license I felt like I knew a lot already. However, I learned a ton about Arizona real estate by taking the 90 hours of licensing requirements (which cost just $400).
    Vaughn
    Replied over 7 years ago
    Marty – Two sentences hit me right behind the eyes. “If you’re dealing with an unrepresented seller just be sure to disclose that you aren’t representing them in the transaction and that you intend to make a profit” and “This drastically limits my liability.” Thanks.
    Marty Boardman
    Replied over 7 years ago
    Vaughn, after the real estate market crash here I decided the best way to limit my liability was to stop working directly with distressed homeowners. They are your best friend when you bail them out but can become your worst enemy if they figure out you made money from their crisis.
    Marty Boardman
    Replied over 7 years ago
    Vaughn, after the real estate market crash here I decided the best way to limit my liability was to stop working directly with distressed homeowners. They are your best friend when you bail them out but can become your worst enemy if they figure out you made money from their crisis.
    Jim Wagoner
    Replied over 7 years ago
    I’ve been a Realtor and an investor. Both were great for a long time, but the last few years have really sucked for both. Let’s hope 2012 is the beginning of the much needed recovery.
    Marty Boardman
    Replied over 7 years ago
    Jim, what part of the country do you live/invest in? The market here in Arizona has been great for Realtors and investors since 2009.
    Kevin
    Replied over 7 years ago
    We you are buying from an unrepresented seller do you use a Purchase & Sales Agreement supplied by your Realtor Board or a more generic form? If you use the the PSA of your Board do you just not complete the portion regarding your Brokerage & license #? I have an opportunity to buy from an unrepresented seller and my broker only requires that the home not be listed on MLS for me to not pay my split, but I wanted to cover myself legally inlcuding full disclosure.
    Kevin
    Replied over 7 years ago
    We you are buying from an unrepresented seller do you use a Purchase & Sales Agreement supplied by your Realtor Board or a more generic form? If you use the the PSA of your Board do you just not complete the portion regarding your Brokerage & license #? I have an opportunity to buy from an unrepresented seller and my broker only requires that the home not be listed on MLS for me to not pay my split, but I wanted to cover myself legally inlcuding full disclosure.
    Marty Boardman
    Replied over 7 years ago
    Kevin, I don’t buy from unrepresented sellers. It’s a business decision I made after the market crash in 2007. If you use your Realtor board’s PSA and a separate disclosure with your intent to profit clearly stated you’re probably okay.
    Jeffrey Smith
    Replied over 7 years ago
    I use a simple 1-page “Non-Fiduciary Disclosure” attached to the purchase & sale contract. It says I am a professional real estate investor, I intend to earn a significant profit by entering into transactions with the customer, I do not represent the interests of the customer, the customer is strongly advised to seek legal and accounting advice from a licensed professional. The customer must acknowledge (sign) it before I will proceed with the transaction. I let my RE broker license expire last year, mostly because I believe the N.A.R. was at ground zero of the mortgage meltdown by allowing realtors to steer naive buyers into bad mortgage loans. I saw it happening too many times for it to be just a few bad apples. N.A.R. has blood on its hands and I won’t forgive them.
    Andy
    Replied over 7 years ago
    FYI I am a real estate broker in Ohio and have done plenty of both. Not sure why you let the license expire over NAR however. There is no requirement in Ohio at least that agents have a NAR membership… Unless your brokers do. There are a lot of non realtor brokers around.
    Marty Boardman
    Replied over 7 years ago
    Jeffrey, there’s plenty of blame to go around – starting at the top with Wall Street and Washington. The back-scratching and corruption going on was sickening.
    Robert Steele
    Replied over 7 years ago
    “As a “professional” I would have an unfair advantage over the poor unsuspecting homeowner in foreclosure.” Reason why my partner (real estate broker) and I settled for a small cash payout with a buyer last year. Even though the buyer had a very tough case to make (according to my attorney) it was just too risky considering that if it went to trial it would be poor innocent homeowner versus the slick professional real estate broker.
    Marty Boardman
    Replied over 7 years ago
    Robert, this is exactly why I stopped working with unrepresented sellers. It’s much easier to focus on trustee’s sales, REO deals and short sales (when the seller has a Realtor).
    Marty Boardman
    Replied over 7 years ago
    Robert, this is exactly why I stopped working with unrepresented sellers. It’s much easier to focus on trustee’s sales, REO deals and short sales (when the seller has a Realtor).
    Kelly
    Replied over 7 years ago
    Marty, thanks for your article. Could you please comment on your criteria for selecting the brokerage firm you chose to hang your license, and if you went independent when you could.
    Kevin Polite
    Replied over 7 years ago
    Thanks for all the comments. Such a great community here. This is somewhat of an unusual situation where I know the seller and it is a neighbor and the home is in my neighborhood. Talk about close to home. But it’s been a good area and it’s a good price for both me to make a profit and the seller. He’s aware that he doesn’t have to pay a real estate commission plus he’s had a lot of investors calling because they had started the foreclosure process. He sold to me because he wanted to sell to someone he knew would do a good job on the property. Wish I could find more like this.