To License or Not to License?????????

14 Replies

Hey all,

I'm a newbie Wholesaler and am really struggling with finding deals and more importantly when I do find what could be a deal finding reliable comp data for ARV. I'm not getting very much cooperation from realtors on helping me with comps.

I'm on a very limited budget to get started and am weighing the merits of becoming a licensed real estate agent. 

Pros: Access to MLS, Access to seeing listed houses any time I want, if I work with an RE agency getting to sell properties, Making referral fees on those deals that the numbers don't work.

Cons: Taking a lot of time out of my days to get the license, costing valuable $$ that could be going into DM campaigns, and a little nervous it's distracting me from taking my eye off the prize - in other words is this just one more place I am choosing to get more educated rather than just diving in and making deals.

Any input???

As a newly licensed investor as of about 3 weeks ago, I would say DO IT!

Yes it took time, money, and effort away from the end goal, but I'm definitely glad I did it.

Side note: Take time to put yourself out there to other investors as a real estate agent. Ask them EXACTLY what they're looking for and FIND IT for them. You'll probably get "I'm already working with an agent" 9/10 times, but if you actively seek and bring properties to these investors, they will gain trust in you and ultimately use you. Just ask their permission to send along any properties within their criteria and go from there. Essentially I'm acting as a bird-dog with MLS access, which makes it MUCH easier to get in touch with listing agents and having an educated discussion about their sellers and properties, ultimately leading to better deals for the buyers/investors.

I put in an offer on my second day of being licensed doing exactly this and have done 3 more since.  We've yet to get one accepted, but at the very least it's great practice, and will pay off soon.  My goal is to have 5-10 investors that I find properties and put offers in for exclusively, and maybe help some close friends and family along the way if they're buying or selling.  I'm also offering pretty significant rebates to them in hopes of building long-term relationships with them.  And, of course, I intend on using my license to slowly purchase properties of my own along the way, which I will be compensated for upon closing.  Talk about win-win!

I just got mine after 15 years in the business and am kicking myself for not doing it sooner...

@Kim Handelman  I currently work with a realtor and he provides Comps, even CMAs although I don't like to ask him for CMAs because they are more time consuming. He provides this information because I give him leads that I don't want  (short sales or people who want to sell the property at market value). You need to provide a benefit/incentive for them and develop a good relationship with them. 

I'm not sure what are the costs of getting a license but it's something I'm considering as well. You'd save 3 % commission fee if you list your wholesale deals through the MLS and if you run mail campaigns, you will run into people who want to seller only for Market value. In which case, you would just offer them to list the property on the MLS, and get your commission once the property sells.

@Kim Handelman  

First of all I would highly encourage getting your license. It will pay for itself in just a few deals. Access to the MLS for comps and the reduction of commission costs are very favorable.

However, you should budget for the associated costs involved.  Typical costs in CT can be well over $2k in the first year.  You should also consider which brokerage you will affiliate with.  Many of the larger brokerage firms will require a large out of pocket cost for training which will typically be offered only during the week day.  I am still working full time as my objective was to use the license for my own investing purposes and not to become a typical buyer or listing agent.   Therefore I don't have the time to attend a week long training class during the day.  I ultimately went with Keller Williams as they offer just about all their training online.  Their marketing and tech tools are excellent as well.

I would also attend REIA meetings to network with other investors. Perhaps using @Jim B.'s  strategy to act as a bird-dog for other investors.  We also have a monthly meet-up in East Lyme if your interested.   

Hey @Kim Handelman  

It was great seeing you at the Fairfield Meet-up last night. I would highly recommend getting your license if you are looking to wholesale deals, mainly because it gives you a lot more options to make money. Most sellers are going to want more for their property than you can afford to pay them to make a good wholesale deal, but if you can turn around and list that property closer to their price and find them a retail buyer you just made yourself a nice commission instead of walking away empty handed. 

I hope this helps.

Dan

Daniel Raposo, Real Estate Agent in Connecticut (#0783769)

From what I hear, being a licensed real estate agent will limit your ability to be a wholesaler due to Real estate laws. Can someone shed some light on the reasons why this mught be the case??

Get the license, the average agent out their does a couple deals a year and you can do that and more as a investor agent. I keep hearing having a license restricts you but in general that is BS. First of all what it does in most states is require you to disclose your an agent but think about that for a minute, if your really an agent you know the paperwork, you have relationships with other people involved in the business, such as closing agents, title companies, and other professionals. The seller or buyer is normally glad you know what you are doing and they were not having the deal handled by some half knowledgeable idiot and I made a point of that in my disclosures. Now I became a California Agent/Broker in 1965 ten years after becoming an investor and if I could redo it I would have gotten my license as soon as possible.

As a side note California law doesn't require me to disclose my license status when acting as a principle, but I did it anyway and it didn't screw up my life, it actually gave me more side business. 

I am in the minority here but if you are going to wholesale - I think a license limits your earnings. You got to disclose as well as who do you represent ?  Unless I am wrong-You can make a few grand wholesaling but only 3% if an agent.

Find an agent that is investor friendly. Go to a local REIA club. Ask around. Get your feet wet first- than decide is a RE lic is right for you.

I make more  money hiring out than doing it myself. 

There are a bunch of threads on BP as well as discussions on some of the podcasts related to this very topic. I think it all boils down to your motivation for getting a license, and I'm not sure there's a right or wrong answer.

I got my license because I wanted to be able to get into a property quickly - not having to wait for my Realtor, who in this case is my business partner (and Mom!) and who lives an hour and a half away - and I wanted to be able to write up an offer asap. I also wanted my own access to the MLS and the ability to run comps myself (though we both usually run them and then compare notes). So speed and autonomy were my major motivators. I also enjoy the educational component and the continuing ed classes, which help my understanding of some of the technicalities involved.

To my mind, that's about where the benefits end. Sure, we save on commission - but so what? This is one of the current conversations in our personal business. It can be quite time-consuming to sell a property, and I wouldn't mind paying another Realtor - a GOOD one - to do the marketing, create the listing, do negotiations, attend inspections, etc etc etc. It's the old question about what your time is worth. If you know you're going to pay a commission on the resale, you factor the $$ into your initial purchase. Again, personal preference. Mom says she doesn't mind being the go-to person on our sales, so for now she handles that and we typically list our own properties. (As for the purchase, we could earn a commission there, and we sometimes have. But whenever possible, we offer up both sides to the listing agent to potentially sweeten the deal and make our offer stand out just a little bit more.)

On wholesaling, there's a quite a bit of debate on this topic as well. The concern, as I understand it, is in something called equity stripping. As a licensed professional, some folks feel that you could get yourself into trouble if you offer the seller one price to purchase, then turn around and wholesale it to an end buyer for something higher. The potential trouble? Your duty as an agent is to get a seller the highest price possible. The flip side of this argument: you're not acting as the seller's agent, you're acting as a wholesaler, and so long as you disclosed everything you need to disclose, all is good. That's an overly-simplified summation from someone who's not an attorney nor an expert on the topic - search around for a bit on BP and you'll find much more, and much better. And you of course can always check with an attorney.

Sorry for the long-winded reply, but I hope that helps!

@Kim Handelman  There is no substitute for a one on one coach, especially in today's competitive real estate flipping market. I would not start in this business by getting e real estate license. The mentality of agents is different from an investor. Real estate is a business. Most people who succeed treat it as a business. 90% of people who take courses never do anything. The get overwhelmed with information and become disoriented from jumping form program to program, lead source to lead source and information overload. I am an agent, but I have never listed anyone's property, yet I have been paid commission on over 400 properties. In addition, I made another $20-40k profit on each property because I controlled each property. You can find out about me by googling my name, or check out my one on one coaching program by emailing me at [email protected]  

I think it depends on what you are doing for deal flow, what you know now, where you are working, etc.

IMHO Transaction Engineers look at leads and say: how can I help the seller and make money too.  Wholesalers say: how can I get my All Cash Buyers to be interested in this lead.

What kind of deals you are doing:

Wholesaling only, I do not think you need a license, as long as you have a good realtor team and good all cash buyer list.  In wholesaling, it is all about you finding the kind of deals your all cash buyers want. Transaction engineer: If you are doing sub2, lease options, wraps, etc, I would recommend you get licensed.  You can get referrals from licensed agents, and have more respect from attorneys and the public.

What you know now: 

If you have not studied basics of Principles, Legal, Financing, etc: I think you are not prepared to do real estate.  At least buy the books in your state.  Just having the books of being an agent and a broker are good references.

Where you are working:

If you are "wholesaling only" and All Cash Buyers are not buying where you are, you are not going to do well, no matter what you are doing marketing wise.  If you are a Transaction Engineer, and you are in a smaller market, you can do any kind of deal, and being licensed helps you to succeed, IMHO.

TINSTAAFL Theory

"There is no such thing as a free lunch."  TINSTAAFL is a golden rule.  Get licensed and be invaluable to the best training RE Broker like Keller Williams, that allows investor buying and selling.

License 3% on the front and back end. At the height of the foreclosure crisis I had my agent write 15-20 deals a week he was overwhelmed Disclosure is not a disadvantage it shows that you are serious about closing the deal ,plus all the comps and deals that come thru an office The cost is very little for a license compare to the benefits 

Originally posted by @Kim Handelman :

Hey all,

I'm a newbie Wholesaler and am really struggling with finding deals and more importantly when I do find what could be a deal finding reliable comp data for ARV. I'm not getting very much cooperation from realtors on helping me with comps.

I'm on a very limited budget to get started and am weighing the merits of becoming a licensed real estate agent. 

Pros: Access to MLS, Access to seeing listed houses any time I want, if I work with an RE agency getting to sell properties, Making referral fees on those deals that the numbers don't work.

Cons: Taking a lot of time out of my days to get the license, costing valuable $$ that could be going into DM campaigns, and a little nervous it's distracting me from taking my eye off the prize - in other words is this just one more place I am choosing to get more educated rather than just diving in and making deals.

Any input???

 Hi Kim, I would have a comment on one of the "Pro" points which you have highlighted.  If the numbers don't work (for you), make sure the numbers work for the person who you refer to.  You want to make sure for EVERY deal that run through you, the end client thinks it is a good deal.  Reputation is much much more important than 1 single deal's earning.

In general, it is certainly easier to get comp data if you are a licensed realtor.  If you can afford it and if there is no way that you have cooperating realtors, you should strongly consider to get licensed just for this reason alone (I was, even though I have realtor friends, it's just easier!)

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.