Can attaining a RE license in any way be a detriment to a RE Investor?

29 Replies

This is a question I hadn't considered until a couple days ago, but here is why I ask it. I'm new to investing and want to start making money, and I'm also committed to learning everything I can about whatever I get serious about. So as a result, I decided to go to real estate school and get my license, which I'm scheduled to do next month. I figured, the knowledge will benefit me, I'll gain access to MLS, save commission if I want to buy a property, etc....But then I attended a REIA meeting the other day, and the speaker was a lady who was a short sale specialist. After the meeting, I was chatting with her and mentioned my plan to get my RE license, and she immediately said, "that is not necessary, and when it comes to short sales at least, it could even be a detriment, in that a licensed agent has to make all sorts of disclosures that a non-licensed person does not have to make". I didn't press for details, but it got me thinking. If I want to spend most of my efforts on the investing side of the business, am I actually hurting myself by getting a real estate license? I would like any licensed agents/brokers who are also experienced investors to weigh in on this issue please. What are the pros/cons of being BOTH a licensed agent/broker AND an active investor....regarding shortsales, wholesaling, rehabbing, or whatever topic you would like to relate it to. Thanks for the input.

If you are doing things responsibly, you have nothing to worry about the ethics disclosures that are required by a RE liscense.

On the other hand, without it you can use the "dont ask, dont tell" with banks about being an investor since they do make it harder by having more hoopes to jump through for investors and some banks just wont deal with them. It is their loss, not yours.

Having been a Broker in CA and CO many years ago, I'd say do all the study but DON't get the license. The knowledge is what you want and need to help you succeed.
I agree with the second part of the previous post in the don't ask and don't tell with the banks because of more hoops to be concerned with. However I disagree with the first part of the previous post for the same reason.
If you want to negotiate with a FSBO seller and are a realtor, you better have the seller sign something like the following;
" I, the FSBO seller am not very aware of what I am doing and may be selling my property at a RIDICULOUSLY low price to someone who understands the market much better than I, is a professional, and may be stealing my property as to value in comparison to price being paid. I, the FSBO seller am OK with that and make this transaction with that knowledge."
Have that statement signed and you MAY not suffer any repercussions, lawsuits and errors and omissions controversy from it.
Without an agreement of this type, you may have an ethics problem develop due to inadaquate disclosure of your knowledge and intent. Lawyers feast on that kind of stuff, Rich.

Thank you for both posts. It is very interesting you say that Mr. Weese. I was actually considering going through the entire class, and then just not getting the license. Now that I have a confirmation on that idea, there's a great chance that's what I'll do. At this point, I don't see myself focusing that much on the realtor side. I really prefer to retain as much flexibility and freedom as possible in my transactions.

I welcome more input and ideas.

Rich.

Without taking away from others comments here which I find note worthy. As an Investor first, I chose to get my license for one very important reason. That reason seems to be the thorn in most Investors sides. Finding a competent Realtor who knows what Investors want and need. As a Realtor-Exclusive Buyers Agent/Financial Advisor, gives me free access to info, data, stats, title profiles, seller mortgage info, nationwide MLS access, etc, etc, etc, I have access to this info for my own investing and I offer the same to my Investor clients. A turnkey network of services, which also includes free access to my property & tax analysis software. + mentorship under one roof. Priceless, for those Investors who can appreciate what I have to offer. Two more things! Under what might become a new property seller law. Realtors are exempt! Having a license also gives you the freedom to clam Real Estate Professional Status on your tax return.
Study hard, get your license! The negatives in my opinion will never out weigh the positives. Short Sales are a waste of time anyway!!!!

Matt Mathews
Mathews Associates
Real Estate Investment Services
Exclusive Buyer Agent/Financial Advisor. Certified Energy Star Preferred Agent.

Very interesting. I'm going to take this into strong consideration. I'd be interested to know any specifics of the tax advantages on your return. My real estate class finishes up on Aug 26, so I'll let you all know which way I went when all is said and done, and what my reasons were.

Hi Matt,
I can only say Amen after your clear info. But I do have a question though ;How can you get access to national mls intead of the state you have your license from ?I have mls access just for the state i live in .

I am an agent and I think its the best step I've taking. My business partner is not an agent so the things that I can't do she does. I'm able to pull up a lot valid statistics, run my own valid comps (instead of free comps you get what you pay for- never again), AND because I only choose certain areas to invest in, the areas I don't hit up I become an investor friendly agent for those investor so therefore constantly making money.
However, I don't recommend an investor to be and agent just to get comps it has to be another stream of income for you. We have an investor who hyped up a lot of investors in our area to become agents while charging them $300 a month and with full time jobs, a lot of them have realized it was a waste of time and money.

I still don't buy the need to be an agent. I have MANY realtors that will share their entry code for all the info they have. Anyone can find out every single listed property any where in the U.S. by just going to realtor.com and enter the city and particulars you want.

Temi- That is smart having a partner that doesn't have a license. Best of both worlds, imo.

Matt- it is not easy to find a competent realtor. They say 10% make 90% of the money and the other 90% of realtors share the 10%. I look for the high wage earners. Normally, they have earned a reputation for their work ethics, knowledge and experience. Not in all cases, but in most.

Rich, one more thing. There are a lot of other threads discussing this same subject. Check them out for more info. Rich.

Originally posted by Matt Mathews:
As a Realtor-Exclusive Buyers Agent/Financial Advisor, gives me free access to info, data, stats, title profiles, seller mortgage info, nationwide MLS access, etc, etc, etc,
What? You mean you don't pay a fee for your license, you don't pay an anual fee for your MLS access, etc., etc.? I believe (and agree with Rich) that having a RE sales license as an investor has it's limitations.
This HAS been discussd in previous threads, in fact, I posted this very same thing and one response claimed to have heard the negatives but nobody ever could lay them out for him, so I did. Rich's example of dealing with FSBO's is just one of several potential hinderences having your license. The obvious benefit is access to MLS and most important, commissions.
I get free access to title reports and the MLS through my team mebers and it is actually FREE (I don't pay a dime, but I certainly repay them with my business).

That all said, one of the BEST strategies (in my opinion) is to not get YOUR license as an investor and ave your spouse get one. That way, you have the best of BOTH worlds! :D

Will- good idea on the wife getting license, unless your wife HATES real estate , like mine. She has done all our bookkeeping on somewhere over 1000 homes and who knows how many apts. She has done her part and then some!! Rich.

With ongoing education requirements, dealing with paying of fees, meetings, listing entries into MLS, taking agent calls, and due diligence who has the time to be a investor?

Focus all your efforts on being an investor and leave the marketing of properties to those who focus on being a REALTOR. I recommend finding an agent or agents who will give you access to MLS or at least who can give you quick response for listing detail and CMAs.

I was a REALTOR and take it from me it is much easier being an investor. If I ever get demoted or fire myself, I guess I can always rehang my license.

Good Luck!

P.S. I like Will's idea about the wife being an agent..... I guess that would be one reason for me to get married!!

Having a license also gives you the freedom to clam Real Estate Professional Status on your tax return.


In reading through the IRS documents on "real estate professional" status, and discussing this with my CPA, I can't see how a license has any impact on this at all. The regulations are that you must spend at least 750 hours doing real estate activities AND must spend more hours on that than anything else. It says nothing about being licensed or not. Certainly, if you are working as an agent, you can more easily accumulate the 750 hours, and you don't have some other job that's accumulating "other" hours. But I can't see how a license in itself has any impact on achieving this rather valuable status.

However, as an "investor" (newbie), what do you have to show for? It seems that although there are stipulations here and there, isn't attaining a license in RE saying to the world that you are committed to your career? For many newbie "investors", I think this is one area they can control and create value in.

Getting started is half the battle. Once you're up and going and partners and deals are in place and you are a "bona-fide" investor, then maybe you can decide to lose the license so that you can attain more flexibility.

This is a shortened down version of a conversation I had with a family member (seasoned investor) and myself (newbie finished with Brokers classes prepping for exam).

Sidenote: What are your guys' thoughts on education through such organizations as ULI and ICSC?

http://www.uli.org/sitecore/content/ULI2Home/ProfessionalDevelopment/RealEstateSchool.aspx

http://www.icsc.org/srch/education/university/uscindex.php

Are these of any value to investors?

Real estate investing and real estate brokerage aren't the same career. Related, yes, but not the same. It might be a stretch to say its like comparing being a barrista at a Starbucks to owning a coffee shop, but that's not that far off the mark. A real estate agent prepares you to help people buy and sell real estate. It teaches you about the transaction process and some of the legalities. As far as I can tell, it teaches nothing about much of the financial aspects of rentals, flipping, or most of the other types of activities done by investors. As far as I can tell, getting a residential real estate license does nothing at all for preparing you to invest in strip centers or apartments.

Having a license also gives you the freedom to clam Real Estate Professional Status on your tax return.


Originally posted by Jon:
In reading through the IRS documents on "real estate professional" status, and discussing this with my CPA, I can't see how a license has any impact on this at all. The regulations are that you must spend at least 750 hours doing real estate activities AND must spend more hours on that than anything else. It says nothing about being licensed or not.

I agree with Jon and have spoke to my attorney and CPA about this many times. Being a "licensed agent" has NOTHING to do with the IRS classification of "Real Estate Professional". Do not take the iRS term so literally. Not only does this classification require you to spend a min of 750 hours per year in RE, and spend more hours on that than anything else, you MUST have more than 50% of your income derived from RE to qualify. Keep in mind that while there are certain advantages to this classification, their are alos disadvantages.
Consult with your RE attorney/CPA in mkaing the right decision for YOU.

I think this might be a state by state issue and worth checking with a local attorney.

The conversation here has been about the feds and the IRS but for me the choice was state law.

if you buy / sell more then X number of homes in Michigan (I forget how many now to be honest) you have to be a licensed agent

Now – will someone do or say anything if your not? I don’t know – another conversation to have with that lawyer :)

I do generally agree that with that issue aside being an agent can be more trouble then it is worth if all your doing is investing (vs being an agent)

Be that as it may, the IRS classification is a federal one and not governed by states. The property limitations Scott mentions are additional issues on the state level.

This topic always seems to conjure up a lively discussion. I would like to make a few more points. First of all, the RE. exam does cover (in detail), Investing strategies, techniques. There is even chapters covering Lease Options, wrap mortgages, sub-2, commercial, apartments, multifamily. Not to mention, pages of Math calculations. All of which you need to know, just incase those questions are on the the test. I forgot! There is a whole section on property management/landlord law. For whatever it;s worth., The test is written on a 3rd yr college level.
As a Buyer Agent/Investor I have no problems working with FSBO properties. My speciality is Lease Option/Sub L/O for my Investing as well as my Investor Clients. MLS question! FYI! On any given day there are roughly 40K-50K properties that never enen see the MLS. (Pocket listings). The good Investor/Agents get to see those properties before the public. Realtor.com etc. Conclusion: Yes, you don't need a RE Lic to invest. But the majority of successful Investors I work with, not only value my experience, and knowledge, but they are are more than happy to pay for my services. One more thing. Under a new law that passed a while back. Licensed RE. Agents are exempt from the RE Prof IRS status. I also, have no limitations on how many properties I can own for my own account. I have Invested without a Lic. and now with a Lic. Professionally speaking, the Pros out weigh the cons hands down!

Matt Mathews
Mathews Associates
Real Estate Investment Services
Eco-Green Certified Agent

i started in real esate by thinking i needed my license, i think it def. helped to learn a lot and i have met a lot of connections in the business. now, i wish i didnt have anymore and just could invest so i'm trying to make the switch especially with all the fees i have to pay to be a realtor... if i could start over i would not have gotten the license but develop a team of professionals,multiple realtors to help me along the way, i know of a bunch in my area that help investors and do very well at it.

Good luck Richard.
I remember going to Lumbleau in Santa Ana and getting my sales license in 27 days. I applied for the test the day I started school. Good times!! Rich.

It was almost a year ago today where I was going through this same dilema. I guess one of the questions is what are you doing for your current source of income. As they say in a lot of industries, don't quit your day job. Everyone has their monthly bills; where you live, what you eat, you've got transportation costs etc. How are you meeting these bills. I would not want to do this as purely an investor, unless you have 10 plus cash flowing properties currently. This is the first question I would ask you.

I'll give you the pros of getting your license.

Education: I believe the knowledge you gain with a real estate license is invaluable. Let me stress the knowledge from the actual real estate license is good to marginal. I can only give direct knowledge of the state of Colorado, but it seems to be the same everywhere. The person who compared it to a 3rd year college education, I say no way. It's marginally above high school if that. In Colorado, it's about 160 hours of work. LOL, I'm supposed to know this for the test. How is that supposed to help you in a real estate transaction? While you certainly get a basic education it does not help with most investor related issues and topics.

It's the ongoing education: Next week I can attend for free a four hour course about the HUD homebuying process. If you are interested in purchasing HUD homes as an investor there are a lot of little tricks. Do you know if you overbid on a HUD home you need to bring that cash to the table. For those of you who think it's worthless a fellow agent at my company purchased a HUD home, went 30 K over asking. He was doing a flip. He missed his budget, he ran over 10-20 K. His net profit after all closing, holding, etc. was only 80K. He had it sold in 90 days from the date he bought it to sale. It was under contract after four days on the market. It opens the door to all sorts of additional and ongoing education. That is where the real value in learning is.

The traditional advantages: mls access, squeeze the cost, showing properties etc. These have been addressed by different people already and what initially attracts people to do both.

Networking advantages: This is in my opinion the biggest reason to do this. It is easier to talk to most people when you are a real estate agent. When I go to an REI it is much more useful to me as an agent. I may not be able to work with these people as an investor; we have different models, there deals are to thin, etc. As a real estate agent I do have the opportunity to monetize the relationship. It also makes them more willing to talk to me. It opens doors!

Internal networking: This is the most overlooked aspect and I have not seen anyone mention it in this post. It is the ability to network with your fellow agents that can make a big difference. You can pretty much work with one agent as an investor. I have the ability to spend time with a ton of successful agents and learn what they are doing. Here is a profile of just 3 in my company. Names have been changed to protect the innocent

The Ouzo drinker - I'm guessing he has over 30 properties. As he says it's none of your f'n business. He raises a ton of private capital. He buys notes.

The crazy brit - College and liberal arts educated. He is an expert at fix and flips. He is the one who made 80K on the last one. He has another one this weekend, I get to do the open house. Talk about a great way to get a profile of what the buyers look like and feedback. It can't be beat.

The Godfather - The person who owns the company. He owns 140 doors of rental units. Can I learn more from him or from a course with coaching?

The developer - He was involved in all types of development deals. He moved over to residential about a year ago when the market changed. He also had a baby and the quality of life became more important than the constant travel.

I have a great network that I would not of had access to without joining this company.

MY ANALYSIS OF YOUR DECISION - We kind of did it backwards. When I was wrestling with this decision a year ago I got feedback from the Bigger Pockets board, and was still unsure. I went out and started interviewing for real estate jobs.

The most important decision will be the company you joing It's like law school, the firm and mentoring you receive will be more important than the education you get. I found a great firm in Denver, Your Castle Real Estate. It specializes in working with investors. We have 200 agents. About 1/3 are investors themselves.

Figure out who or where you would work for and then answer the question of to get your license or not. For all the people who are negative, I see your point. Think of getting your RE license the same as spending the money on a guru course or a coach. It's cheaper than a lot of coaches and better than a lot of courses. (That's a different topic and I share the viewpoint of MikeOH)

If you've got a job with benefits paying more than 60K stay the course. If you're working at Starbucks, probably smart to make the switch. Don't go into being a real estate investor without a source of reserves, alternate income (wife working, living with your parents can count.), or a lot of capital.

This is not a get rich quick game.

If not for the company I joined I'm not sure I would of gone down the path I did for getting my license. 50/50

Feel free to contact me direct if you have any questions.

P.S. If this helps I'd love a thumbs up. I don't have a single award yet

:cry: