Would I benefit from getting my Real Estate License?

73 Replies

Hello All,

I am looking to jumpstart a (NJ) RE business (flipping/buy & holds) and was wondering whether I would benefit more from obtaining my RE license or finding a good agent? My main concern is that if I'm flipping a couple of houses a year, I will potentially be spending a lot of my profits on agent commissions. Where if I act as my own agent I could find and list my own properties and save on that end. Can anyone please help me weigh out the pros and cons?

What are the fees associated with maintaining a (NJ) RE license once you have it?

I believe you need to be sponsored by a broker, meaning you need to work for an agency or strike out on your own as a broker in addition to the license itself.

I'm sure you're not the first person to think of this idea, I've thought about it on my own, so there must be a brokering agency that has investor-agents on their staff and maybe take some nominal fees while you do all of the work.

Following the thread to see if any investor-agents know. I wonder if I could bother @Tara Sullivan since I know she's a NJ agent and might also do some work on her own..

@Joe P. I’m quite sure I would require the sponsorship of a broker, which is why I posed the question about additional cost involved in maintaining the license. I’ve also heard of some type of RE commission you have to pay dues to. In any event, thanks for the referral. Hopefully Tara has some insight for us both. 

@Dennis Soto

https://www.biggerpockets.com/...

In the above I wrote a bunch on this topic.  There were a few other recently, but I can't get my hands on it quickly.

So, don't forget that you have a split with your broker (or really, the broker is splitting the commission with you since all deals are broker to broker, and agents work for brokers).

As I wrote, your yearly fees and dues are anywhere from $2k to $4k depending on a bunch of factors.

You need to find a broker that is willing to take you on knowing, or will find out, that you are really just wanting to represent yourself.  Thus, your production will be minimal, at best, thus potentially actually costing him/her money.

There is the usual concept is how well can you really represent yourself as a real estate agent? Its is a profession, and if you never really spend time learning the trade... I know many investors who don't have a license, find their deals off-market (really where the deals are to be found) and just hand it off to a Realtor to sell when they are done. They don't spend time dealing with it, and focus their time on what they know best. That being said, yes, I personally am an "investor with a real estate license" but I do also work full time as an agent representing "regular" and investor clients...

Yes, you could save some listing fees (not so much the cooperating fee) for your flips by representing yourself.  You maybe you are saving 1%..  Obviously, it adds up but don't think you are saving the 5%-6% listing commission.

I know its a bunch of info.  If you want to chat about (two way dialogue is always so much easier), send me a direct message and I'd be happy to chat.

Originally posted by @David M. :

@Dennis Soto

https://www.biggerpockets.com/...

In the above I wrote a bunch on this topic.  There were a few other recently, but I can't get my hands on it quickly.

So, don't forget that you have a split with your broker (or really, the broker is splitting the commission with you since all deals are broker to broker, and agents work for brokers).

As I wrote, your yearly fees and dues are anywhere from $2k to $4k depending on a bunch of factors.

You need to find a broker that is willing to take you on knowing, or will find out, that you are really just wanting to represent yourself.  Thus, your production will be minimal, at best, thus potentially actually costing him/her money.

There is the usual concept is how well can you really represent yourself as a real estate agent?  Its is a profession, and if you never really spend time learning the trade...  I know many investors who don't have a license, find their deals off-market (really where the deals are to be found) and just hand it off to a Realtor to sell when they are done.  They don't spend time dealing with it, and focus their time on what they know best.  That being said, yes, I personally am an "investor with a real estate license" but I do also work full time as an agent representing "regular" and investor clients...

Yes, you could save some listing fees (not so much the cooperating fee) for your flips by representing yourself.  You maybe you are saving 1%..  Obviously, it adds up but don't think you are saving the 5%-6% listing commission.

I know its a bunch of info.  If you want to chat about (two way dialogue is always so much easier), send me a direct message and I'd be happy to chat.

@David, wouldn't it make *more* sense for an investor to try and find an investor-friendly agent, someone who might be willing to share some of THEIR proceeds with you, especially if you find the deal yourself?

For example, the property I just BRRRR'd, I went on MLS to find distressed properties that had stale listings, found this one, asked to tour with my realtor, told her to make the offer, etc. Now she did most of the work on the realtor side, but I'm wondering how appropriate (or not appropriate) it would be, in that type of situation and perhaps ongoing, if I'm finding those properties and making those deals, should I ask for some of the proceeds back to help with the numbers? I think its kind of disrespectful to ask, so I am curious to know a realtor's perspective in that situation.

 

@Chow Ahmed

You are joking right?  I guess you really are new.  Let me explain some...

Like I said, fees and dues add up. You can lookup eXp which is a national brokerage. After their prorated stuff, it works out their fees are close to $3.5k annually because of their high tech fee. In general, you will have Error & Ommissions insurance premium (E&O), franchise fees (most franchises will charge the agent and the broker a fee per agent), MLS fees, National Association of Realtor fees (paid at the local level), etc. Those are the major ones. I think one BP agent/broker said his was closer to $4k or $5k and had 4 MLS' that was part of. NJ alone as 12 MLS' in the state.

And these are the fees if you do "nothing."  This doesn't include any advertising or more one-time fees like getting signage, etc.

Depending on your agent commission split and your price point, it might take a 2-3 closings to break even.

To go into the split since people seem to get this screwed up...  All deals (I think pretty much across the country) are broker to broker.  Agents work for brokers.  Its a two level licensure system.  Only a licensed broker can have their own brokerage/company (although in the northwest, apparently the license system only uses the term "broker" so it can be confusing).  Next, agents will have a split with their broker.  Lets say its 50/50 (which is pretty standard for a traditional brokerage for new agents). So...

Lets say you buy a (distressed) property and are presenting yourself.  There is a 2.5% cooperating commission.  Lets say for sake of example its a $100k property.  So, that's $2.5k of gross commission to YOUR broker.  Now you have your 50/50 split.  The broker cuts you a check of $1250.  That is your commission check which will be reflected in your 1099 come year end --- so don't forget to take out all taxes and fees...

To chat on commissions..  Remember, the seller enters into a contract with the listing agent/broker (technically the broker) to broker the sale of their property, usually for a commission.  Lets say its 5%.  Meanwhile, you agree to 2.0% cooperating broker's commission.  Lets say you are the listing agent...  If you find a buyer for the listing (called "double ending the deal"), your broker gets the 5% commission, yada yada yada as explained above.  If another agent/broker brings the buyer (which happens most of the time), then the buyer's agent's broker gets 2.0% and your broker gets 3%.

@Joe P.

How are you suggesting this "investor friendly agent" share the proceeds with you?  Thats sort of the whole point of licensure and the fact that brokering of real estate is regulated in every State (as I believe as every State has licensed Agents I thought).

I wrote another post about the benefits of a Realtor/real estate agent on your side.  Many BP members and investors just see them as money grubbing sales people making tons of money via commission (as you can see above, they don't necessarily).  Also, agents seem to be compared with salary-type positions vs. any other sales/commissioned-based positions.  You might want to find and think of them as one of your "team members" which is talked about so much.

For me personally, I can do flips and handle my own investments since I quit my day job recently. Previously, when I was working 100+ week for my day job, my agent handled lots of things for me. It was just part of the service... In the end, she was well compensated for it. She has gotten dozens of sales of my tenants, and she got all my transactions. So, to spend some time here and there running around or making phone calls for me as basically a property manager was a huge payoff, much more than any property manager would have made (I didn't run the numbers, but you get the idea).

Anyway, what was your point?

Originally posted by @Dennis Soto :

@Joe P. I’m quite sure I would require the sponsorship of a broker, which is why I posed the question about additional cost involved in maintaining the license. I’ve also heard of some type of RE commission you have to pay dues to. In any event, thanks for the referral. Hopefully Tara has some insight for us both. 

 Basically you need a place to hang your license. There are different models depending on broker. Some discourage non productive realtors, which would be your situation if you are only doing your own deals. Others charge a flat fee for brokerage costs and a cut of deals. They generally don't care how much business you do, but it could cost you more. I am not familiar with all the arrangements, so I would say call around and explain what you are trying to do. See if it makes sense financially.

Thanks @Joe P. for the tag. This is actually exactly why I got my license in the first place because I thought it would benefit my investing career and to be totally honest if you don't want to be a realtor full time and just want it to be a bonus to your investments it's not worth it. It costs a lot of money to maintain your license (MLS fees, broker fees, board of realtor fees, continuing education, insurance etc). Best advice find a agent who also invests and tag team with them. I personally pass all my off market deal to my clients first as a bonus for working with me. Things like that. I am also in south jersey if you ever wanted to connect, I am happy to help!

@David M. wish I was joking but I really am an infant here. I thought it was literally enough to get a license to get access to all inventory state-wide with no brokerages involved (thought there was some magical online portal or something that I can access myself from home to the coveted access to MLS) - good to know I'm as mistaken as a newbie can be.

At any rate, thanks for the explanation, I'm now definitely not planning to get a license soon.

@Dennis Soto, I see now why you had to raise the question.

@Chow Ahmed if you just reach out to an agent they can give you access to the MLS . Obviously not direct but thought that agents online portal. It's still faster and more accurate the Zillow

@Tara Sullivan , that's what I'm doing now. But I'm at this stage where my ideas, criteria's, and knowledge change wildly every week and as a result feel the need to bug agents constantly. But given what I've learned from this thread, better I spend more time on BP forums instead of badgering agents until I have a better idea of what I'm trying to do with my REI life haha.

@Chow Ahmed find an investor friendly agent. I happily guide my clients in the rite direction. Correction not just investor friendly find an agent that also invests and is experienced they are usually happy to help. Just jump in and navigate as you go otherwise you will over analyze everything lol

@David M. Thank you for your detailed response. I feel like I already had an idea this would be the case but your insight has confirmed it for me. Since you offered I will definitely reach out with further questions before I rule out the potential move.

@Tara Sullivan would you say obtaining your license did NOT help you with your investing?

Is that why you decided to be a full time realtor?

Do you think you would have been better off without the license or it just wasn’t everything you thought you were gaining?

@Dennis Soto so my license benefits my investing but not enough to where I would get it JUST for my investing. That’s why when I got my license since I was already into it I quit my day job and took it on full time. So my license is a good side kick to my investing but it’s not a tool I would recommend getting if your not going to actually work as a realtor with clients as well 

@Chow Ahmed

Glad I could help.  Oh, and don't forget we have to do 12 hours of CE every two years...

I've heard that in CA there are or were some brokerages that you hang your license with them and just were able to signup for some or all of the MLS' (in that state). Otherwise, no its not that simple..

Good luck.  Direct message me if you ever would like to chat.  I'd be happy to help.

Originally posted by @David M. :

@Joe P.

How are you suggesting this "investor friendly agent" share the proceeds with you?  Thats sort of the whole point of licensure and the fact that brokering of real estate is regulated in every State (as I believe as every State has licensed Agents I thought).

I wrote another post about the benefits of a Realtor/real estate agent on your side.  Many BP members and investors just see them as money grubbing sales people making tons of money via commission (as you can see above, they don't necessarily).  Also, agents seem to be compared with salary-type positions vs. any other sales/commissioned-based positions.  You might want to find and think of them as one of your "team members" which is talked about so much.

For me personally, I can do flips and handle my own investments since I quit my day job recently.  Previously, when I was working 100+ week for my day job, my agent handled lots of things for me.  It was just part of the service...  In the end, she was well compensated for it.  She has gotten dozens of sales of my tenants, and she got all my transactions.  So, to spend some time here and there running around or making phone calls for me as basically a property manager was a huge payoff, much more than any property manager would have made (I didn't run the numbers, but you get the idea).

Anyway, what was your point?

The point was determining if you should get your license versus working with an investor-friendly agent who would share proceeds with you on a deal. Certainly I wouldn't expect it, but wondering if volume from a single person buying multiple MLS properties in the course of the year would allow someone to recoup some of that money (sweetening the deal for the investor), especially if the investor is taking their time to find the properties first.

Certainly not an argument that it should happen, was just asking a hypothetical question in the thread. I'm a consultant for my day job, and if I have a client who is committing or consistently proving to put multiple contracts in front of me, I would certainly consider a "volume discount" for that client, especially if they asked.

 

@Dennis Soto I fought the same question and, ultimately, I got my license here in Texas a little over a year ago. This is my perpsective from the standpoint of a "part-time" agent. It is absolutely worth it in my opinion. Here are a few considerations as to why it was for me. 

1. Weigh the cost of getting / maintaining per year vs. your expected commissions on personal deals, think both buying and selling. For me, this in itself was a substanital win this year. 

2. You can see the value in negotiating and representing yourself. 

3. MLS access is very, very helpful. Not just the access, but being able to get data real time as soon as you want it. The timing of the access so to speak.

4. You will get deals by association. (Friends, family members, etc.). For me, this has been gravy on top of the personal side of it. 

5. The brokerage I am with is excellent and supports someone like you or me and the ongoing cost if much less than a standard brokerage. Feel free to shoot me a PM and I can fill you in. 

Best of luck!