Wholesaling VS Being A Realtor

There seems to be an ongoing debate as to what path a real estate entrepreneur should embark on. As a newb in the real estate world there are tons of ways one can get started in real estate. The two most popular ways are to become a Wholesaler or to become a Realtor. In this post I will point out the pros and cons of each and let you decide which one is a better choice for a new person in the real estate world.

What is a wholesaler?

A wholesaler is a middle person in a deal trying to collect a fee. Their main goal is to assign a contact to an end buyer for a profit. A wholesaler's main clients will be the investors that are looking for investment property. A wholesaler's job includes looking for investment properties for his or her buyers as they will typically deal with the same investors over and over.

What is a Realtor?

A Realtor is a real estate agent or affiliated real estate professional who is a member of the National Association of REALTORS, called NAR for short. A Realtor's main goal is to get the highest and best offer for their client (homeowner) . A Realtor's main clients will more than likely be homeowners who are looking to sell their houses. A Realtor's job includes listening the houses on the MLS and coordinating offers with the homeowner more than likely they will one deal with one homeowner one time as most people only own one house to sell.

Pros as a Realtor

1. Having access to MLS (which is awesome).
2. Saving Commission (If you plan on buying/selling several properties per year).
3. Being able to see listed properties yourself.
4. Make your own appointments to see properties.
5. Have direct access to lock box codes.
6. Being able to submit your own offers.

Cons as a Realtor

1. Everything you make must be paid through the broker first, then to you. Fsbo, mls transaction, it doesn't matter, even if you are disclosing everything, which everyone does. Payment comes from the broker.
2. You cannot put out bandit signs or hand out business cards unless you have the broker's info on it as well.
3. You cannot pay unlicensed birddogs.
4. You cannot advertise a home that is unlisted.
5. You have to disclose that you are an agent which can be a deal killer for some people on some deals.
6. Passing the exam
7. Hang your license with a broker (although not hard)
8. Paying MLS dues
9. Take a course for the exam (but preparing for the test you will learn a lot about real estate)
10. Do continued education training (but not really a bad thing).
11. Follow a strict code of rules and ethics (no creative financing).

Pros as a Wholesaler

1. You don't have to get paid through a broker.
2. Not having to disclose that you are a wholesaler (unless you want to).
3. No exam.
4. No MLS fees.
5. You can put out bandit signs or hand out business cards with only your information on it.
6. You can pay birddogs.
7. Can advertise a home that is unlisted.
8. You typically make a larger spread on deals than a realtor would.
9. Can use other creative strategies for acquiring properties.
10. Learn skills that will help you later on in your investing career.

Cons as a Wholesaler

1. No direct MLS access.
2. No direct access to lock box codes.
3. Not able to submit your own offers.
4. Not able to see listed properties yourself.

Let's take a $50,000 house for example.

As a Realtor you receive a 3% commission of $50,000 property, you can cover the cost of your license for one year. But, you're not going to receive the entire 3% commission unless you have already served your time to become a broker. And some brokers like Re/Max, Keller Williams, Century 21, etc may take up to 50% of your commissions.

As a Wholesaler you may receive upwards of 90% on a $50,000 property. If you get the property under contract for $5,000 you can sell it for $50,000 to an end buyer. You may only need to do 1 deal to cover your marketing cost and there are no license fee's. That can certainly cover your marketing cost.

What Do I recommend...?

Do Both!

That's right, I say get your license and sell the pretty houses on the MLS, wholesale the ugly ones.

Check out my site over at Tennessee Real Estate Deals for great deals in Tennessee and great articles like this one.