Should I get a license to invest?

Question

Hi, I have a goal to transition from my day job into full time real estate investing.  It would be cool to build my own investment portfolio and earn a stream of income managing other people's properties for them.  I'd like to speed up the process - but how?

I've taken a wholesaling class and have started a marketing mailer program sending out 600+ mailers last month.  Did not get many responses and none of them turned into a deal...  I plan to send out another 1,000 this month.  I'm testing the waters to see if I can make a living strictly on "off market" deals as a wholesaler.  Are the other reliable methods a full time investor (not licensed) uses to build cash?

Or, would it be better to get my real estate agent license to help earn a living while I do "wholesale" marketing and/or other types of investing strategies?

I've gotten mixed feedback on this topic...

Some say that agents are held to a higher code or standard that presents a conflict of interest when trying to buy properties significantly below market value.  I've also heard from investors that they don't want to become an agent because agents are expected to "know all of the rules," and therefore, cannot pull the "ignorance" card if they find themselves in court.  On the other hand, others say that having your license is an advantage because you can save $ on commissions.  You can also earn a stream of income managing other people's property.

So it there a law (or rule or understanding) that says real estate agents cannot buy properties at a significant discount?  i.e., 30-50% off as-is market value?  If real estate agents do buy properties with these type of significant discounts, are they more likely to be sued?  Or held liable?

If the answer is no to both of these questions, than why don't more investors get their license?

Appreciate any feedback you can give me.

Andy B

Dax Gurr · Answer

It terms of the question,  "So it there a law (or rule or understanding) that says real estate agents cannot buy properties at a significant discount?  i.e., 30-50% off as-is market value?  If real estate agents do buy properties with these type of significant discounts, are they more likely to be sued?  Or held liable?"  My advise is don't ever lie.  I have people call me all the time to do real estate appraisals on estates.  I do the appraisal as accurate as and honestly I can.  I am not an investor at that point I am an appraiser.  When I see a house next door that is vacant I am an investor and I approach the owner as an investor not as an appraiser.  In other words don't misrepresent your self or lie about values.

Meghan McCallum · Answer

Andrew, no one can answer this for you. Do you like data mining? That to me is the BIGGEST + in the field. If you don't contact an appraiser (or 10) in the area and establish relationships with them...take them to lunch and ask if they could give you guidance on the appraisals in the local area. I don't know if they can give you appraisals that they have done...but that would give you a great insite into the area when predicting ARV's. ESPECIALLY of they can help you gather information on homes bought with cash and sold within the past 6 mos.

These are your local flippers properties. This pretty much would tell you everything you would need to know.

#2 Find a real estate agent who is an investor themselves. Just call every RE brokerage in the area and ask to talk to the agent who invests or works with investors. These guys often have the passion to mentor or run your local REI meetings.

#3 Start small...slow...make your mistakes and keep a job that allows you to learn wholesaling instead of having to learn a new job and wholesaling.

#4 You will be more successful as a wholesaler if you can find deals in ways no one else is.

I just picked up a property on FB and sign the contract tomorrow.

I don't wholesale...but I love finding great deals. You can't do ANYTHING until you know how to find great deals.

You can always get your license when (if) you feel like you need it to accelerate what it is that you are doing.

Trey Brooks · Answer

Hey Andy! I'm a 19 year old investor I actually just moved from Keller, Texas.

But, After I did my first wholesale deal, I rolled that money into getting my license. The only perk so far is it gets your foot in the door if you find a brokerage that has extensive knowledge of the investing world. You'd be surprised how many realtors are clueless about the investing side of real estate. My sponsoring broker is a huge wealth of knowledge and a crutch for me. He looks over any deal I come across & helps me make good decisions. So getting my license was well worth it, but my goal was to strengthen my foundation and to sharpen my knife. Not sure what your goal for getting your license is.

You mentioned managing your portfolio, while managing others... If you decide you want to manage property but don't want to get your license, look into using a master-lease, with the right to sublease. Let me know if you have any questions about that.

Also it costs about $1,000 to get your license, then about $1,000 a year for MLS access. (Wish I knew that before I got licensed... & most investors who say "you're held to a higher code of ethics" are most likely doing something they have no business doing.

Good luck, let me know if you need anything!

-Trey

Clint Hale · Answer

I won't repeat what has already been mentioned, but it's all good info. I am licensed in multiple states, and I can say that you need to be honest with yourself...are you detail oriented and accountable?

A lot of licensed investors get into trouble because they move very quickly and simply do not give the details the attention they deserve, mainly disclosures (in writing...verbal is not good enough). Having a license adds more accountability, but it is not difficult if you simply commit to running your business properly i.e. abide by the law.

*I enjoy having my license because it frees me from being dependent on other agents for information. I still work with them, but I don't depend on them.

Dax Gurr · Answer

I have had my license and I would say the best part of having a license is having the MLS. I have no idea how anyone would expect to do anything in real estate unless it is long term buy and hold with out having access to the MLS.  If you can get the MLS, and you don't want to sell houses I would not get my license, at least to start out.  The reason is you can find deals on the MLS.  You can then structure them to your advantage by approaching the listing agent and using them as the buyers agent.   This is advantageous because it is human nature to want to make more money on the deal and the listing agent will be making 6% so they will want to help you.

Then when you go to list a house you can use a discount broker, the guy I use only charges me ~$300 per deal.  Most agents have to pay their brokers twice that.

It is a lot of time and energy to get a license that you can spend doing other things.   But the key is you have to have access to the MLS or you are dead in the water.

The advantage to having your license when you are starting out is if you buy a house from the MLS, you can get that 3% commission back at the end.  If you buy a $100,000 as an owner occupant,  you will need to put down 3% to get the loan.  If you get an FHA loan and put down 3% you get that back at closing in the form of a commission.

If you are wholesaling the advantage would be if you find a house that can go on the open market you could list it rather than wholesale.  @Meghan McCallum is right, no one can tell you what will work best for you.  Think it through then Jump, avoid "analysis paralysis" you can make money either way.

Andrew Briggs · Answer

Thanks Clint, appreciate the feedback.

Andy

Andrew Briggs · Answer

Meghan, thanks for the insights.  I'm a programmer so data mining is my thing.  That's the logic behind my mailers.  I'm using the county appraisal district property data.

Dax, thank you as well.  Any ideas on how to get a hold of the MLS data?

Andy

Andrew Briggs · Answer

Thanks Meghan and Dax.  Appreciate your feedback.

How do you go about finding your local appraisers?  Google?  Is this public info?

Should I get a license to invest?

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