Should I start out investing as a Real Estate Broker???

Question

Hello Everybody,This is my first forum post hopefully with many more to come. I am just getting started in Real Estate Investing and thought it would be a good idea to get my Real Estate License and a General Contractors Licenses. Understanding of course neither is MUST have, however I thought it would be nice to have both. I stated taking Real Estate Broker classes about 5 weeks ago, we are about half way thought the class and not only has the teacher said but also a former investor whom is in the class with me, told be that I may not want to get my RE License. They both told me that with all the extra expectations such as laws and ethical codes that Realtors have to follow that they can get in the way of Investing, which is my true focus. So what do you think, is me getting a Real Estate licence a good idea? Or should I just finish the class to background info? Please enlighten me.Thank you.

Rich O'Neill · Answer

Hi @Matthew Kalencki! Welcome to the site. If you read through the forums there is a lot of debate on this topic. Everybody seems to have a different opinion. Personally I think it is less of an issue of expectations and disclosures (you should hold yourself to those expectations anyway!) but more of an issue of value. Depending on where you hang your license, they will charge you either monthly or a percentage of your commissions. You have to weigh if those fees are bringing you more value than they cost you. For example, I hang my license with The Virtual Realty group which costs me about $300 a year, and they take $375 flat fee for each transaction. Then MLS access costs me about $336 a year in PA. Add in some licensing fees and I am paying a total of about $700 a year to hold my license. The question is, can I earn more than $700 a year in extra income because I hold my license? This is my first year doing it but I am sure I will be able to do that. The MLS is a powerful tool and allows me a lot more flexibility in my investing and it is worth every penny to me. You will have to run your numbers and see if that is similar. My guess is that you will come to the same conclusion. With the contractors license I have also thought of doing this, but figured out it would not be worth it for me. In PA you do not need a license to work on property you own. I do not know the laws in your state so it may be helpful to find out. In my state it seemed like the only way it would be worth it is to do work for others and I would need to do a lot to break even. PA makes you hold liability insurance of at least $1 million which blew it out of the water for me. Much easier for me to pay a GC if needed. I hope this is helpful! Let me know if you have more questions.

Duke Marquiss · Answer

One other thing, find out what your seller really wants. They all think their house is the nicest on the block and must be worth $25K more than the one across the street that just sold. What they are really saying is " I pray there is a sucker out there that will pay me more."What are their plans, where are they moving to, why do they need to sell, what are the issues with the house, why did you buy the house, what did you like about it???? and the list goes on.Drill down as deep as you can.

Duke Marquiss · Answer

I was first licensed in WY back in 1974. Kinda makes me sound "old" but then I guess I am. I have had my real estate license in CO since 1991. I have always been a lazy realtor and found that I could list and sell my own stuff with less headache than get a listing, selling it and dealing with the education process for each buyer and seller. I will usually list our own properties but do not deal with the selling side. I act as a Seller's Agent in the transaction and let the buyer be represented by the Buyer's Agent. That way no one can misunderstand representation. When buying a property, I always disclose that I am a licensed agent buying for my own account and that I am doing so for profit. Simple clause that will keep you out of trouble. The nice thing is, I frequently find a deal or a buyer that I can bring to the market that is outside of my business plan and make a nice commission.Just remember the bad experiences that you have had with a RE Agent and do the same things. Be fair and disclose always. No one has lost their license or gone to jail for "over disclosure", but many have for not doing so.

Linda Chmar · Answer

Thanks for this info Rich, I also have the same question about getting my real estatel icense...most brokers I talk to say no, but I wonder if that is just because they don't want another investor agent out there! Listening to the BP podcasts, many of the investors DO have their sales and/or brokerage licenses.I am a practicing real estate attorney and have my law license, so I am already bond by a high code of ethics, best practices, disciplinary codes, etc. that are similar to those imposed by the GA real estate commission.Best regards to both you and Matthew.

Matthew Kalencki · Answer

Hello everybody,@Rich O'Neill, @Linda Chmar and @Duke Marquiss, Thank you all for your input. It seemed that this post was going unnoticed for a few days so I started read some others forum post and came to the same conclusion you all brought me too. But it is nice to know others are thinking along the same lines as me, so thank you again for your input. I couldn't understand why people were telling me point blank not to get my RE licence when having access to the MLS seems like invaluable tool to an investor. The expectation and regulations that are put on REA doesn't seem to be unfair at all or to difficult to manage if you're an honest person. I just wanted to be sure that there wasn't something else I wasn't seeing or wasn't understanding. But it sounds like, as I expected, as long as I get in with an understanding brokerage I will be able to run my investment business the way I want, and without to much constraint. Thank you all again.

Rich O'Neill · Answer

@Linda Chmar no problem! Hope it was useful for people. Just seems to me that there are more pros than cons to it unless you are trying to do shady stuff in which case you shouldn't be in business in general!