Being a REI and real estate agent … ethical issues, restrictions?

Question

Hello BP Community!

I am brand new to real estate investing and am considering going pro with BP. I signed up for classes to become a real estate agent. I am looking for advice on whether this will be an issue and/or what types of restrictions I might encounter as an investor, particularly with wholesaling/flipping in Colorado and/or Texas. Thank you in advance!

Kevin Sobilo · Answer

@Gingah Palmer, that is a good question. First off, wholesaling. Wholesaling isn't really REI. Its a job, you generally aren't investing much of anything except your time and prospecting costs and you never own anything to be investing in. Wholesaling also is tricky and difficult to manage while acting as an agent because often it isn't clear to the seller what a wholesaler is doing. That creates risks and because of that many brokers will not allow their agents to act as wholesalers. You can't blame a broker for that because they have nothing to gain and a lot to lose by allowing it. As an investor, it only becomes at issue if you are interested in a property as an investor. The main issue is communication/disclosure. They need to know you are a real estate agent and what that means. So, I personally make sure I identify and disclose my licensing to anyone I deal with and with a seller where I might want to buy their property, I CLEARLY tell them I am acting as an investor at first and that if we don't strike a deal and they wish to talk to me about acting as their agent that is possible. This way there is no mistake on their part. They KNOW we are talking about me buying the property as an investor FIRST... and only if that doesn't come together we might discuss acting as their agent. The communication and disclosure of your licensing as an agent are the key things to keep in mind.

Bruce Lynn · Answer

I think it is better not to have a license if you are planning to wholesale.I'm not saying you cant do it, but how do you act as a fiduciary for the seller, when you're trying to put it under contract for the lowest price at the same time. If you can sell it for a higher price to another buyer (assign) why didn't you just give that profit to the seller in the first place for your brokerage fee.There are brokers that will likely allow you to wholesale, but many won't. They either don't understand it or don't want the liability.

Jon Carag · Answer

Hi Gingah, Similar to what the previous replies are saying, you do have to be careful with wholesaling as an agent. Some investor-friendly brokerages allow it and some don’t. Most states allow wholesaling for anyone. Some only allow it if you are licensed. At least 1 (Kentucky) does not allow it whatsoever, so just do you due diligence to verify before making any decisions. I do apologize that I don’t know about Texas or Colorado specifically. Either way I personally think getting your license as an investor only opens you up to more resources and opportunities so I commend you for that! I was in your shoes 2 years ago, pursuing wholesaling, but soon after my state required me to get a license to keep at it. I did that and joined my current brokerage where I’ve been really happy since. The group I’m part of is very investor-friendly and has loads of resources and 1 on 1 mentorship to help investors leverage their license to the maximum. Actually the founders of the Fortune Builder’s group are part of the same brokerage. Anyways, there are loads of great options out there. Just make sure you ask how each brokerage can benefit you and your investor/wholesaling goals. Good luck and please don’t hesitate to reach out if you have any questions.

Eliott Elias · Answer

Biggest issue I face is I have to disclose what the value of the property is before I make an offer. Often times sellers don't care about getting top market value, just being taken out of whatever situation they're in. I think being licensed give you more power

James Wilcox · Answer

You can wholesale in KY. That is incorrect. @Gingah Palmer

Wale Lawal · Answer

@Gingah PalmerWelcome to BiggerPockets!You are definitely in the right place. Just make sure to consume contents here as much as possible and feel free to ask any questions you may have. We are here to help each other grow.Being an investor and an agent should not be a problem but you should check and follow the state laws.Get in touch with a local agent or investor and shorten your learning curve and save you a lot of headaches as they tend to understand the market better.All the best!

Gingah Palmer · Answer

I am looking to work for a broker part time while in school in the Aurora/Denver area if anyone has information on firms that I can contact. Thank you in advance!

James Wilcox · Answer

IDK. It definitely is legal. We even have larger national wholesalers that work out of KY. If she was an agent maybe her broker told her it was illegal since they have a conflict of interest in such business.

Jon Carag · Answer

James,I apologize. I will defer the facts to you since you know Kentucky. It's odd though because I knew someone who had a wholesaling business in KY and was told it was not permitted regardless of being licensed or not. She had to stop her business and focus on typical agent activities. I just researched it and don't see any concerns with wholesaling in KY either. Weird that she was told otherwise.

Gingah Palmer · Answer

Thank you so much to everyone who replied to my post with very helpful information! I may reach out individually moving forward as I am sure to have more questions. It’s a lot of information to digest. Thanks again so much!