How did you pick your broker?

Question

So, after the Summit, I decided to get my real estate license here in Arkansas. Today ended my first week of school and it was eye-opening!

I am not a very experienced investor, (2 rentals), but I feel like I have always had an investor mindset. Back to back closings! subject to! owner financing! lease option! wrap around notes! submit 30 offers to get 1 accepted! whatever it takes to get it done!

No matter what I wanted to do, if it wasn't buy off the mls, 45 days to close and give them their commission, realtors always said it's illegal or unethical. I was always curious why they shut down like that.

Now I know.

At least in Arkansas, there are so many regulations and ways to get fined, lose your license, or even get put in jail. Everything has to go through your broker. For example, even in my personal investing, since I am licensed, my broker has to review all of my leases, keep them on file, and can choose to keep my security deposits in his escrow account. Also, brokers can choose to keep a commission off of my own personal real estate transactions.

I understand that it is to keep the public safe from a vulture like me (tic) but I feel like a criminal even though everything I do is legal and I have my customers best interests at heart, so they will keep giving me their business.

Sorry for the long intro. So how does an investor, becoming a real estate agent to supplement his investing, chose a broker? Is it worth it to be an active real estate agent?

Matt Jankowski · Answer

In Texas, there are a few guys who will act as a hands off, sponsoring broker. They'll let you set up your own DBA, LLC, etc. and let you do whatever you want. If this exists in your state, this sounds like exactly what you need. Google "Texas Sponsoring Broker" to find out what I'm talking about (not affiliated).

Joe Delia · Answer

I interviewed several and signed with one that I felt most comfortable with. They seemed flexible and filled with people willing to teach, which is critical to newer agents and not something you come across often. It has been the best decision I could of made, to date.

Shari Posey · Answer

You should interview brokers and be upfront about what you want to do. Make sure they understand you are not going to be a retail agent and that you are primarily going to be doing your own deals. My first brokerage allowed us to do our own deals but my current one makes us use another agent do it for a small fee. I think most brokers, even with the big firms, will be willing to help you be very creative as long as it is legal. Maybe the main question to the broker is to ask how many properties they own or have purchased themselves.

Joel Owens · Answer

At one point I was doing the 300 trans fee years ago and had about 50 agents. Back then every brokerage was thinking about starting the 100% thing.It was a fairly new concept but today it is saturated with companies trying to undercut each other. 285 per trans,275 etc. just to get market share. The problem is not all the agents produce transactions.They want to just hang a license.When they do transact they are rusty and you have to basically almost do the deal for them and make a crappy 300 for your time. Many agents get license suspensions for bad student loans,child support etc. Then other do not meet educational requirements,do not renew in time and on and on. My stat was for every 5 agents you had maybe 1 deal was closing that month.So 50 agents equals maybe 10 deals a month at 300 which is 3,000 gross before paperwork,time managing the agents,having a building (which I didn't it was virtual),and admin staff. When you take all that away the return was very minimal in my opinion. So I have around 8 agents now.I have been paring down and not accepting any more agents for years now. I am the qualifying broker and owner so yes I do my own deals and have agents under me. I acquired my agents license in 2004 and my brokers license in 2007.

Ray Johnson · Answer

Joel Owens I definitely agree with the "puppy mills". It seems like that is what alot of the brokers are going for. Everything you said seems pretty spot on with the bigger brokerages around here. It must be a universal condition. In Arkansas it's 2 years to become a broker, plus showing "evidence of being active in real estate". Do you hold the licenses for any agents currently? Are you able to do your own deals and have agents under you?

Joel Owens · Answer

"In the school, we have brokers come in and recruit us (because we can fog a mirror" They don't allow that in Georgia.The instructor is their to train the people to pass the test and NOT to plug their brokerage. In Georgia we can buy lists from the real estate commission FOR A FEE of course for newly licensed agents etc. What some brokers do is give FREE CE courses to win agents over to their company after licensing. Most 100% companies do not let an agent get 100% out of the get being newly licensed.The first 2 to 3 deals they take a big cut for the training they have to do with you. The brokers want you to join as a new agent because they run what I call "puppy mills". They know about 90% of new agents will fail after the first year but will squeeze out 1,2 maybe even 3 deals before puttering out. The brokers want those deals to be at 50% or 40% to the broker.They make fat bank before you leave the biz.Just keep churning new agents every month and watch the other ones die off. Once a agent produces volume consistently they become very demanding and you don't make much off of the split as a broker and they might leave so new agents become more profitable. Personally I like doing my own investment deals and working with clients.I don't like babysitting a bunch of agents for a low return.Some brokers would rather interact with their agents than close deals and work with clients.I am the opposite and love putting deals together and working with clients. I do work with a few agents but find they are fired up for the first week and then when they find out this business is not "get rich quick" but "get rich with hard work and dedication" they slack off. It's a rare breed that can maintain the fire in the belly to do deal after deal and build a business. Attend a local REI meeting and you will find head brokers there that deal with investing or agents there that have a brokerage they work for that deals with investing. In some states you can be a broker right away.In Georgia you have to be actively licensed for 3 years and take and pass additional courses and brokers exam by the state.

Ray Johnson · Answer

Ed O. Thanks for the PM! Andy Chu Is there a smooth way of asking that other than "Are you an uptight broker that won't let me do things in a creative way?" :) I will definitely begin looking for a broker out of the mainstream though. Don Konipol I am looking for a broker to hang my license under. Hopefully, I can find one that will work with investor agents. In the school, we have brokers come in and recruit us (because we can fog a mirror, not because we are God's gift to real estate). Would it be better to be a motivated agent in a huge firm with a lot of not so motivated agents, or in a small firm where everyone is a go-getter?

Don Konipol · Answer

Quick question Ray - Are you asking about finding a broker to represent you as a buyer, or finding a broker to hold your salesman's license?

Andy Chu · Answer

Remember when you practice the type of real estate you do, it is the exception to the rule. Don't let the conference fool you, there were 300+ of us at the conference but over millions of real estate practioneers. Back to picking a broker. Find one that is not main stream, so not century 21, cold well banker, and etc. Find a broker that appears to be helpful and doesn't say this and that is illegal but how to structure deals so they are legal.

Ed O. · Answer

Your realization mirrors the one I had when I began doing the online brokering course. The only upside I see in being licensed is mls access. I'm sure others will see some upsides, but from the mindset of an investor, I see way too many downsides. Also, many people in the re industry, be it a title agency, realtor, broker, etc, when they hear of something they know nothing about, especially creative RE investing or trusts, it IMMEDIATELY becomes illegal. Quite laughable if you ask me. Look for my PM on this.