Where to hold license when flipping

Question

Hey Everyone,

I am new to real estate investing.  I am looking at into getting my real estate license ( I am from Michigan) but am not sure where to hold my license so that I can practice but not be expected to go out and be an actual agent for an agency.  I am looking strictly to be able to buy and sell my own properties.  I know some agencies frown upon this and do not hire agents that only use the license for flipping purposes.  at the same time I do not want to pay outrageous monthly fees/dues.  Any help or insight would be extremely helpful.  Thank you.

Fred Heller · Answer

Hi Louis,

I'm curious as to your reason for getting a real estate license. If you're only going to buy and sell for yourself, most states don't require a license. There are definitely advantages (and disadvantages) to having one. But I don't think you need one for what you're planning.

Here in Texas we have a bunch of online brokers who will charge you a flat monthly fee (usually somewhere in the $90) range, and then they'll either charge a split or a flat transaction fee ($200-$300) whenever you buy or sell a home. They don't really care how many transactions you do, so you can work full-time, part-time, or every now and then.

I'm using one as the designated broker for my S-Corp because I do property management, and a lot of brokers around here don't allow property management.

I'm guessing they have something similar in Michigan. You can google "online broker" or "100% broker." I've seen them listed in the real estate services section on Craigslist as well.

Good luck!

Chris Kennedy · Answer

@Louis Schmidt

Look around for some of the smaller local brokers, many of them will be open to you placing your license with them. In fact, many of them are probably real estate investors themselves.

Even if you're not listing property or working with buyers, there are many benefits a broker can still receive by having you as an investor in their office:

1. You might need property management services they provide

2. You will need title services, which they may also provide

3. You can refer them listings that don't make sense for you as an investor (and get a nice referral fee as well - a huge benefit to having a license)

4. You can refer them other agents who might be looking for an office to work in

5. If you're buying, fixing, and selling houses then you will be listing them under the broker's company which will bring exposure to the office, that's great marketing for them.

6. You also open up the possibility of working larger deals which you may not be comfortable doing as an investor, but you can get yourself a nice commission as a side benefit by putting the parties together.

I have bought and sold many houses. I disclose clearly (in bold capital letters) on every contract that I have an active real estate broker license, and I explain that to the property owners or buyers. Never once has anybody decided not to work with me because I have a license. If anything I think most people have more trust in me because they know I am regulated by the state, and they can check my license status and complaint history online anytime.

If you're going to conduct business ethically then being a licensed agent who also invests should not be an issue.

Heera S. · Answer

@Louis Schmidt

You don't need a license to be a Real Estate Investor. If you feel you would gain more knowledge or access to information that would help you, there are other ways of gaining knowledge without the hindrance of having to disclose your license as @Brent Coombs said.

I am currently taking an online education program as well as frequenting BP. Let me know if you are interested in learning about the program I am enrolled in.

Best of luck!

Jason A. · Answer

Hi Louis,

Here's the website that tells you about the various licensing requirements for Michigan:

Michigan Broker Licensing

Here are the steps involved in getting your salesperson's license:

Michigan Salesperson Licensing Steps

Looks like you will need a sponsoring broker to back you before your salesperson's license approval is finalized.

That "online broker sponsor" thing in Texas is wild. I've never seen that before, and I wonder if this is an option available in any other state.

The idea behind the requirement for a broker sponsor seems to be that a salesperson cannot act on his/her own due to lack of knowledge or experience. Thus, the legal requirement for a sponsoring broker, who is held responsible. It would appear that these online sponsors are taking a tremendous liability risk be allowing virtually anyone who passes a salesperson's exam to effectively go out there and do whatever seems ok to them. I've never read the fine print on these arrangements, but at least around here, "sponsoring broker" means just that, and that broker will be held to answer for the actions of his/her salespeople.

Anyway, all that aside, let's look at your original question: does licensing make sense if you just want to out and flip properties for yourself?

For the answer, you need to do a cost/benefit analysis.  Consider the cost of licensing courses, exam fee, licensing fee, renewal fee, continuing education costs. If you want the benefits of MLS, there will be a subscription fee and sometimes more (such as separate listing fees), depending on the requirements of whatever MLS you join. If you affiliate with a sponsoring broker (which as a salesperson, you will legally need to), that broker may have his/her own set of fees. Also, as a licensed person, you will be assumed to have "superior knowledge" in dealings with principals in your flip deals, which has the potential to come back and bite you if for example you purchase a property way under market price from someone deemed to have inferior knowledge. There might also be legal requirements for certain disclosures you'll need to make when doing your flips.

In return for all that, your main benefits would likely be access to the MLS and a discount on buying and selling commissions for your flips. How many transactions per year will you do? Add up the potential commission savings and see if it's worth it. My guess is that unless you are doing a lot of transactions per year and/or you are flipping some expensive properties, the costs will outweigh the benefits.

There are lots of extremely good reasons to become licensed, as I explained in one of my other notes. I did, a while ago, and am very glad I did. But it may not be an optimal strategy for a novice real estate investor merely as a mechanism to save a few $$ on flips.

Sorry for the length of this. I think I need to start a blog to put it all in one place. This seems to be a question that comes up often.

Brent Coombs · Answer

As an Agent you will be OBLIGED to tell each Seller that you buying it specifically so that you would be able to profit from the purchase. Now, if you were selling, would you sell TO an Agent (or would you rather find an Agent who will work in your interest by listing it for you)?

As a Wholesaler without a license, you could withhold that little detail. Cheers...

Kyle Gregg · Answer

Maybe access to the MLS as well? @Ulises Romero

Where to hold license when flipping

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