Do Turnkey Providers Need to have a real estate license?

Question

How do realwealthnetwork, Norada and Memphis Invest sell properties they do not own without being license real estate agents?

Chris Clothier · Answer

Hey Tomas,

You ask a great question and one that hopefully a lot more investors will read and pay attention to your thread.  First, Real Wealth Network and Norada are not Turnkey providers.  They are promotional companies whose primary operation is connecting investors to Turnkey companies who will carry the freight they expect to be paid per buyer per transaction.  In my experience that can be anywhere from $5,000 to $10,000 or as much as 6%, whichever number is larger.  They are not actually selling a piece of real estate.  Those companies are selling a pre-vetted investor to a Turnkey company who then sells a piece of real estate.  The investor is the product, not the house so no real esatate license is needed.

In the case of Memphis Invest, every property sold is actually owned and fully renovated before being offered for purchase.  At the same time, a portfolio adviser is who an investor talks to at Memphis Invest, and even though it is not required, each of those advisers is a licensed real estate agent.  The company that manages each of our 5,600 properties, Premier Property Management Co., is a licensed brokerage in those states.  Tennessee, Texas, Oklahoma, Arkansas and Missouri.  The advisers hang their licenses in those brokerages.

I'm not sure how all other Turnkey companies handle their operations, but the prior commentator was correct.  The better companies that I have advised, worked with at masterminds, or just shared best practices with, they all sell their own inventory so no license is required.

I would advise you that if a company is selling something they don't own, you should be walking away to begin with.  I wouldn't worry about why or how, just realize that they are not operating as best in class if they do not own what they are selling.

Chris Clothier · Answer

My fault, I didn't read that clearly.

Depends on what you are trying to do.  If you simply want to refer buyers and will not represent them or have anything to do with which property they buy or if the deal is any good or not, you can earn a referral fee by being licensed in Ohio.

If you want to give your clients advice on the deals and help guide them with what they are purchasing, you would need to get licensed in those states.

I'm not the guy that gets paid to make those determinations though, LOL!  Make sure you get advice from someone paid to give that advice :)

Chris Clothier · Answer

James,

We have had lots of discussions with RE divisions, SEC departments and even Attorney's General about our set-up and what we do.  We do that because we not only want to be in compliance, we also want to have a high level of comfort that we never get close to any lines.  To be direct, we are not required to have licenses to sell real estate because we own everything we sell.  However, we do it so that we never accidentally end up on the wrong side of a RE department.  There are a lot of rules and regulations taught in those licensing courses not to mention the continuing education that helps us stay current and even speak from a point of comfort with investors.  Im sure you know the management side and the fact that you must be a licensed broker or partner with one in a new state in order to manage property there.  You also have to be super careful to not cross the securities lines and get in trouble on that side.  How you structure your company, sell your houses and offer your services is critical to staying compliant.

Happy to answer questions for you and help if I can.

For us, we got advice on everything from every entity we could think of out of an abundance of caution and we took a lot of actions out of an abundance of caution.  But, it also led us to be thought of as a gold standard type company.

Thomas Staub · Answer

@Chris Clothier - thanks Chris. So basically Norada and RWN are coordinating the paperwork and promoting the properties to vetted  investors, which doesn’t require a license. Seems to make sense. Appreciate the feedback.

James Wise · Answer

Good stuff. That's basically how I was interpreting everything myself. If I push buyers to company X in Indy or company Z in Memphis I am clear to receive a simple referral & or marketing fee just utilizing my Ohio Broker's license. If I push a buyer to buy Property Y from company X in Indy or Property S from company Z in Memphis I need to get licensed in those states as well. I'll look into it further once I get closer to securing a pipeline in each market of interest. Right now I am doing some light marketing test runs to prove out the concept with a couple vendors in a couple states...........Anyways, thanks Chris always appreciate feedback from you on compliance type stuff. I know if one dude is dotting all the i's & crossing the t's it's you.

James Wise · Answer

Right on. Same page on all of the above. I wasn't speaking as to the licenses needed for you guys (Memphis Invest) I was speaking directly about your comments on the sentence below as that is as far as I am considering taking my business into the other markets. I have ZERO interests in running a top down company in more than one market. Dunno how you guys do it man lol.

First, Real Wealth Network and Norada are not Turnkey providers.  They are promotional companies whose primary operation is connecting investors to Turnkey companies who will carry the freight they expect to be paid per buyer per transaction.  In my experience that can be anywhere from $5,000 to $10,000 or as much as 6%, whichever number is larger. They are not actually selling a piece of real estate.

James Wise · Answer

Hey Chris I assume you spoke to a few State's Division's of Real Estate about this? I ask because I am gearing up to add some other markets to my business but am in no way interested in spending millions building up the infrastructure in other markets like I did in Cleveland. Want to refer people to other Turnkey providers same way as above. As I am looking into this to decide if I need to also snag myself a license in those other state's I am thinking that the marketing of the actual individual property addresses themselves is something that will require a license........Hoping I am wrong in that assessment as it's another layer of red tape..........Any thoughts you can shed for me?

Tom Ott · Answer

Well, those first two aren't even Turnkey Providers. Those are more like a Marketplace. Think Amazon.

I would assume they would need to be an agent or a broker in order to sell them to you safely. Now, if they own the properties and do the renovations in house, they can sell them as For Sale by Owner, BUT they still can't manage without a license. A True Turnkey provider does the management in house after the purchase.

Ryan Mullin · Answer

Its also worth noting that to do 3rd party property management a RE license is required in most states.

Leah Stuever · Answer

It depends on a lot of the details.

But the first company you named is just a company that forms teams in areas that find, buy, rehab, and resell. So the local team owns the property. And it doesnt even look like they sell it. They just advertise it to their members.

The second one looks like a website to promote buy and hold in order to get you to hire them to manage the property

Do Turnkey Providers Need to have a real estate license?

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