To Realtor or Not to Realtor?

[Chris Taylor]

So like most newbies on here I am looking to transition from my current occupation to real estate with my primary goal being buy and hold rentals.  I have read a lot of mixed opinions about becoming a licensed agent.  I don't think becoming a licensed agent will benefit me in the short term but it may be beneficial long term.  That being said, I was considering taking all the proper course work (it costs around $1500 at a local community college) just so I could learn the more technical details of the business.  Then if I decide to pursue it in the future I will at least have the course work completed, and if I don't, at least I will have gained knowledge.

What got me thinking about this was a property that came out on the MLS Saturday afternoon. This Property is listed at $38K but would have an ARV of $100K after about $30K to $40K in repairs. Me as an average Joe could only contact a real estate agent to inquire ...which I did. But good luck getting a response from an agent on Saturday evening especially when you are a buyer with little experience and zero investment properties. I then contact a guy I work with that is a real estate investor but is also a licensed agent. Within 30 minutes he had all the details (beyond what was listed on the MLS) of the property including the fact the owner is taking cash only and will not accept any offers until it has been on the market for 5 days. Then because he is a licensed agent he was able to access the lock box and get inside. In this particular scenario it doesn't matter because the owner is not accepting offers for 5 days. However, if the seller was someone who cared more about a quick sale then I would be at a disadvantage.

My question is ... is it worth it to become a licensed agent if you are a buy and hold investor?  And if not, is it worth spending the $1500 on the course work if you have no intent on becoming an agent?

[Dawn Brenengen]

@Chris Taylor If you are going to be doing many deals, then yes, it's probably worth it. If you are only doing handful, probably not. The cost of being a realtor is not only the class, it's the test and license, joining a brokerage (they charge), joining the board of Realtors, and gaining access to the MLS. You'll also have ongoing continuing ed, license fees and board fees. So, I don't think it's worth all that to only buy a few homes, but if you are going to go all in on RE investing, then yes, I would.

[James Wise]

Originally posted by @Chris Taylor:

So like most newbies on here I am looking to transition from my current occupation to real estate with my primary goal being buy and hold rentals.  I have read a lot of mixed opinions about becoming a licensed agent.  I don't think becoming a licensed agent will benefit me in the short term but it may be beneficial long term.  That being said, I was considering taking all the proper course work (it costs around $1500 at a local community college) just so I could learn the more technical details of the business.  Then if I decide to pursue it in the future I will at least have the course work completed, and if I don't, at least I will have gained knowledge.

What got me thinking about this was a property that came out on the MLS Saturday afternoon. This Property is listed at $38K but would have an ARV of $100K after about $30K to $40K in repairs. Me as an average Joe could only contact a real estate agent to inquire ...which I did. But good luck getting a response from an agent on Saturday evening especially when you are a buyer with little experience and zero investment properties. I then contact a guy I work with that is a real estate investor but is also a licensed agent. Within 30 minutes he had all the details (beyond what was listed on the MLS) of the property including the fact the owner is taking cash only and will not accept any offers until it has been on the market for 5 days. Then because he is a licensed agent he was able to access the lock box and get inside. In this particular scenario it doesn't matter because the owner is not accepting offers for 5 days. However, if the seller was someone who cared more about a quick sale then I would be at a disadvantage.

My question is ... is it worth it to become a licensed agent if you are a buy and hold investor?  And if not, is it worth spending the $1500 on the course work if you have no intent on becoming an agent?

 Yes it's worth it to hold a license. You can get into properties on the drop of the dime like your buddy did. Question is why would you contact another agent other than him in the 1st place? Sounds like he did all the legwork why not just write the offer through him?

[Chris Taylor]

@Dawn Brenengen

Thanks for the response! I knew there would be additional costs (and testing) associated with getting and maintaining your license and that you are required to join a brokerage, etc. Continuing education is pretty standard for any professional license. My goal is to purchase one investment property for the next 10 years. Hopefully I can accelerate that but I want to be conservative by setting attainable goals. At this point I would agree with you. The number of deals I would be doing wouldn't offset the cost of being a licensed agent. I was thinking of taking the course work regardless but didn't know if the information gained would be worth the $1500 even if I never pursued my license. I also figured that in 5 years if I was able to go all in with REI then I would already have the course work in. Is there any disadvantage to taking the course work if you don't plan on pursuing your license for say another 5 years?

[Russell Brazil]

Im actually glad you have some self awareness on this issue unlike a lot of people who post this question.  Because it isnt as beneficial as people think, especially in the short term. There are a lot of costs associated with maintaining a license that are just overlooked by most.  It can be a benefit in the long term.  I was a part time agent for 10 years before becoming a full time agent. I have no doubt though, that the costs I paid for those 10 years outweighed the financial pluses. That doesnt mean it wasnt beneficial though, it just wasnt financially beneficial.

Particularly at the low price points, you are not going to find quality agents anyways, so its not like you are going to find a top notch top producing agent who is going to give you great representation when you are looking at properties that cheap.  So in this case, yeah it could be worth it to get your license, as long as you understand its probably a negative cash event and accept that.

[Lynn McGeein]

If your current interest is in learning the more technical requirements of being a real estate agent without actually becoming one, check your local library as they may have textbooks or online access to them for free. Also, depending on your state, check online. I found a very good online course that also offers free continuing education. I also interviewed with brokers in the area and went with one who does not require Realtor membership, has reasonable annual fee and only charges if/when you actually sell (unless you do no business in 2 years, then you'll have to take your license somewhere else), so I pay quarterly MLS & lockbox access fees.

[Chris Taylor]

@James Wise

Thanks for the response!  I would make the offer through him especially on this one.  When the property first came out I just sent a quick e-mail to the listing agent telling them I was interested.  I really don't have a specific agent at this point as I am just starting out and learning this process.  That is why I was thinking the course work for real estate licensing would be beneficial to me even if I didn't pursue my license.  Anyhow, after I sent a quick message to the listing agent I then contacted my colleague to see if he could write an offer and to see if he had access to the property.  He really doesn't use his license for anything other than purchasing his own investment properties so I wasn't sure if he would do this for me.  Turns out he will.  I had also previously contacted a few agents letting them know I was in the market for investment properties and gave them my criteria.  Since my colleague and I work full time at a construction company he doesn't really have the time to search properties for me like a full time agent would.  While discussing this property, my colleague and I also discussed the possibility of a future partnership.  Knowing what I do now, yes he should have been my first call.    

[Chris Taylor]

@Lynn McGeein

Thank you for the information.  I may contact you for more information on the online course. 

[James Wise]

Originally posted by @Chris Taylor:

@James Wise

Thanks for the response!  I would make the offer through him especially on this one.  When the property first came out I just sent a quick e-mail to the listing agent telling them I was interested.  I really don't have a specific agent at this point as I am just starting out and learning this process.  That is why I was thinking the course work for real estate licensing would be beneficial to me even if I didn't pursue my license.  Anyhow, after I sent a quick message to the listing agent I then contacted my colleague to see if he could write an offer and to see if he had access to the property.  He really doesn't use his license for anything other than purchasing his own investment properties so I wasn't sure if he would do this for me.  Turns out he will.  I had also previously contacted a few agents letting them know I was in the market for investment properties and gave them my criteria.  Since my colleague and I work full time at a construction company he doesn't really have the time to search properties for me like a full time agent would.  While discussing this property, my colleague and I also discussed the possibility of a future partnership.  Knowing what I do now, yes he should have been my first call.    

If you plan to go through the coursework & it appears as though you want to delve into real estate as a full time venture, not just a passive place to park your money I see no downside to holding your license. The annual costs of holding an active license are under $2,000. The commission on 1-2 tiny deals alone will pay for that. The coursework doesn't teach all that much. The real value as an investor is having access to the MLS & as an entrepreneur in general having another potential income stream like your buddy does. He doesn't write deals often but every now & again if he feels like helping out someone with similar interest like you he can earn a nice check from it.

When I originally got my license I never intended to work on any deals other than my own. However the limitless earning potential really changes things. Today I run a $50M portfolio that consists of my own investments & 3rd party management. Having a license has made me a better investor & being an investor made me a better Broker.

[Chris Taylor]

@Russell Brazil

Thank you for the information.  You're point about not finding quality agents at the lower price points is not something I really thought about.  I think I may pursue doing the course work and re-evaluate after gaining some more experience.  Even if I don't pursue a license I think it is worth the education.  

[Sean Liszka]

@Chris Taylor I second Dawn in that there are other fees in addition to the education part. Also, in my state, the classes through the community colleges are much more expensive. I was able to find a self-paced online class for about $250. Just something to look into.

In my state, I believe you only have a specified length of time after you complete your course to take the exam. I just got my license recently so if you have any questions in regards to that process feel free to PM me. Best of luck!

[Chris Taylor]

@James Wise

Thank you.  That is exactly the type of feedback I was looking for.  While it is my intention to go into real estate full time I am not at that point yet.  If it's only $2K per year to maintain then I think that is worth the investment.  It seems like it would pay for itself especially as you build experience.  Even if it is just few small deals here and there like you said.

[Chris Taylor]

@Sean Liszka

Thank you.  I am going to look at the online options that you can do at your own pace.  I appreciate your advice and will direct message you if I have any questions.

[Greg Junge]

As a licensed Realtor, I think it's definitely worth it for a handful of reasons.  First is control! As a realtor, I can control my searches, and if I see a property hit the mls, I can access it right away, and not rely on someone else to fit me into their schedule.  That's the biggest benefit, but there are more. 

I'd say that having a license obviously helps you save commission when buying or selling properties for yourself, but you can get creative with that. I've done personal deals where I use the commission that I would have received and pay for closing costs on that deal. So I bought the property myself, saved 3% there, and used that 3% to pay for closing costs also.  There are rules on how much you can use, but you get my point.

I've heard of agents rolling their commissions into the deal if it's a mutlifamily deal and you are partnering with someone.  So you sell a 2 Million dollar multi, which would be about 60k in commissions. Again there are things to look for when doing this, you can own a small part of a 2 million MF building that will grow and cash flow, or you can take a 60k commission. 

I don't think anyone can answer this for you, but those are the pros that I see of having a license, and it all does depend on how you use it, how often you'll use it, and what that education is worth to you.  Paying $1500 a year for the education you receive as a Realtor and how it applies to investing, is much less than any seminar or coach.

Anyway, that's just my opinion but I hope it helps!

Greg J

[Chris Taylor]

@Greg Junge

It definitely helps.  And based on your opinion and @James Wise opinion I think I will pursue becoming an agent.  Thanks for the feedback!

[Brandon L.]

@Chris Taylor i feel that a good agent needs to be passionate about real estate. If you have to ask a forum about "realtor or not to realtor" I don't see the passion. Stick to investing. :)

[Chris Taylor]

@Brandon L.

I appreciate the feedback.  I am not looking to be a full time realtor or make that my occupation.  Just exploring the possibility of getting my license for the knowledge, to be able to find my own deals and write my own offers, and to become a better investor.  If I can help other people along he way that would be great too.  I would think that any real estate investor is passionate about real estate unless you are just trying to do it passively by giving your money to someone else to invest for you.  Having passive income is my goal not passive investing.    

[Tyler Stamets]

@Chris Taylor for me it was all about perception from other people, including family. When I was just an investor people questioned me constantly. Once I got my license the same people started asking for advice.

[Brandon L.]

@Chris Taylor Getting a license will give you no knowledge about investing, or even being a real estate agent for that matter. It will teach you the basic laws relating to the representation of clients during the practice of real estate. So if you are looking for knowledge that myth is busted.

If you do not intend on doing real estate full time to help clients then it is an expensive investment in the beginning. 

Find a really good sales class, learn about managing databases and if that sets a fire then get your license.

[Chris Taylor]

@Brandon L.

I don’t know that you busted any myth about gaining knowledge by taking educational courses. Maybe your definition of knowledge is different. I was not implying that by taking the course work or getting your license it would teach you about investing. But it certainly could provide you with tools to be a better investor. I am also wanting to learn about the laws in the real estate industry along with the technical aspects of the transaction process. I was was simply quoting a very successful real estate investor and broker in my area @James Wise who said being an agent helped him become a better investor and being a better investor helped him become a better real estate agent. I can see the logic in that statement and would tend to agree with his opinion. I’ve talked to people who carry their license simply because they use it for purchasing investment properties and I have already experienced a situation that if I had my license I would of had an inside track on a deal compared to someone who would need to contact a realtor and set up an appointment. Yes it costs him $2000 a year but it pays for itself in a couple deals. I also understand that it can be an expensive initial investment. But so is college and people still go to college. A sales class would definitely be beneficial but at this moment I am in the buying market not the selling market.

[Jose Alvarado]

I currently just did exactly this. I'll reiterate my pro's and con's for doing it. To note I have bought a house and am house hacking, and am working a full time job at night, so currently I am doing real estate part time for the time being. I have only had my license for about 3 weeks now, but I can give useful information to those just starting out!

Pro- Really cheap education. I used online method and it saved me a lot. I used train agents, and at the time they had their course about 50% off. With an online code I paid $75 total for the education for my state. Long story short, you can find deals with online sites. Just make sure they are state approved and that you have looked for coupons, discounts, etc. 

Pro- You get access to the MLS. This is your best tool bar none. This gets you access to houses, at the quickest rate, right when they hit the market. You can set notifications for your or other's preferred houses. It is awesome. It is a tool and an investment. I'll reiterate. It is awesome. For you, for friends, for fellow investors. Use this tool.

Pro- Depending on your firm, you will meet a lot of awesome people interested in the same general scope that you are. With a large enough firm you are bound to find people who have done exactly what you want to do. It is awesome in connecting with people who work at stuff you do.

Pro- If you do get full on in investing, it is likely that you will be able to find, track and locate deals that you know would work for someone. You could do a lot with these. Refer them to other people. Whole sale them. Buy them. Etc. 

Con- Yearly costs. This is a minor con, but if you don't plan on investing, they can and will have to be budgeted for. Is this an investment for YOU? Factor it in, see if it is worth the costs.

Con- Time- If you do plan on selling, get ready to be floored by how much there is to learn. There is an insane amount. Can you set aside time every day to work on a bit of education. Are you plan oriented and focused? Can you stick to that? Important questions to ask.

[Chris Taylor]

@Jose Alvarado

Great insight!  Thanks for sharing your experience.

@Brandon L.

After reading your profile I am surprised you don't encourage people to pursue obtaining a license.  It certainly seems like it helped you in more than one way.

[James Wise]

Originally posted by @Brandon L.:

@Chris Taylor Getting a license will give you no knowledge about investing, or even being a real estate agent for that matter. It will teach you the basic laws relating to the representation of clients during the practice of real estate. So if you are looking for knowledge that myth is busted.

If you do not intend on doing real estate full time to help clients then it is an expensive investment in the beginning. 

Find a really good sales class, learn about managing databases and if that sets a fire then get your license.

 Brandon you've got tunnel vision man. A person who's trying to replace their primary income source via real estate investing would be nuts not to get a license. $2k / year is an irrelevant sum of money. Pays for itself 100's of times over. Time, Control, Speed, Access to data, Commissions on your buys, Paying less commissions on your sells...The list goes on.