The Pro's & Con's of Switching From Real Estate Investor to An Agent

Many investors and agents struggle with the idea of having to decide whether they should stay licensed or to go and get licensed to become an investor.

Many ask themselves, would it be better to be licensed when starting an investing career? I’m here to share my personal experience with being a licensed agent for over 20 years, why I’m no longer licensed, and the pro’s and con’s I discovered with being a registered licensed real estate agent.

Laura Alamery - My Story of a Real Estate Agent Turned Investor

Back when I started in 1987, I told myself that I was going to learn more about real estate and doing so pushed me into obtaining my real estate license. With being a new agent and new to the country (coming from Italy around 1985), I had no clue about a majority of the terminology used in real estate and I certainly did not have the do’s and don'ts on how to succeed within this field. One thing that was most evident was that I didn’t know at the time that you could become an investor if you didn’t have a hefty set of funds or resources.

Within the timeframe of 1987 to 1991, I resided and worked as an agent in Hawaii. Throughout this period, I ran across agents who were also investors and informed me of their process causing me to become interested in that part of the business. I then started purchasing books and even late night infomercial products so that I could start applying the steps and testing out the validity of investing.

It was around 1991 that I decided to move over to the mainland and chose Missouri to start buying into rental properties. In order to do this I used “no money down” with different creative financing techniques that I had picked up from the books and infomercials I had purchased and dissected. Roughly within an 18 month timeline, I was able to buy 16 properties using the creative financing strategies. Two years later, I obtained my real estate license again but this time for the state of Missouri. I did this because I was interested in working for a real estate investor who also was a broker and very good at “flipping contracts” (which is referred to as wholesaling in today’s market).

On top of gaining a license for the state of Missouri, I also obtained a license in New York since I was living in both states and started to virtually invest in those areas. Over the course of the next 15 years I stayed licensed and moved my business between Missouri and New York accordingly. It was around 2008 when I started working in short sales and with banks to get their REOs (Real Estate Owned or foreclosures owned by the bank) that I decided it was too much to work with banks especially since they were not too keen on working with real estate agents. Banks didn’t appreciate that agents were looking to purchase their foreclosures or pre-foreclosures for their personal use. Ever since, I’ve been just an investor and have not renewed any of my real estate licenses in Hawaii, Missouri or New York.

Through my journey as an agent and investor, I’m going to share with you the pro’s and con’s of having a real estate license.

Pro’s of Real Estate License:

1. Access to the MLS (Multiple Listing Service) - Having this access to the MLS is one of the main reasons I maintained my license for as long as I did. However, since I stopped renewing I have found many other tools, such as Propstream, that will give you the ability to find a lot of the same information you would by using the MLS. Not everything that is available on the MLS is available through Propstream. For example, the MLS gives you the option to pull cash buyers lists, comparables, expired listings, motivated sellers, etc.

If you’re into fixing and flipping properties, you can even list and sell the properties you own through the MLS. With being an agent, the process of doing this is much easier since you don’t have to rely on another agent to do this for you. You end up even saving funds in commission that can be in turn placed into another part of your business.

2. Credibility - Most of the time, being licensed and an investor can qualify you as a professional. Reason being, you have learned the real estate rules and applicable laws by studying to become an agent.

3. Commissions - This goes hand in hand with what I stated above, as a fix and flipper you can save money on commissions by listing your own properties. You can even make money on the properties you buy since you’re your own agent and representing yourself as the buyer for the properties. In turn, the buyer’s commission ends up going to you so you’ll make a profit.

4. Networking - You always have the opportunity to network with other real estate professionals through being a licensed agent. You’ll even be included in meetings that are hosted by the local board of real estate agents’ association and other exclusive events, too.

Cons of Real Estate License:

1. Disclosures - You have to give a full and clear disclosure for buyers and sellers letting them know that you are a licensed agent. On some occasions, investors have to walk a thin line in real estate investing since they are trying to negotiate a deal that is best for themselves, while participating in full disclosure compliance and making sure to keep the best interest of all party members in mind.

2. Audits - When licensed as a professional by the State licensing board, you are opted into participating in random audits. Meaning that your files must be in dated order and have record of any and all closings, money disbursements, clear real estate company organizational structures (board meeting minutes and agenda), etc. All agents can agree that these audits are very time consuming and add an unnecessary amount of stress into your life during this time. You will find yourself not having as much time to dedicate to your investing business due to filing your paperwork so that everything is in the right order. If this isn’t done correctly, you may even find yourself facing penalties that can be severe.

3. Licensing Course and Continuing Education Classes - As with most licenses, you are required to take a course, pass tests and retake State and Federal exams in order to stay licensed, which can be difficult and time consuming. It’s best to mark your 2 year anniversary on your calendar with “retake agent exam” because you will most likely have to put everything on hold to relearn the courses and pass the exams.

4. Liability and Compliance - As an investor, there will be situations when you’ll have to make choices that don’t necessarily line up with the full agreement with the disclosures and compliance that real estate agents have to abide by. Although, when you’re a licensed investor you can be more prone to being sued and reported to the real estate commission for negligent acts, regardless if the choices were made for good reason.

In summation, whether or not you decide to become a licensed real estate investor is up to you and is best made after reviewing the pros and cons. Personally, I decided to give up renewing my license years ago as I feel moving freely as an investor allows me to not worry about the disclosures and conflict of interests.