Squeeze more money out of that deal! (Get your RE license.)
Have you ever thought, "How can I squeeze a bit more money out of this Rehab?" Of course you have.
Well, if you are an investor who does 3 or more deals a year, then consider getting your own real estate license. It may be just the answer you are looking for to add a few more greenbacks to your bottom line.
I know several investors who became agents for this very reason.
Here are 7 reasons I just thought of that you should become a Realtor in 2017:
1. Keep the commission! Well of course, here is the main benefit. When you buy a property, in most cases you can keep 3% of the purchase price, which is (currently) what is usually offered to the buyer's agents. You represent yourself and you keep the commission. You should be looking for off-market deals, but being an agent yourself makes the MLS deals just a bit more realistic.
2. List for free! When you sell the property, you don't need to pay someone like me anything to list the home on the MLS. Even though I only charge investors 1.5%, you could keep the whole amount (except for the broker's portion).
3. Good education. The 120 hours of online or classroom education is valuable for you as an investor too. It will make you a better investor. It will help you see deals differently and help keep you out of trouble. (To keep your license active you have to do about 10 hours of CE each year.)
4. Low Hanging Fruit. Even if you don't actively seek out retail clients, some of them will naturally fall into your lap. You could double your income with part time agency work. Surely you have friends or co-workers who are going to move in the next couple years. When you are showing your own rehabs, if the person doesn't like the home, you may at least be able to pick up a new client to show other homes to.
5. Referral fees. If you never want to become a listing agent or a buyer's agent, you can still get referral fees of 25%+ for sending people to other agents. (The law prohibits agents from giving commission-based finder's fees to non-agents.)
6. Markets Change. If you decide to take a break from rehabbing, you can still make money representing others.
7. Potential New Career. And of course, you may decide that you love working with buyers and sellers and you may just jump in full-time like me. I have done 50 deals in the last 2 years.
It's been 5 years for me, but I recall the schooling was about $1000. After that, the cost to keep your license going is about $750/year (includes Supra Key) and the MLS access is about $500 per year.
If you do want to get your license, please let me know, and I can give you some great pointers.
Comments (12)
Steve - Thank you for sharing!
Lesina Vaka, about 7 years ago
Steve Theobald, over 7 years ago
Thanks for this post! I'm on the fence about getting my RE license, but you've definitely pointed out some tangible benefits of investing the time and money to do so. Great food for thought!
Laura Sulak, over 7 years ago
You are welcome. Success to you either way, but my vote is Go For It.
Steve Theobald, over 7 years ago
Since you would be hanging your license with a broker, one possible extra cost could be Errors and Omissions (E&O) Insurance. Some brokers cover the cost, others don't. If you are a newbie, E&O insurance can feel a little pricey. Not sure how it works in other states, but here in California brokers require it.
Another potential benefit, at least in some RE offices, is access to their RE attorney(s). Also the office managers are walking RE encyclopedias; good ones know every law, every contract, every horror story and more. They live and breathe everything real estate 24-7. Some RE offices can be a great resource as well... they have meeting rooms, copy machines, fax machines, computers, all the contracts, and parking for clients (makes you look more professional). You can also be privy to the coveted "POCKET LISTINGS" from more than just one agent.
I don't personally plan on investing anymore in California, thus I am not looking to renew my license. I agree that investors can benefit in the ways you mentioned above, and if anything, the education and experience alone will get your feet wet... especially, if you are that newbie that feels a little intimidated jumping into the market; it's a step forward.
Hans Thurau, over 7 years ago
Thanks for the great insights Hans. You are on a roll. a) My broker does cover E&O, but I have no idea how much it costs. b) I have called the Salt Lake Board attorneys multiple times. c) Great idea about the office managers. d) I have used my brokers office for meetings. e) I have not tried to develop the pocket listings connections, but you are a great catalyst!
Steve Theobald, over 7 years ago
To some it may seem counter-intuitive, but I encourage ALL my non-agent investors to get their licenses. "Aren't you afraid you will lose their business when they find their own homes?" some may ask. To which I say the following:
They got their licenses to save money on the transaction on both ends, but if I can find them a good deal, then they can spend more time rehabbing, which is what they really want to do.
They can still save money on the back end by listing it themselves, but finding homes is certainly a full-time job, especially in this tight market.
Besides, they can now let themselves in the home! This is especially valuable when I find a good deal two counties and 60 minutes away.
They are more knowledgeable about the transaction, and because they are agents, I don't even need to go to the closing with them.
And they don't try to get super "creative" on me when it comes time to do the paperwork.
And they can run their own comps so I don't feel the potential pressure of having my client complain if the home doesn't sell for the ARV I initially quoted.
Yes, I may be losing out on the commission on the resale on many homes, but I sold 8 homes to one agent-investor-contractor in the last 15 months and I only saw half the homes. So for the time spent, and for reduced headaches (there will always be a few in each transaction) I love finding agents who are willing to entertain deals from me.
I have only had one agent in 5 years ask me to split the commission with him because he was "also an agent and could find the deals" himself. (I only agreed to the deal because I didn't have any other options at the time.) All the other agent-rehabbers realize that I work hard to find the deal and see it through to completion and they are happy to let me keep the 1.5 to 3% commission on the purchase.
Steve Theobald, over 7 years ago
Steve, I just got my license in Texas last fall, for the very reasons you mention here. Thanks for the great confirmation that I made the right decision. I will be listing 2 of my own flips in the coming weeks, which should offer commission savings above what I've invested in the license.
Jon Camp, over 7 years ago
@Jon Camp Congrats on your license and your own listings! You may find some unrepresented buyers because of these two listings, and I encourage you to run all the way with them even if your rehabs aren't right for them. You are off to a great start.
Steve Theobald, over 7 years ago
Here are three more reasons to consider getting your RE license:
8. You can let yourself in! With your own Supra key, there is no more waiting for an agent to get you into a listed property. You can now run circles around non-agent investors.
9. You can run your own good comps. Wholesaler's comps driving you batty? With full MLS access, you can do your own, and do them correctly.
10. Better Tax Deductions. Here is what one of my non-agent clients wrote when I sent him my list, "You missed the main reason that I am thinking of getting my license. It is because the IRS is changing how real estate investors can deduct expenses. As an agent, you can deduct almost everything. But as a real estate investor, you cannot deduct many things that you could before. The IRS is targeting investors and so it will continue to look at investors and how it can get more taxes from them."
Steve Theobald, over 7 years ago
Good points, Steve. Costs, continue education requirements, etc. vary by state and locality, (looks like it's a little cheaper here in middle Tennessee) but you've mentioned many of the reasons I chose to get my license. One I would add: It is a blast to sell properties - whether your own or someone else's. (OK, maybe that falls under "Potential New Career", but still...) Thanks for the post!
Aaron Lovett, over 7 years ago
Thanks Aaron!
Steve Theobald, over 7 years ago