All Forum Posts by: Mark Brown

@Jerel Ehlert Just trying to game that out, if I were the listing agent, and someone wanted to shoehorn in another realtor at the last minute. As an independent broker, I'd probably just tell them I'm not splitting the commission with the fake buyer's agent, and if they try to bring in another realtor, tell them the other realtor is not the procuring cause of the sale. No commission split. When they throw a hissy fit, I'll tell them they can file for an arbitration hearing in accordance with the MLS rules if they really feel like they deserve the commission, but I'll bring up the attempt to negotiate the commission split downward and the "threat" to bring in another realtor if I don't acquiesce as further evidence that the other realtor was never a procuring cause. At the end of the day, I know the buyer wants this property, they are sophisticated and well-funded, and they aren't going to let a good deal slip by because they can't get another 3% discount off the purchase price. So if it was me, I'd just tell everyone to go pound sand. I know when all the crying is done, I'm going to keep the full 6% percent commission and not splitting it with anyone.

To be more precise, you need in Texas, at a minimum, a real estate agent's license to do property management for other people's property. You'll need a real estate agent's license if you want to join the local MLS and list your own or other people's properties for lease. All real estate agents work for a real estate broker - so you'll need to find a real estate broker who does property management that will let you hang your license with them.

@Cody L. Interesting insight there. Is there a flip-side, though? Those properties in less desirable areas often come with renters living paycheck to paycheck, so eviction rates will be higher, and higher tenant turnover leads to higher expenses, plus renters living paycheck to paycheck are not as concerned about getting their security deposit back and may not take care of the unit as well.  So the gross rents per unit may be higher in less desirable areas but so are the operating expenses.  I'm wondering if there isn't a happy medium, where you can get renters in better financial conditions that lead to lower operating costs for you and higher profits in the end?

What a great story. Congratulations.

@Brian Alfaro Set it up. I’d be interested in attending.

@Andrea Rivera. Congrats on the start of your new adventure. A lot of the full service brokerages have new realtor development programs to help you get up and going. HAR also does a class periodically to help new realtors get started. I’d recommend not quitting your day job until 1) you have your license and 2) you’ve interviewed several brokerages to work for. Instead save up your money for a cushion during the transition.

Great! See everyone there. :) 

@Blake Hernandez Hey Blake. Glad to hear you're not gonna have to resort to plasma donations. I had a similar story - I got my license because I wanted to further my own real estate investments. Saved the 3% commission for myself and had access to the MLS to research and scour properties to my heart's content and eventually got my RE Broker's license. I've never looked back, but the road hasn't always been easy. After you get your license and interview brokerages, you'll find they differ in a) how much mentoring they provide to new realtors, b) how much they want you to go out and sell residential homes like a traditional realtor, and c) how much of a commission split they take. The brokerages that don't care if you spend all your time looking for your own real estate investments as opposed to selling homes are generally the ones that take the smallest commission split but give you the least amount of - or even no - mentoring or training. You have to decide what best meets your own needs, of course, but you could always work for Keller Williams until you've done a couple transactions and feel like you've gotten all you can out of their new agent training program, and then switch to another brokerage later. Best of luck! And feel free to reach out if you have any questions.

@Ethya Lawani Congratulations on the new adventure you are about to begin in real estate investing. Trying to protect your assets by forming an LLC probably won't be successful, and I'll tell you why in a minute. But if you want to form an LLC, you can go to the Texas Secretary of State website, https://www.sos.state.tx.us/co..., create an account with their SOS online portal, and for about $300 bucks file a certificate of formation. That creates your LLC, legally. Since you are the only owner of the LLC, the IRS will consider you a "disregarded entity" for tax purposes, so you won't need a separate tax id, and you file all the income and expenses on your personal return. Now, real companies also have operating agreements, which specify all the big picture items of how the company will do business, who the officers are, how they get elected, etc.  You need a lawyer to craft that for you. They have their own form documents, so they can spit out a basic one for you at a fairly nominal cost.  Then you have to go through the motions to have a company. This means having annual meetings, and then signing minutes of those meetings, and storing them in a way you can find them later.  A lawyer can help craft annual meeting minutes for you.  Finally, you need to make sure you business has separate bank accounts, and the money is accounted for like a business would. So you may need to pay an accountant to keep your books proper if you're not familiar with business bookkeeping. You need to do all these things because if things ever hit the fan and you get sued, the first thing a good lawyer will do is try to "pierce the veil" of your company, say its a sham company, have the judge disregard the entire company, and then go after all your personal assets.  If you ever do get sued over something, you'll spend a bunch of money paying a lawyer, whether you win or lose, so in a sense, you always lose because you're out the money. That's why this strategy isn't always as successful as people hope it is, even after you spend all that money doing these things I outlined above to protect yourself.  

Here's an alternative strategy that works pretty good: buy insurance. Most of your liability in real estate can be insured away. Find an insurance company that specializes in helping small businesses, such as people who have dba's, for example, and ask for a) property insurance for your REI investment, b) but also "completed products coverage" for your property rehab business. Best part, if you get sued for something, the insurance company's lawyers will now go to bat for you at no charge. And if they settle with the person, the insurance company pays the settlement, not you.

Finally, sometimes real estate investors can suffer from analysis paralysis. What I mean is, it's great to look at all the pros, cons, numbers, and spreadsheets, but at some point, I want you to pull that trigger and take a leap. Run a good business with good ethical practices and create a good product, protect yourself with insurance, and you'll do just great.

Houston *is* a great area to invest. Hurricanes will destroy everything in their direct path, but the odds of the central eye hitting your particular property are small, so you can insure for it. Once the come ashore, the weaken rapidly. You can minimize your downside risk by not buying properties in a 100 year flood area. Avoid coastal counties south of Houston to cut down on really expensive wind insurance. Upgrade your insurance in non-coastal counties - such as replacement cost coverage, flood insurance, insurance that covers water leaks.  Newer homes (built in the last 15 years) are built to a higher engineering standard, so they hold up better to hurricanes, cutting down on your insurance costs and risk.  You can take up one or more of these measures to reduce your risk down to your particular level of appetite.