Should a Real Estate Investor Hold Their Own Real Estate License? (Part 2)

Article from: http://www.stlagent.com

Click for Larger Font | Click for Smaller Font

By: Darin "Sid" Cameron, CRS
Sun, Aug 6th, 2006 1:36 pm

“I am brand new to this industry. I am going to be rehabbing homes and doing a little bit of property management. I am really confused about whether or not to become a licensed broker. I have passed my real estate sales person state test, but I will be owning my own property when I go to sell it. Any advice - pro-broker license or against broker license?”

Yesterday I started addressing the question above with a list of pros and cons but only made it all the way through #1 on a Top 5 Benefits (it's a complex answer and I'm long winded!). So today I'd like finish the list of benefits and then I'll tackle the reasons why not to do it tomorrow.

REASONS FOR #2-5...

2) THE MLS. Lots of real estate investors I've known have become licensed because they want their properties in the Multiple Listing System (MLS). If you don't know what that is, the MLS is the database most real estate agents with buyers use to search for properties to sell. In other words, it's the tool that drives the cooperative broker concept I spoke of yesterday.

The MLS also provides the listing data for a lot of popular websites like www.realtor.com as well as most broker and agent websites.

As a result, having your homes listing in the MLS is usually perceived as being a very valuable marketing tool.

However for a home to be listed in the MLS it not only has to be listed with a licensed real esate broker but that broker also needs to be a member of the local Association of Realtors and follow their additional rules and guidelines to listing and selling properties. There are also fees associated with being a member and having this access.

So bottom line, if you want your homes listed in the MLS you either need to hire an agent/broker who can put them there for you or you need to go through the process yourself.

3) MAKE MONEY. Another strong reason to be your own agent or broker would be if you wanted to sell or manage someone else’s property. Per Missouri state law, to be paid by others (for either real estate sales or property management) you must have a state license (or be an employee of the owner).

Ultimately the value of this benefit comes down to your own personal goals and objectives.

For example, if your goal is quit a job so you can focus on rehabbing and/or property management full time but the handful of properties you currently own aren't enough to support you then taking on real estate related work for others is a great way to supplement your income while staying focused on your goals.

The questions to just need to ask yourself are:

- What is your business plan, personal/professional goals, or objectives?

- Forgetting about financials for a moment, if you could only do one or the other, which would you really love to do- rehab or sell/manage? (i.e. which would motivate you the most to get out of bed at 5am and/or work all night?)

This is an important question to answer honestly. If you love the rehab work (i.e. getting dirty) but hate dealing with people, you probably won’t like managing or selling real estate, so you might find it more enjoyable to hire someone to be your agent or property manager and stick to what you love.

If you hate getting dirty and are only rehabbing because you think there is money in it, you might prefer to focus on sales/management and ultimately become a full time broker/property manager and get out of rehabbing (or just find the projects and pay someone to do the work for you). That means absolutely get your agent license. Then you'll need to determine if there's benefit in it for you to have someone to work under who can provide you training or support or if you're ready to just do it all yourself.

4) CONTROL. As your own broker you have 100% control over how the property is marketed and advertised for sale (within legal guidelines of course). As an agent, you will need to talk to your broker to determine what and how you can market and advertise your home because they're in charge. As a property owner just hiring it out you'll need to interview agents until you find someone who fits what you're looking for.

One thing to add, as an unlicensed property owner selling your home youself (the FSBO concept I mentioned yesterday) you also have 100% control over how the property is sold. In fact there are actually less legal guidelines and rules you'll have to follow as an unlicensed person than a licensed broker who works for themselves would have to follow (like disclosing to all prospects that you're licensed).

Probably the biggest thing you give up by being a FSBO is the ability to promote your listing in the MLS (although you could still offer a cooperating broker who brings you a buyer a commission).

5) NO MORE CRAPPY SERVICE. Working with agents can sometimes just flat out suck. I’ll make no apologies for my industry. Heck, my wife Kimberly became an agent in 2003 not because she wanted to, but because her family’s construction company had so many awful experiences with agents that they decided they just wanted to start their own brokerage so they could control how things were done (Kimberly then left the company and went out on her own in 2004).

I’ve met more than one builder/rehabber who has felt the same way.

Tomorrow I'll address the Reasons for NOT Geting a Real Estate License.