SHOULD A REAL ESTATE INVESTOR OBTAIN A REAL ESTATE LICENSE?
Real estate, even in today’s hot market, offers the opportunity to buy a house for the price of a car, both for new and seasoned investors alike. The decision to buy, rehab and rent or buy, rehab and sell often comes down to market conditions. Which raises the question of whether a real estate license is required or provides an edge in assessing market conditions and becoming a successful investor. A REAL ESTATE AGENT OR A REAL ESTATE INVESTOR? First, to the question of requirements: real estate investors are nonrequired to become or to be licensed as real estate agents. While some real estate agents invest in properties and property-related businesses such as property management, and some real estate investors sell property as agents, the two are separate activities, and the pursuit of one does not require engagement in the other. That said, obtaining a real agent license offers certain advantages and can serve as an asset for real estate investors. Deciding on whether to pursue a real estate license should not be considered lightly as a significant time investment is required along with licensing costs. To help better inform your decision, let’s take a look at the pros and cons of pursuing a real estate license. BENEFITS OF OBTAINING A REAL ESTATE LICENSE One of the biggest advantages of a real estate license is instantaneous and comprehensive access to information on upcoming and sold properties. If your goal is to spend significant time researching, buying and selling properties, not just on behalf of your own portfolio but on behalf of others, then obtaining a real estate license will serve you well. Likewise, if you intend to amass a significant investment portfolio or plan on selling a number of properties through the services of a real estate company, then representing yourself in these transactions as a licensed real estate agent may offer advantages, particularly in terms of the commissions that will no longer have to be paid to a third-party selling agent. Real estate licenses are issued state by state, with some states allowing holders of a license in another state to qualify to buy and sell property in their state through reciprocity provisions. As such, if you have or intend to build a multi-state real estate portfolio or real estate agency, the requirement for multiple real estate licenses and availability of reciprocity should be weighed. ACCESS TO MLS- THE MULTIPLE LISTING SERVICE: As mentioned earlier, the biggest advantage of becoming a licensed real estate agent is access to the MLS (Multiple Listing Service): Particularly in a hot market, receiving immediate notifications of new sales listings can provide an edge in getting ahead of investment competition. The MLS system also speeds your research, offering detailed information about recent sales, fast-selling neighborhoods, popular home types and comparable properties without having to check multiple sites. INCREASED INDUSTRY KNOWLEDGE: Another advantage of becoming a real estate agent is firsthand introductions to appraisers, title companies, lenders, inspectors and other key players in the real estate industry. This exposure increased your expertise in the many facets of the real estate process. Additionally, directly working with lenders and appraisers improves your negotiating position and assists in reaching quick settlement on terms and conditions. GET PAID TO BUY AND SELL YOUR OWN PROPERTIES: By becoming your own agent and representing yourself as the buying or selling agent, you can receive the buying agent’s commission when you buy a property for your portfolio, and likewise the selling agent’s commission when you sell a property. As an example, if you buy a property that has a standard 6% commission, a commission of $12,000 would be paid to the selling agent, who would then split it, 50/50 with the buying agent. Since you’re representing yourself as the buying agent, you receive the $6,000 commission, effectively lowering the purchasing cost for you for the house from $200,000 to $194,000. EXPANDED CONNECTIONS: As a real estate agent, you will work under a licensed real estate brokerage firm. The relationships you form with other agents at your brokerage will yield tips and lessons about the market. Additionally, through your colleagues you will build a strong network that helps you find and close good deals quickly and gain intelligence on recently-visited properties. DRAWBACKS OF A REAL ESTATE LICENSE While becoming a real estate agent offers many advantages, it is not without its challenges, especially for beginners. DIFFICULT TO ACQUIRE: Obtaining a real estate license requires a time investment on the order of 4 – 8 months for most in terms of classes, exams, applications and background checks. While the required courses differ from state to state, they generally cover topics including fair housing laws, ethical standards, real estate practices and record-keeping. In addition to time, an investment of a few hundred dollars to a couple of thousand dollars is required to obtain a license, along with ongoing investments icon continuing education and license renewal. TIME COMMITMENT: Once a license is in hand, it can take new agents several months before they obtain their first client or close their first deal. Marketing, advertising, showing and helping to stage homes can take many hours a week, all of which takes time away from searching for investment properties. MUST ENSURE NO CONFLICT OF INTEREST: Real estate agents have a legal obligation to prioritize the interests of their clients. As such, agents must ensure that they act in the ethical interests of their clients and disclose any conflicts of interests, such as if an agent is selling their own investment property to a buyer that the agent represents. A conflict of interest could lead to a lawsuit and/or penalties and damages. As such, it is crucial that agents who are also investors ensure that no conflict of interest, perceived or actual, occurs. Read my other Blogs: Click Here Follow Us at: @MySmartCousin
Community Development Block Grants (CDBG), a Gateway to Affordable Housing
The development of its citizens is the surest path to the development of a country. People who are homeless or who cannot afford to purchase a home can become property owners through a little-known program sponsored by the U.S. Housing and Urban Development Agency (HUD), the Community Development Block Grants program (CDBG). HUD’s CDBG program, established in 1974, was created to provide a path to homeownership for low and moderate-income families. Under the program, states, cities, and counties are able to apply for grants annually to revitalize housing stock and infrastructure in their communities. Eligible activities under the CDBG program Funds provided through CDBG grants support housing-related activities including housing repairs and rehabilitation, down payment assistance and closing costs, and the purchase or construction of rental housing or owner-occupied housing. Housing counseling and relocation assistance are also provided to help aspiring owners in their home buying journey. You can read my recent blog here: Click Here
Ring in Mo’ Money This New Year
Ring in Mo’ Money This New Year Nothing keeps your head more in a spin than out-of-control finances. Since most of us didn’t grow up with banker parents teaching us the ins and outs of budgeting, make this your year of earning your ‘3M’ degree— your ‘Masters in Making Money’. Your first class?— the Envelope System. ‘Cause Money Don’t Grow on Trees The cheapest car is the one you already own. Same with money, the quickest dollar is the one already in your pocket. Grandma was on to something when she used different coffee cans to stash away money. The envelope system works the same way. The Envelope What? The envelope system is as old as the hills, but the need is even more critical in our credit/debit card society where money goes so quick, you’re not entirely sure you ever earned it. The envelope system forces you to put your hard-earned coins on the table and parcel them out to different envelopes or spending needs. Prime categories for envelopes are required expenses that leave you scrambling every month— I see you car payments, rent and light bill— and non-critical stuff that eats a hole in your wallet— cigarettes, eating out, shopping. An Example Let’s say you take home $700 a week, after Uncle Sam gets his cut, and you spend your money on five main things: groceries, rent, car (including the note/gas/repairs), utilities and hanging out. Your $700 a week, or $2,800 a month, is going to get divided into 5 envelopes. If your rent is $1,000 a month, then each week you’re going to put $250 in the Rent envelope. If you spend $100 a week on groceries, then you’ll put $100 every week in the Groceries envelope. And so on. Your envelopes will serve two purposes: first, they’ll help you really see where your money is going. No longer will money run through your fingers without a trace— you will have to physically carry the Grocery envelope to the store, open it to pay for groceries, and put the change back in the Grocery envelope. If you get to the supermarket and realize you forgot the Grocery envelope, guess what, no groceries for you, it’s back home you go to get the envelope. Second, the envelopes discipline your spending. So let’s say you’re midway through the month and your cousin says it’s been a minute since y’all have gotten together, and to come to the movies with her tonight. Checking your Hang Out envelope and seeing only a couple of singles, you realize, not unless the movie is playing on television, you can’t do it. But then you spy the Rent envelope and see it fat with $500 in it. Two words: back…off… No money, I mean no money, comes out of an envelope to pay for anything other than what’s written on it. In other words, no two-timing between envelopes. When money in an envelope is gone, it is gone. Leftover Money So you arrive at the end of the week, look at your Groceries envelope and what do you know, there’s still some money left. Cool beans, you’re under budget! Your options? Reward yourself, within reason, but enjoy your budgeting success. Rewarding yourself for a budgeting job well done helps you feel not just pain, but also pleasure from the process. Next Steps Start now! Gather your envelopes, get a pen, and get started with your 3M degree!