When you first get your real estate license you are more of a real estate agent or associate. To begin practicing real estate you must associate or hang your license with a broker. So, where should real estate investors hang their real estate license?
Hang Your License With a 100% Commission Real Estate Broker
With a 100% Commission Real Estate Broker you keep 100% of the commission and instead pay a monthly fee. The monthly fee enables the broker to pay overhead, follow all the necessary regulations, and make a profit.
How to Find 100% Commission Brokers
The simplest way to find a 100% Commission Broker is to do a statewide online search. It doesn’t have to be a brokerage in your own town or city. You just need to hang your license with a broker that is affiliated with your area and MLS region.
For instance, my broker covers the Orlando, Tampa and Daytona areas, all the way down to South Florida. Because you can do all your business with them by email, they can cover a greater demographic area. If you don’t know your MLS region, you can do an online search or ask a local real estate agent.
4 Reasons to Hang Your License with a 100% Broker
1. It Saves You Time
A 100% broker differs from a traditional brokerage in that there is no desk duty and you aren’t required to attend sales meetings with the broker. In fact, you may never show up in the office. The process is much more efficient. I email and mail all the necessary paperwork on each file and haven’t physically been in the office in years!
2. It Saves You Money
Unlike a traditional broker, you either pay a monthly fee or a charge per transaction fee. The cost per transaction will vary depending on your region and range from $300 to $600. For example, in California where you have higher priced real estate, they will be more than in a state like Ohio or Kansas. With the brokerage that I’m associated with, I only pay my MLS dues and then per transaction. MLS dues differ as well and can be $50 to $100 a month.
3. It Gives You Flexibility
Not only do you have the benefit of keeping the full commission, but this brokerage model also gives you flexibility. Traditional real estate brokerages are not 100% and they want their cut. In a way, you have a partner in every deal and you can’t alter the amount that goes to profit as a real estate investor and how much goes toward commission.
The 100% commission structure gives so much flexibility from a tax standpoint. It gives me flexibility to legally incentivize a seller or a buyer. You may not want to get the 1099, but rather all that go to your LLC because the updated tax rules make it better to pass through entities. Partnering with other brokers limits this flexibility because they may not want you to reduce your commission to zero for tax purposes.
4. They Promote Real Estate Investing
The final reason for real estate investors to associate with this kind of broker is because their business model supports real estate investing.
The 100% broker wants you to do more transactions because they make their money per transaction. By the same token, most of these brokers make their money from referral fees to closing and mortgage companies they are legally affiliated with.
In contrast, conventional brokers make their money from the 30% or even 50% commission. They don’t want you investing because they make more money if you do traditional real estate work. Traditional brokers don’t want to invest energy and time into training you, only to have you go out and create wealth through real estate investing and become independently wealthy.
Even if they say they support it, their business structure requires you to continue being their living. This structure also determines how they train you, including the way they teach you how to do lead generation. Making you do the grunt work lead generation while they keep all the techniques that require little effort for themselves.
Whereas the 100% broker business model was set up for you to be supported. They encourage you to do your own thing, because all the money’s not coming from you being a traditional real estate agent.
2 Disadvantages of Hanging Your License with 100% Brokers
1. They Don’t Provide Training
Some would argue that a disadvantage of 100% brokers is they don’t teach you anything. Although this is true, they presume you are already trained. You associate with them as a professional real estate practitioner because you just need the benefits they offer.
Do Real Estate Investors Need Broker Training?
I would argue that the training is an illusion. I think at first glance it looks beneficial, but once you take a second look, you find as a real estate investor that it’s not necessary. When I refer to “training”, I mean teaching you how to make more money as a traditional real estate agent. There are two ways you make money as a real estate agent; listings and representing buyers.
How difficult is it to sell a property? I don’t want to simplify this, but in a way it is. You need to list the property on the MLS and make sure all the listing information is correct. Then it gets sold. Now, it can be difficult to sell if it has incorrect information, the pictures are unappealing, and you price it too high.
However, this is the method me and my apprentices have used to do thousands of deals over the last decade. We just list them on the MLS correctly with a flat fee agent. We don’t get a listing agent involved; we do it ourselves and it works incredibly well. How much more difficult can it be to represent someone else’s property to sell? It’s not.
Representing a buyer is about asking a lot of questions, being a good listener, and understanding what the buyer wants. They may not know exactly what that is until you have shown them several houses, but once you know what they want, you show it to them. This is only difficult if you don’t ask the right questions and show them the wrong houses.
There are some details within the negotiations to be concerned about, but as a real estate investor you know the negotiation techniques and the ins and outs of these contracts. In fact, I would argue that as a real estate investor you are the best person for friends and family to work with. As a real estate investor you can relate to them as a buyer and a seller.
At times there is a fear that you aren’t going to get enough training with a 100% broker and my argument is, how much training is necessary?
At the end of the day, if selling a house isn’t that difficult, and representing a buyer is not that difficult, what’s the hard part about being a real estate agent? It’s generating leads. If you don’t have any listing leads or buyer leads, you starve.
However, as a real estate investor, at the same time you are producing seller leads, you’re also generating leads that aren’t great for investing. These are good listing leads. Given that you’re already generating leads, you don’t need a 50/50 broker for that either. Usually, real estate brokers will teach you how to generate leads using traditional techniques. These are not nearly as efficient as the techniques that you practice as an investor.
2. They Aren’t Brand Marketed
Traditional brokers do have the benefit of a big brand name. But I have found time and again that in this business, both buyers and sellers of real estate are not nearly as swayed by brand marketing as we think. They want someone who is knowledgeable, who responds quickly, and can get them what they want.
As an investor, you’re already generating the leads, connecting with people and building rapport. Yes, the brand name sign lends a little credibility, however, it’s not worth 40% or 50% of the commission.
To learn when it makes sense to have a real estate license, watch my video called Should Real Estate Investors Get a Real Estate License.