Why the Realtor's Licenses?
Why the Realtor’s licenses?
Why a land buyer holds real estate licenses
Back in 1978 when I first got licensed, there were no “gurus” telling a person how to get started in real estate investing. My thought was that I would go through the licensing process and would learn how to invest in real estate that way. I was wrong. What going through the licensing process teaches the student is how to help a potential homeowner find a home without creating a problem that will get them sued.
But the benefit of getting the license was access to the MLS, which had all the listed properties in it. I started buying and renovating houses with the limited construction knowledge I had at the time. Over time, as I got more experience, I learned more and more about construction and how to build. Ultimately I got my builder’s license and started building houses from the foundation up, rather than trying to add updated features to an older structure.
While in Asheville, I have purchased almost all the lots that I built on right out of the MLS. I also bought land that I could build multiple houses on if I added sewer and water to the original parcel. I have done that multiple times, turning a piece of raw land into a piece of land where multiple homes could be built once the necessary infrastructure had been added. I learned how to be a developer of small subdivisions. Once I have built a house, I list it myself to save the Realtor’s commission.
I am a member of multiple MLSs because the MLS is where people who want to sell put their homes. I still buy approximately 50% of the properties I buy right out of the MLS. When I buy there, I am paying a retail price for the property.
I do not simply buy from the MLS and then resell. And when I buy a property from a seller that hasn’t listed in the MLS, I cannot simply put the property in the MLS and resell at a profit. There is not enough margin to do that.
Then how do you make a profit? What creates the profit for you?
Each piece of property has to be evaluated on its own. When I evaluate a parcel using my 40+ years of experience, I have to evaluate the property from many angles (see the Factors page, where I go through that). The size, shape, topography, location and many other factors of the property form the possibilities. I have to improve the property and create value in order to make a profit ultimately. Let’s take an example.
Suppose I buy 10+ acres and believe that there is a market for 5-acre farmettes for someone who lives in a big city nearby and wants a “getaway place.” I have to transform that 10+ acre place into two 5-acre farmettes that align with what that future buyer wants. I have to bush-hog the properties, limb up the trees so a person can walk around, establish two driveways, grade an entrance to the building pads, grade out the building pads and slope them properly for runoff, and perhaps thin out some trees for a potential view. If I do all that properly, the future owner sees the vision of the future farmette and pays me enough that I make a profit. But the point is that I have to create that vision for the future buyer by the actions that I take.
Let’s say I want to buy an urban infill lot, in an area where most of the lots have already been built on. The lots that haven’t been built on are the left-over lots, often hard to build on. As a builder, I know how to correct the problem, often cheaply. Once done, I can either build on that lot myself or form a partnership with another builder to build a new house. It often takes me 30–40 hours to find a building plan that will fit the lot. As mentioned previously, I have to create the profit opportunity by overcoming initial problems — that’s what 40+ years of experience allows me to do.
Sometimes I will see a parcel where there is an obvious problem that I know how to overcome without a lot of work or expense. I’ll buy that lot, overcome the problem, and then resell the lot. I have to overcome a problem in order to make a profit. Even when I resell the property, I have to use another Realtor to sell it, so I have the same expenses you would if you listed it yourself. Selling real estate requires local expertise, and I can’t be an expert if I’m 100 miles away.
I’ve spent 40+ years figuring out the best thing to do with a piece of land, and that expertise, ultimately, is where I make my profit. You still get paid a fair price based on the current usage of the parcel; if I want to make a profit, I have to create the vision for the next buyer.