Subject To and RE License
I am just doing my homework in learning about this awesome opportunity. I happened to look up the RE code for Wisconsin and according to this states daffy-nition, if you "sell" more than 5 properties per year or 10 in 5 years, you are acting as a broker and are required to have a license.
1. I have heard that a REI should NOT get a RE license, but I have not seen why.
2. If I hold DEED to a property and not Title, am I still "selling" the property?
3. How would I use a RE professional to close on these deals to bypass this law? I believe that I would need to find one before even starting.
I cannot believe that this state has this type of law. Really shoots a hole in the REI scene and limits total profits. It is a hefty price to pay for the license.
Just starting, got allot to learn, profit and mistakes to make but this is one law with which I do not wish to mess around.
I realize that there may not be a real "legal" answer in the replies but comments and suggestions are appreciated.
I'm not an expert..but I did stay at a holiday Inn last night
but I would think that you could get around this by placing each property in a land trust whereas I would think would never show you technically as the owner but as a beneficiary
just my thought
A trust would not be a problem, however I am looking at Subject To: and the Trust has to follow the same rules as an individual.
I would need 1 trust for every 5 properties that I sell.
Each property has its own trust.
atplack
This is not the first state I have heard of that has that rule/law limiting the number of properties. My opinion is that they have a very strong realtor lobby in the state capitol.
I have heard that there are people who are able to get around that rule, not sure how they do it, possibly buying with different entities or something like that. You might check it out for sure.
John (LV)
I live in this messed-up state also and like you I plan on becoming a REI.
First, thanks loads for the info!!!!
Second, after you reach your limit of 5/10, why don't you have your significant other or a friend do the deal. You can "pull the strings" and it is their name on the paper work. A small commission could be in it for them. You still get the deal and can laugh at Doyle all the way to the bank.
Just a thought.
daven11,
Glad to meet you.
Different entities sounds like a plan to me. I believe you have this one figured out.
Welcome on board this board, it is done all the time where you are located.
John $Cash$ Locke
I think I figured this thing out. I will need to use a PAC trust to do the deals. Thought about the wife, friend, buddy, etc angle but that is still not enough.
I live in Utah aand so far I could have not found out if this State limits the number of properties you can trade without a license. I asked a lawyer and had to get out of there because the guy did not know spite of he is in the real estate business. Any one knows?
UTinvestor,
Check out Utah Real Estate Code. It would be somewhere in this link.
I just wanted to comment on WHY you don't want to get your license if you're looking to do REI. I can speak from experience - I'm a Realtor, and finding myself having a really hard time! The reason is, as our instructors put it, we are the "wolves" and the public are the "sheep", and we are held to a MUCH higher standard for our actions since we're licensed. We have to disclose, disclose, disclose. That, and I can't get around how to do some of these deals and not run them through my brokerage (ie they get a cut of my profits) if the buyer knows I'm an agent... they see me as a part of my company instead of an individual investor. My partner and I have talked about one of us letting our license go so we don't have to do all this crap.
For example, if we're wholesaling properties, and we find the buyers and/or sellers through our means as agents (which is most likely, of course, because we have good sources) then we have to kind of act like an agent even if we're really not in the transaction, because that is how we're seen.
I'm finding it's really hard to overcome the potential liability of being sued, which is, of course what this is all about. Someone saying you took advantage of them and suing not only me, but my company even if they didn't have anything to do with it.
Actually, as an agent, I've found my own personal problem has been overcoming 8 years of Realtor mentality and thinking like an investor instead - all I can think is, "Why didn't these idiots list their house for sale when it went into foreclosure?" and I can't overcome the guilt of feeling like I'm taking advantage of them (ie DISCLOSURE being beat into our heads).
So NOOOOOOOO don't get your license. If you want to learn, go through the courses and learn, but I wouldn't get your license if I were you. Just my opinion.
alarson,
I agree. I have spoken to a number of agents who would not event think of being creative for the loss of your license. Getting a license was a last place alternative to finding out how to do this as a citizen. I have no intent to do ANYTHING that would be illegal but I do not need a real estate board of the state reviewing my deals for their narrow view.
Thanks for the post.
Does this rule apply to State of Florida residence?? I don't think so...
Not only must an agent disclose that they are fully licensed, but they cannot accept referral fees, which is a big deal if you have bird dogs working for you.
Check out http://www.realtor.org for info and http://www.state.fl.us/dbpr/re/frec_welcome.shtml for florida RE Commission.
Debbie[ Edited by dshnaidman on Date 03/21/2003 ]
How does it work if your spouse is licensed? Is the other allowed to give monery to bird dogs? I'm guessing you don't have to disclose anyhting. Has anyone else done this? Is it worth the fees if you have your spouse licensed, but not a relator that shows property? Is it a state to state thing? I'm only 24 and no where close to this situation, but good to know for future plans.
Thank you
How does it work if your spouse is licensed? Is the other allowed to give monery to bird dogs? I'm guessing you don't have to disclose anyhting. Has anyone else done this? Is it worth the fees if you have your spouse licensed, but not a relator that shows property? Is it a state to state thing? I'm only 24 and no where close to this situation, but good to know for future plans.
Thank you
How does it work if your spouse is licensed? Is the other allowed to give monery to bird dogs? I'm guessing you don't have to disclose anyhting. Has anyone else done this? Is it worth the fees if you have your spouse licensed, but not a relator that shows property? Is it a state to state thing? I'm only 24 and no where close to this situation, but good to know for future plans.
Thank you
It seems that most posters are telling you to take title in a trust or an entity and that if each trust or entity purchases less than 5 properties you should be fine. DON'T FOLLOW THIS ADVICE! While the posters are well intentioned, if the state's department of commerce (the usual state agency that policies licensing activity) goes after you (which they will once a realtor finds out about your activity and makes a complaint), you will be spending alot of time and possibly legal fees to defend your actions. This should not be taken lightly.
Minnesota has such a law and while you can structure your transactions to get around the law, simply taking title in another entity or trust will usually not be enough.
I sugggest you contact your real estate attorney and talk to him/her about your concerns and this law. A knowledgeable attorney can help you structure your activities to avoid these types of laws. The key is that, in substance, you have to have an equity stake in the deal. A de minimis investment may or may not suffice, especially if you have an investor putting up the money and only paying you an "equity fee" on the purchase of the deal.
What is the risk? Well, most of these laws are part of the criminal code, and violating it is a misdemeanor.
Taxjunkie
taxjunkie,
I may have said it before but I am going to say it again, it is great to see you on this board.
Here is an Article I authored that the new person should at least take a look at.
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=102
John $Cash$ Locke