Do You Need A License To Be A Real Estate Investor? One of the most common questions we get from new real estate investors is should they get a real estate license.
So do you need a real estate license to be a successful real estate investor? Well the short and direct answer is NO, you don’t need a license.
However, there is a lot to consider when making the decision to be licensed or not. (watch the video… full transcript included)
There are some really good advantages to being a licensed Realtor. In our experience these are the major benefits as we see it:
Access to MLS. Hands down having access to the MLS is the biggest advantage to getting licensed as an Investor. The MLS has data that can be extremely valuable. From comparative analysis to customized queries and searches, you will be able to find out information that most of your non-licensed competitors will never find out.
Even with many of the online services like Trulia and Zillow, nothing comes close to providing the data that the MLS does especially in terms of timeliness and accuracy. Remember, Zillow calls their valuations Zestimates…and that’s exactly what it is. An estimate. With the MLS you can be a lot more targeted and specific.
Make More Money. Many investors realize that every time they sell a house through another agent, they are spending about 6% of the sale price in agent commissions. What they don’t realize is that when they buy property, their agent is also collecting up to 3% for facilitating the transaction.
This means that on a typical purchase and sale of a property, an investor has access to up to about 7-8% of the total sale price of the property in extra profit, if he didn’t have to give that money up to his agent. If you buy a property for $100K and sell it for 200K, that’s $15,000 in additional profit (assuming your buyer didn’t have his own agent) you could have if you were your own agent on the purchase and sale of that deal!
Ability To Work With Other Agents. Many agents will openly deny this but it’s a well known fact that realtors and investors are like polar opposites. In fact they may be the antithesis of each other.
Agents don’t like dealing with investors. They don’t understand where we’re coming from, they don’t like our strategies, they are erroneously taught that a lot of what we do is fraudulent, they don’t like our forms…there’s a host of reasons agents don’t like working with Investors.
It makes life so much easier if you are an agent or represented by someone who is an agent. It is much easier to make a listing agent comfortable when they are relating to another Realtor. Does it make sense? No, but it is a fact of the business.
On the other hand, there are also some major disadvantages to having your license. In our experience these are the major disadvantages as we see it::
• Licensing Requirements: Just because you want a license doesn’t mean you automatically can get one. Different states have different requirements that need to be met. The cost isn’t too bad but the time requirements for classroom training, broker meeting requirements, mandatory continuing education, and exam taking will require a good deal of time that you will need to commit to in order to maintain a license in good standing
• Fees You Need To Pay: Just getting your license doesn’t make you a Realtor. To be a recognized Realtor by your local Board, there will be a number of annual fees that you will have to pay for the privilege of being a Realtor. Here in South Florida it costs nearly $1,000.00 per year to be a Realtor but if you don’t pay it you can’t have MLS access. That’s the Gotcha!
• Those Stinking Disclosures. When you have your real estate license, you are held to a higher standard. I know…don’t laugh…they actually believe that they have higher standards. But on paper, they actually do. You must disclose to buyers/sellers that you are a licensed agent; you can’t “knowingly take advantage” of a buyer/seller; etc. Some investors feel that having to make these disclosures and being held to this higher standard negatively impacts their business, and that is why they don’t want to get their license.
Is it all that big of a deal to disclose that to a Buyer or Seller what you are doing? Well in today’s volatile foreclosure laden real estate market, many state governments are creating laws to protect the homeowner from unscrupulous practices. In order to operate a successful real estate investing business we make a ton of disclosures to make sure that we are in compliance with the new Statutes.
You may want to check the laws regarding real estate investing in your state. I also can tell you that as an investor you already have cross hairs on your back. If they can report you they certainly will so be careful and govern yourself accordingly.
So what is our recommendation? Well I can say that now looking back over the last 15 years of my career as a real estate investor that there is no way I could have been so successful without having a close relationship with a Realtor.
Initially I worked with a great Realtor who really helped me out for my initial years. But, she always took 3-6% depending upon which side of the deal we were on.
After seeing all of those HUD statements showing her making a ton of cash I realized that I needed to find a way to get that money coming my way.
Luckily, I had two choices. I could either become licensed or I had to find someone very close to me to become licensed. I chose the latter and my wife is a licensed Realtor and has been for over a decade.
She has become very skillful in working the MLS and finding deals for me to look at and researching the data to make sure we don’t by duds. Keeping the extra 3-6% in the family doesn’t suck either.
So in closing, while you don’t NEED a real estate license to be a successful real estate investor, it is our recommendation that you do get your license or well…marry someone who does!
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This is great information guys.I have been told by agents and brokers that I associate with that I should get my license. It’s good to hear the reasoning from the investors perspective.
I’m studying for the test in California as I write this.
MLS access is the biggy! Agents willing to work more cooperatively with a fellow agent is next. Saving those commissions is right at the top also.
Hi Alan,
Thanks for stopping by and thanks for the comment. Yeah, I bet some..actually a lot, of people were probably surprised by what we recommended regarding getting a license. But as you have seen, our reasoning for getting a license, or working closely with a licensee is a lot different than most would think.