Does a Real Estate License Help Investors Get an Edge?
You do not need a real estate license to invest in real estate. We know this.
But you probably are considering it because having your real estate license gives you access to the MLS, commissions when you buy properties, and saves you commission when you sell your property yourself.
I’ve created a video below sharing some thoughts and tips on whether or not you need your real estate license to help your investing business.
In short, there are several pros and cons. Let’s dive into them shall we?
Should An Investor Get Their Real Estate License (Pro’s & Cons)
The Pro’s of Getting Your Real Estate License:
- You get access to the MLS to search for properties, research market statistics, and pull sold comps of recently sold homes
- You earn a commission when you buy your property by representing yourself as a buyer’s agent
- You save money on the commission when you go to sell the property by listing it yourself
- You control the deal
- The networking and relationships
Access to the MLS
When you have a real estate license, you also get access to the Multiple Listing Service, known in short as the MLS.
It’s a property system that gives you access to data on all the deals that are currently active for sale as well as deals that have sold, been withdrawn, expired, or are currently pending sale.
This makes it easy to quickly analyze your housing market for average prices of different zip codes and neighborhoods if you want to pull comps on a specific property you’re thinking about purchasing.
It’s also easy to quickly look up data on specific properties including who the owners are, how much they paid for the property, and even how big of mortgage they took out on the property.
All of this insider information can help you make a smart decision when making an offer on a property.
As an investor, you normally don’t get a commission for buying property. Instead, that money goes to your buyer’s agent representing you.
But once you get your real estate license, you can now represent yourself on the purchase contracts and receive a portion of the commission that gets split between seller’s agent and buyer’s agent.
This extra income adds up if you do a high volume of deals annually or large dollar deals like big apartment buildings.
For example, purchasing a $1 million dollar apartment building could result in a $30,000 commission potentially.
On the sell side..
You can save yourself money by listing your investment properties as a licensed realtor yourself. These savings can add up if you do a high volume of deals or large dollar deals.
Controlling the Deal
When you work with a real estate agent, you’re at their mercy a little bit. They are in control of communication with all other parties like agents, inspectors, lenders, etc.
They also are in control of how your property gets marketed and presented to potential buyers which can impact the perceived value a buyer is willing to pay.
By getting your own license as an investor, you now hold more control in your deals..especially on the negotiation side of things with other agents.
Most importantly, you control time.
If a deal hits the market tonight while you’re sitting at home watching TV, then you have the ability to quickly write an offer and submit it, giving you first mover advantage hopefully against other potential buyers.
In a competitive market, speed is everything.
Networking & Relationships
Another great benefit of getting your real estate license is the connections you’ll make and relationships you’ll build in the real estate industry.
This could lead to off market deals being brought to you first before other parties get a chance to see these deals.
It can lead to great relationships with lenders who will end up financing many of your deals.
And by talking to all the different trades and services in the industry, you’ll gain lots of new knowledge that will help you make smarter decisions with your investment properties.
The Cons of Having a Real Estate License
The Con’s of Getting a License:
- It can be expensive
- You open yourself up to more liability potentially. You have to disclose more things since you are now holding a license and know things most people don’t know.
- Your time is limited when you decide to do it on your own instead of leveraging the time of a realtor who could do tasks for you
Being a Real Estate Agent Can Be Expensive
Depending on how you negotiate your payment structure and expenses with your broker, real estate agents can end up paying lots of money in annual fees, which might eat into your profits as an investor.
Typical fees include:
- Broker monthly desk fees / office fees
- Lockbox fees
- MLS fees
- Realtor Designation fees
- % of Commission to Broker
If you don’t buy an investment deal for a year or two, you end up eating lots of fees which negatively impacts your income for the year.
It’s recommended you still practice real estate on the side in addition to working your full time day job.
You can start off helping family, friends, and other clients in addition to representing yourself in your own investment deals. This way you can still earn extra income to afford all the fees of being a licensed realtor.
There is a lot of legal stuff you have to learn to become a real estate agent. And once you have your real estate license, you may be held to a higher ethical standard.
There are lots of things you have to disclose when talking with different parties and if you say or word things wrong, it could result in legal penalties if someone were to sue you.
Leveraging Another Person’s Time
As an investor, you’re likely pretty busy already working on current projects at other properties you own. You’ve got contractors to manage, property managers to manage, and tenants to deal with.
One of the reasons to NOT get your real estate license is that you can leverage another agent’s time and let them find you properties to purchase.
They can spend time doing market research for you on average home prices and average rents in different neighborhoods.
They can handle all the paperwork, legal documents, and negotiations with the other party in the deal.
In addition they can handle all communication with escrow, lenders, inspectors, appraisers, property management companies, etc. saving you time, stress, and headaches.
Why I Chose to Get My Real Estate License as an Investor
In my experience, I got my real estate license for the purpose of real estate investing but also to sell real estate on the side for extra income.
There are many homes I come across from my marketing strategies that don’t work for me to buy as an investment.
But since I have my license, I can talk with the sellers about finding another buyer for them and still get the listing and commission when the property sells.
I also enjoy access to the MLS, allowing me to see all the latest deals as they hit the market and lots of data at hand to analyze deals with to make sure I’m not over paying.
Overall, you have to weigh the pro’s and con’s and see how it applies to your own personal situation. If you can handle selling real estate as a part time job, it could make sense to get your license for extra income in addition to using it for real estate investing purposes and to network.
Thanks so much for being here today to consume my content and giving me time out of your day.
If you have a few extra minutes to spare, I’ve linked to some additional articles I think you’ll find valuable as well as my real estate investing course that has been getting great reviews from hundreds of students.
Additional Articles to Read:
- The BRRRR Real Estate Investing Strategy
- How to Value Single Family Homes (Sold Comps)
- Ultimate Guide to Creating a Real Estate Business Plan
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