Should Investors Have a Real Estate License?Posted on January 1, 2015 by
I have been asked by new and veteran investors if they should consider getting a real estate license. My response is usually, “Sure, why not?” I do not want to push them into it nor do I want to convince them not to do it. I simply want them to consider for themselves their own pros and cons of having a license. Personally, I like having my license and could not imagine being an investor without one.
Are there cons to having a license? Yes, but the cons are insignificant or temporary. The one con that most investors and real estate agents alike share is the cost of having a license. Just getting licensed is an investment. You need to take some classes and make a minimum score before given permission to take the actual exam to get licensed, which cost a few hundred dollars. Once you are licensed and depending in what state you are in you must pay a National Realtor Association fee, local Realtor fee, MLS fee and brokerage fees. In order to keep the license you must also pay to take continuing education courses. However, if you close enough properties they will more than pay for these fees. Another con you may have as an investor is having to work for a brokerage.
Most investors begin or began to invest in order to not have to answer to anyone, so this may not be ideal. The great news is that you only need to be a salesperson/real estate agent under a brokerage until you qualify to be a broker and open your own brokerage. You have to love cons with expiration dates. One “con” I hear a lot from investors is that real estate agents are governed/regulated by the real estate commission. An investor once bragged that a client threatened to report her to the real estate commission and she laughed and taunted saying, “Go ahead. I’m not licensed!” I personally do not see this as a con because licensed or not you want to run a business where your clients are not even thinking about having to report you to anyone. On a day to day basis the major difference between being licensed or not are DISCLOSURES. As a real estate agent you must always get an “Information About Brokers Services” signed when discussing real estate with a buyer/seller/landlord/renter and disclose if you are the owner of that property or make clear who you represent whether it be the buyer/seller/landlord/renter.
Now for the pros. The main pro is access to your own MLS. I know many investors would argue that they have a friend’s access but that is just for information. With your own MLS you can list your properties and only pay the selling agent because you will be the listing agent. This alone has saved me thousands. With MLS’s syncing all the listing information to sites like Zillow, Trulia, Homes.com, etc. that listing information has led to buyers/renters calling me directly and avoiding commission fees entirely. While marketing my own properties I have picked up clients (buyers/sellers). Also, as I market for more investment deals I always run into a few properties that have very little to no margin for me as an investor so I convert them to a real estate listing. This pro gives me an advantage over other investors by allowing me to convert more of my leads into profit. Some fellow investors even forward me leads they cannot purchase as an investment so I can convert them into listings. There are also pros on the buying side like having a Supra key. This gives you the advantage of setting your own appointments to visit potential investment properties. Being the first one into the home and thus first to submit an offer can be the difference between purchasing or not purchasing the property. While others wait for their agent you are already in negotiations. Another pro is you can actually take home a check at closing by representing yourself. This advantage may allow you to offer a bit more than the unlicensed investors and win the property.
There will always be pros and cons to everything but in this instance I believe the pros outweigh the cons. Since I am a broker the only con would be the fees but all the pros I mentioned more than take care of those fees then some. Since I only look to create win-win situations in business I do not even consider being regulated by the real estate commission a con. Worst case scenario, if you do get a license and do not like it you can always go inactive and let it expire. Best case scenario you love it and become a fellow broker.