You don’t need a real estate agent license to invest in rental properties or flip houses. But that doesn’t mean a Realtor’s license isn’t useful for real estate investing.
Getting your real estate license can save you thousands on each deal, and give you a competitive edge with MLS access. But at what cost in time and money?
Consider the following pros and cons before getting your Realtor’s license as an investor.
Pros of getting a Realtor’s license as an investor
Getting a real estate license has its perks. Not only will you save money but also gain access to some exclusive listings. Some of the benefits investors enjoy upon getting a Realtor's license include:
1. Access to the MLS
Every active real estate agent automatically gets access to the Multiple Listing Service (MLS) in their local area. Thus, getting this license means having access to exclusive listings available only on MLS. Investors with a real estate license can use local listings or free online sites to hunt for potential investment properties. Also, MLS allows you to set automated alerts to get notifications whenever there is a new property on the database fitting your criteria.
Additionally, a real estate license gives access to property search platforms, statistics on market research as well as access to information on recently sold properties in your area. This information is priceless in making investment decisions.
2. Saves you money
Generally, Realtors ask for a 6% commission for every transaction. Half goes to the listing agent, the other half to the buyer’s agent. For expensive properties, those commissions add up to big numbers.
Who doesn't get excited at the thought of saving thousands of dollars? You can determine the approximate amount you will save should you get a Realtor's license by considering the kind of houses you invest in and how much you have been spending on Realtor's fees during the transactions so far.
For that matter, you can also advertise vacant rental units directly on the MLS, without having to go through a real estate agent.
3. Commission saved
Real estate investors don't usually get commission upon purchasing a property. It goes to the buyer's agent acting on your behalf. With a real estate license, however, you don't need a buyer's agent. Consequently, you are entitled to a percentage of the commission usually split between the buyer's and seller's agent.
This extra income does add up when you do the math at the end of the year. On the same note, the commission will be quite substantial if you are buying or selling a high-value property.
4. You maintain control
Hiring a real estate agent means compromising at times. Since they serve several clients at any given time, it calls for patience on your side. Calls and messages won't always be answered on time and some business decisions may be delayed if the Realtor is busy with another client. The Realtor also controls marketing strategies and property presentation. These decisions are crucial since they affect the buyers' perceptions hence the amount they'll pay for the property.
With a real estate license, you don't need to hire another realtor to facilitate buying or selling a property. This gives you control, especially when it comes to time and negotiations. Also, fewer deals are lost just because you didn't act fast. Since you control your working hours, the moment you see a great deal you can write an offer and send it quickly no matter the time. If you have to go through a realtor this might be hard to implement if it isn't within normal business hours.
5. Networking and professional relationships
All the best Realtors you have seen or worked with started somewhere. Networking is essential for any real estate investor not only for finding great property deals but also potential clients. Even a single contact can make all the difference since he/she will introduce you to his/her network and you can only go up from there. With a real estate license, you will not only make professional networks as an investor but also as a real estate agent. Those contacts include appraisers, home inspectors, renovation contractors, specialist contractors, handymen, lenders, title companies, and more.
You get to build on that over time to achieve valuable professional contacts you can use whenever you are selling or buying a property.
Cons of getting a Realtor’s license as an investor
1. Study time
You won't get a real estate license overnight. It takes months of studying in preparation for the final examination. Depending on the state, it can take 135-180 hours of study before you are allowed to take the final exams. The license is only issued to those who pass the final test. Additionally, all real estate agents have to fulfill continuing education requirements to keep their licenses.
2. You handle all the marketing
Listing a property with a Realtor has several perks including free marketing. However, if you are playing Realtor or property manager you are also required to handle all your marketing to rent or sell a property. You need to keep calling the contacts who might have a lead on potential clients as well as create the perfect social media ads. Additionally, you'll need pamphlets, video ads as well as plan open houses. According to research, the least amount of time you'll put towards marketing before landing a serious buyer is 60 hours.
Nevertheless, you can also hire a Realtor at a discounted price to help with the marketing while you handle the rest. It will be a win-win for everyone involved, but it also costs you money.
3. You have to work with a broker
Real estate agents work underneath brokers. A broker has to hire you and let you operate under their umbrella broker’s license.
And few brokers want to work with investors who don’t actually want to make a career as a Realtor. There’s not much money in it for the broker, when you only occasionally earn a commission through your real estate investments.
Which raises another point: you have to split your commissions with the broker. You don’t walk away with that entire 3% commission – your broker gets some of it. That limits the savings potential of getting your license as a real estate investor.
4. You have to disclose your license
As a licensed real estate agent, you have to disclose that license when you list properties for sale or make offers to buy. That can make prospective buyers or sellers wary of working with you, and likely to second-guess your offer.
Still, that’s the least of the cons of getting a Realtor’s license.
A real estate license isn't really necessary for real estate investors who are only interested in flipping houses. It takes immense efforts and time to get and the savings may not be fiscal. However, if you plan to practice real estate alongside flipping houses then a real estate license is a worthwhile investment. It all comes down to the money you are hoping to save as well as how much time and money you are willing to invest in this venture.