Should I or should I not obtain a real estate license as a real estate investor? Would getting a real estate license benefit my real estate investing business and how? Or would it actually hurt it? Another set of questions which have started numerous debates in the world of real estate investing. And once again: very important real estate questions with no straightforward right or wrong answer. While many real estate professionals would swear on their life when it comes to the importance of obtaining a real estate license for a real estate business, many others would say that it has no real benefits. Still others would even go far enough to claim that it could prove harmful to real estate investors.
But before we go into details in the discussion of the benefits of obtaining a real estate license for your real estate investing business, let’s see what exactly a real estate license means and how you get one:
What Is a Real Estate License?
In simple words, anyone who wants to act as a real estate agent – i.e., to engage in real estate transactions on behalf of someone else – needs to have a real estate license. It is important to note that licenses are state-issued and state-specific. This means that if you get a real estate license in, let’s say, California, you cannot just go and work as a (licensed) real estate agent in Massachusetts, for example. There are basically two types of licenses: for a real estate salesperson and for a real estate broker. Since real estate licenses are issued and regulated by the state, you should know that each state has its own rules and regulations on obtaining and retaining your license.
How Do You Get a Real Estate License?
As mentioned above, each state would apply its own requirements when it gets to providing a real estate license to interested individuals. However, there are some general guidelines which will give you an overall idea of what’s needed in order to get a license before you check out the specific rules of your own state:
- Sign up for and attend real estate classes: up to about 100 hours of coursework;
- Sign up for the real estate license exam;
- Study well for the exam;
- Take and pass the exam: keep in mind the real estate license exam isn’t particularly easy, and many fail the first time;
- Go through background checks and fingerprinting: to assure your legitimacy and crime-free record;
- Get pre-licensed;
- Work under a brokerage;
- (Possibly) Get additional coursework;
- Obtain a real estate license.
As you can guess from the steps described above, the process can be quite time-consuming and expensive. But after all, that’s how it is with most licenses, right?
How Does a Real Estate License Help a Real Estate Investor?
And now we come to the most important question: how you can use your real estate license to boost your real estate investing business. There are several ways in which having a license as a real estate investor is beneficial, so let’s take a look at them:
1. Gets you access to the MLS database
Probably the most important benefit of getting a real estate license is gaining access to the Multiple Listing Service (MLS). An MLS is simply a service which allows a group of real estate brokers to get together to create an MLS database where they can see each other’s listings of real estate properties for sale. While to many the MLS looks like a huge national database, it is actually comprised of nearly 700 regional databases. The concept devised way back in 1907 has now become a highly modern online database which allows real estate agents to list properties for sale in addition to search through other real estate brokers’ real estate properties for sale by location, price, and property features. So, what that all means is that if you become a licensed real estate agent, you will be able to buy and sell rental properties more easily as a real estate investor through the MLS. Moreover, you will have access to some of the best investment properties which might not be listed in the newspapers and websites which most other real estate investors use. Thus, obtaining a real estate license will give you a comparative advantage over others.
2. Makes more money
Why are you into real estate investing? To make money, right? And the more money, the better. After all, that’s the ultimate goal of any investor and any businessperson. Well, you will be happy to hear that getting a real estate license will actually provide you with opportunities to make more money as a real estate investor. A real estate agent usually charges a commission of about 6% of the sales price of a real estate property for the sale and of up to 3% of the sales price for the purchase of a property. This means that the seller and the buyer pay about 7-9% of the price of the property in commission fees. Altogether, if you have a real estate license and act as your own real estate agent and the real estate broker of the other party, you could make an additional $28,000-36,000 from the purchase/sale of a $400,000 investment property. That’s some good money, you must admit. Just imagine how much extra money that would add up to over the course of several years. Real estate investors are highly recommended to buy a new income property every 2-3 years in order to expand their investment portfolio and grow their real estate business. In addition, of course, the more expensive the rental property you buy or sell, the higher the amount of this additional income.
3. Provides more control over your deals
While working with a real estate agent can save real estate investors lots of headaches, especially those will little experience in real estate investing, it has some serious disadvantages. The most important one is that you lose some of the control over the process and the final deal to the real estate broker who is representing you. On the other hand, if you work as your own agent, you regain full control over the selling and buying of your own investment properties while still benefiting from (your own) professional services.
4. Supplies you with a real estate investment network
Last but not least, obtaining a real estate license as a real estate investor will provide you with instant access to new real estate investment networks that you were not aware of before. First of all, you will meet many real estate professionals while taking the real estate classes required for sitting for the exam. Then you will enter a totally new world of real estate agents and real estate brokers, who will now treat you as one of them rather than simply the buyer or seller of a real estate property. You will also gain access to new people in the brokerage company with which you need to work, at least at the beginning. In real estate investing, there is no wrong networking. The more people you know and the more people who know you, the better.
While obtaining a real estate license is some hard work which costs lots of money, it definitely brings many advantages to a real estate investor and allows him/her to boost his/her real estate investing business. So, you better get to work and get this license of yours. Meanwhile, make sure to keep an eye on Mashvisor for the best real estate properties across the US and for some invaluable real estate investing tips.