One of the most common questions I get from people who are seriously considering starting a career in real estate investing is whether or not they should be getting a real estate license in order to invest in distressed homes. It’s a good question, and you’ll see opinions go both ways when searching online for an answer. But, here’s the detail those other sites may skip: In most cases, you don’t have to have a license—but there are some circumstances in which a few states may require it. So, the prudent thing to do is first check your state laws with a good local real estate attorney. If you are not required to have a license, then you can decide if you want to do what is necessary to get one.
Is Getting a License Worth it?
There are several factors that you’ll need to consider when determining whether you should get a real estate license to enhance your real estate investing company. First and foremost on every investor’s mind is time and money. But, there’s more to it than that. Let’s take a look at some of the biggest aspects of the question to weigh.
- Pros: With your real estate license, you can save money on agent commissions. Typically, agents get about 6% of the sale price, which is split in half between the buyer’s agent and the seller’s agent. That means, in any given real estate transaction, you may be able to save about 3%.
- Cons: While you may save a few bucks on agent commissions, you may be paying a brokerage instead. Many states require you to have sponsorship by a brokerage, which will charge monthly dues and other fees. From advertising to desk fees and even commission splits, this can add up quickly. And, you pay the broker whether or not you are buying or selling an investment property that month. In addition, listing with an agent who knows a specific area may actually help you sell the house faster and for more money.
- Pros: Some professional training and education never hurts, right? Perhaps spending the time to learn the ropes now will save you time later when you are investing. No more waiting on an agent to get you back to you with information when you can have it at your own fingertips! Not to mention, you will also be able to grow your confidence when it comes to making crucial decisions.
- Cons: You will have to complete the initial course and exams to become licensed, though the number of hours required varies widely by state. Then, typically you will have to earn additional ongoing educational credits per year and apply for periodic license renewals. The time and effort may be inconvenient or even prohibitive for investors who already have the resources to get deals done.
- Pros: As a licensed agent, you will be able to access the Multiple Listing Service (MLS) for finding properties to purchase or mocking up comparables on a property of interest.
- Cons: The best investment deals are not necessarily found on the MLS. If a homeowner is in a position to put the property on the market and wait for a buyer, you are not going to get a rock bottom price. It’s often better to obtain leads directly from a distressed home seller who is eager to get out of a bad situation. But you will need to implement the best marketing tools for real estate investors to reach them.
- Pros: You will deal directly with the other party’s agent, lenders, appraisers, inspectors, and everybody else involved in the transaction. This gives you direct control over all the negotiations and details.
- Cons: You may find yourself too close to the deal. Since you are responsible for handling all communications with multiple interested parties, it’s easier to get emotionally involved in the transaction. This can keep you from making good property investment decisions you might have otherwise made with a clear head.
Taking everything in mind, I decided that getting a real estate license simply wasn’t worth it for my particular business strategy and investment niche. You see, I buy distressed houses, rehab them, and sell them at market value. It’s been over a decade, and my business has grown stronger each year.
The Bottom Line for New Investors
Real estate investors come from all kinds of career backgrounds, yet they find it easy to get started on their new path as a HomeVestors® franchisee like me. Many franchisees don’t have a real estate license when they begin. HomeVestors®’ nationally recognized and trusted “We Buy Ugly Houses®” brand brings leads to franchisees so they can take the time to research this issue in order to make the informed choice of whether or not to spend time and money getting a real estate license. If you are ready to jump-start your real estate investing career, reach out to HomeVestors® today.
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