Many new investors have come to me over the years with the question, “Is getting a real estate license worth it?” My answer is always the same – If you really want to focus on building wealth through rental real estate, then I wouldn’t spend the time and money getting a real estate license because it’s not required or needed to be a successful investor. However, there are some individuals who feel there are a few aspects to holding a real estate license that may be beneficial. For this reason, I’ll do a deep dive into the topic where I share the PROS of having a real estate license as an investor, as well as the CONS. With all that said, let’s get started.
Benefits of Having a Real Estate License as a Property Investor
When it comes to the PROS of having a real estate license in your tool belt, I’d say there are two that stand out, and they are multiple listing services and commission earnings – let’s take a look at them below:
Access to Local Multiple Listing Services (MLS)
If an investor prefers to search for profitable properties themselves instead of relying on a third party, then having a real estate license may be of some benefit because it provides access to a multiple listing service (MLS).
An MLS contains a large inventory of properties that are on the market, and it’s only released to those who hold the proper license. Also, it’s important to know that you’ll need to work under a broker to have access to the MLS. In fact, in most states, your real estate license won’t be activated until you sign up with a broker. If you’re unfamiliar with the term, a broker is a licensed individual or firm (brokerage) that facilitates real estate transactions.
As an investor holding a real estate license, this means that through an MLS, you’re informed of what homes are on the market as soon as they are listed. This can provide you with a competitive edge and, therefore, be viewed as one of the benefits of having a real estate license.
On the flip side, some argue that because listings now pop up quickly on sites such as Trulia, Redfin, and Zillow, that having access to an MLS is not as necessary as it used to be. Although, the property information listed on sites such as Zillow may not be as detailed as it would be in a local MLS.
A Real Estate License Gives Investors a Chance to Earn Commissions & Referral Fees
If you’re looking to make some extra cash, you may be able to reel in commissions on your own deals. This means you could earn the same 2-3% of the purchase price in commissions that a real estate agent would normally receive. For instance, let’s say you purchase a rental property for $200,000; your commission might be $6,000. These are funds that could be used towards your next down payment, or for repairs or renovations if you’re buying an older home.
There are also referral fees that you can earn for those deals you’d like to pass on to another agent because you’re not interested. So, instead of just giving up a deal that doesn’t fit the bill, you could refer them out to another licensed agent. In doing so, you’ll earn a small profit when a property is bought or sold. This is common, and there’s actually a form that you fill out to have the referral officially registered.
Ok, now that you’ve had a chance to read about the two main benefits of having a real estate license as an investor, let’s take a look at the CONS so you have a well-rounded view of the topic.
Drawbacks of Obtaining a Real Estate License
For those who are asking, “Is getting a real estate license worth it?” you won’t fully know the answer until you’re aware of the possible downsides to it all. There are two that I think are worth discussing, which are time and money.
Takes Time Away from Investing Activities Making it a Distraction for Some
If your overall plan is to focus on building your investment business, know that a big chunk of time will be taken away from it if you go after a real estate license. For starters, you’ll have to meet the requirement of spending around 120 hours taking pre-licensing classes. The number of hours required for these initial classes can vary from state to state, though – some require more, some less.
After the classes are completed, you’ll then need to pass a test on state and federal housing laws. However, the education and testing are not a one-time deal. Although not as many hours are needed, you’ll be required to renew your license every one to two years.
A lot of investors have spent the time taking the initial classes, and when it came time to renew, they realized it really wasn’t worth having a real estate license in the first place, and they ended up not renewing. This can be viewed as a waste of time, as well as money, which I’ll cover next.
Start-Up Costs, Yearly Dues and Fees
The start-up cost of getting your license, depending on the issuing state, could end up being between $1,000 and $2,000. This includes the pre-licensing costs such as materials and education, the exam fee itself, fingerprinting and background check fees, as well as a possible MLS fee after the fact.
Depending on the location, the renewal charge is anywhere from $35 to $300. If it was just a matter of a one-time initial start-up fee, maybe it wouldn’t be a concern, but investors who wish to have an ongoing real estate license will have to pay every two to four years, and this can add up.
Getting licensed is definitely worth the cost for career real estate agents, but you’ll have to really contemplate if, based on your investment goals, it’ll be worth it or not to hold a real estate license as an investor.
Alternative to Getting a License if Advancing Your Real Estate Portfolio is Your Goal
If you’re looking into the benefits of having a real estate license because you’re seeking out ways to advance your investment portfolio and profits, you’ll find that there are better alternatives to make this happen. For instance, utilizing a full-service real estate investment company is a more streamlined way of going about increasing profits and quickly bulking up your portfolio. Why is this the case? A full-service investment company will know the industry inside and out, and will have a team of experts who create custom investment plans based on their client’s specific goals and financial situation.
To give you a full overview, here’s a post the team put together that details what it really means to work with an investment company that takes care of all the details for you: More Than Just Turnkey — Experience Full-Service Build-to-Rent Real Estate.
You Won’t Need a Real Estate License to Be a Successful Investor
Our full-service real estate team knows exactly what to do to set you on the path to being a successful investor. For example, we do years of research on specific housing markets to ensure we’re focusing on lucrative locations before moving forward with building in an area. Regarding the locations we build in, you’ll want to bookmark the following article for future reading. It covers a city in Texas that’s the home of many secure, high-performing rental properties: Lubbock Recognized as Recession-Proof City and Maintained a Strong Rental Market Throughout the Pandemic.
On top of this, once one of our new construction rental properties is purchased by an investor, we assign an experienced property manager and place a tenant for them as well.
All the steps we take to make a deal happen for the investors that work with us allows them to cut to the chase and place a high-performing rental property into their portfolio quickly. At this point, the rental income can begin flowing in, and the property can start growing in value. This will kick-start the clock on equity so the investor can build up enough funds for a down payment on the next property, increasing their net worth in the process.
We also strategically have non-recourse loans built right into the property purchase. This means that the loan is already approved because it’s based on the property, not the investor. Utilizing a non-recourse loan in this way speeds the process up substantially, as well as makes a purchase possible for those with less than stellar credit. On top of this, we work with over 200 banks to get the best mortgage rates, and most times, the rates are lower than industry standards.
A Full-Service Real Estate Company Can Save an Investor Time and Money
The bottom line is that a full-service investment company can save you time and money, as well as increase your profits, making it more obvious that a real estate license isn’t actually needed to get ahead. All our clients need to focus on is finding a way to provide the down payment for the property, and we’ll do the rest. We actually do have several ideas for drumming up a down payment, though. Head over to these two articles that I put together to read up on a few options:
- Investment Property Financing 101: Down Payments & Loans
- Strategies for Funding a Down Payment for an Investment Property
Is Getting a Real Estate License Worth it if Investing is Your Focus?
“Is getting a real estate license worth it?” I’d say no if your goal is to make every decision count toward increasing profits for your real estate investment career. In my opinion, getting licensed is slightly branching off in a different direction instead of staying focused. Even so, now that you’ve had a chance to contemplate the good and the bad of getting licensed, it’s up to you to decide if it’s right for you or not. I suggest basing your answer on your long-term goals and also take some time to discuss your thoughts with a few seasoned industry professionals to get more viewpoints on the matter.
With all that said, if you’d like to speak with a real estate professional who can help you stay on track with your investing goals, then feel free to schedule a complimentary call. Or, view our program overview page for some insight and also check out our power resources that can help set you on the path to financial independence:
Before you go, take a moment to dive into the following video: Seven Ways to Save with Full-Service Real Estate:
