There are a number of advantages to having your real estate license as an investor. Chief among them is access. Access to deals, access to properties as soon as they come onto the market, and access to more experienced people who can help you make better investment decisions. However, there are some caveats to consider too.
Let’s examine this question a bit more closely below.
In most cases, your potential for success as a real estate investor will be enhanced if you get a real estate license. Right off the bat, every property you acquire will more than likely require you to interact with a real estate agent. If you have an understanding of how that aspect of the business works, you can streamline the process considerably.
You’ll have a better idea of how to structure a successful deal and you’ll have some insight into what it takes to actually get deals closed. You’ll also gain some insights into what to look for in potential investment properties. This knowledge will save you time and money.
Having a real estate license can also reduce your transaction costs. In most cases, whenever you buy or sell property you pay commissions. With a real estate license, you can act on your own behalf and pay yourself the portion of the commission you would have paid an agent to represent you.
A real estate license also affords you more control over your deals. You can negotiate directly with the seller, their agent or the buyer’s agent rather than communicating through an intermediate party. What’s more, you can deal directly with appraisers, inspectors, title companies and closing attorneys. You’ll also gain the advantage of showing your own properties to prospective buyers when you’re the seller.
You’ll learn about new listings before non-licensed investors because your license gives you direct access to the Multiple Listing Service (MLS) and all of the information it offers, including the MLS data that is withheld from the public. With this tool, you can very easily make offers the first day a property comes onto the market.
In addition to becoming apprised of new properties right away, you’ll have all the historical data the MLS provides at your fingertips. You can track pricing trends in given neighborhoods, learn what types of properties typically bring the best returns, and even get an idea of what types of buyers to look for.
As an investor with a real estate license you’re also better positioned to work with listing agents, as you can handle most of the legwork a listing agent would usually have to deal with on their own. Make life easier on enough listing agents and pretty soon they’ll come looking for you when they have something in which their experience has proven you have an interest in.
On the other hand, you’ll be in for a lot of paperwork. You’ll be writing your own deals, ensuring all of the right forms get to everyone involved and that they’re filled out properly. You’ll also be held to a higher legal standard.
A licensed real estate agent must disclose their status in all dealings and you have to make sure you don’t take advantage of people with your “inside knowledge.”
As we mentioned earlier, maintaining your license also has costs. Most states require bonding and insurance. You’ll have to find a broker with whom you can work with and they’ll want to be compensated for admitting you into their fold—usually in the form of a commission on the deals you do or a desk fee.
There are also continuing education requirements to consider. Depending upon the state in which you’re working, these could be annual or semi-annual and those classes also require fees. Finally, as a licensed agent, you’re more open to liability than you would be if you were dealing through an agent as opposed to representing yourself.
So, is there an advantage to having your real estate license as an investor? For many people, the pros greatly outweigh the cons. But the detriments should be considered. Most people find it largely depends upon their business model, the types of property in which they invest most frequently and of course, how often they do deals.
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