There’s no denying that obtaining a license to work in the real estate industry has certain benefits.
These benefits offset the costs in terms of both time and money.
As a real estate agent, you’ll need a license to operate your own real estate business.
As an investor, a real estate license could open some doors.
Having this advantage over the competition isn’t necessary, but it certainly helps.
The process of acquiring a license is time-consuming and costly.
Still, it’s a good investment if you can use your license to expand your professional network or ultimately make more money.
You can always hire folks who already have licenses, but having your own can save time and energy.
We’ll talk about that in detail later.
Read on to discover if getting a real estate license is the next move for you.
Is Getting A Real Estate License Worth The Effort?
Is being a licensed real estate investor worthwhile these days?
It can be. No harm will come to your real estate investing career from getting your agent’s license.
The problem that most people encounter, however, is that getting a real estate license can be tedious.
Could those resources be better invested in hiring licensed real estate agents for your future projects?
Investors must first consider their goals before considering whether or not getting licensed is worth the time and effort involved.
After all, it’s entirely possible to make money without a license while investing in real estate.
Nevertheless, you should know that having a license comes with a number of advantages that could make the process worthwhile.
To some, a real estate license is a prerequisite for any significant participation in the real estate market.
Accredited investors have instant access to property listings, market data, and key property information.
If you have the resources to begin working immediately but are waiting for an agent to get back to you, you are wasting time and perhaps missing out on opportunities.
With a license, you obtain access to the information you need to make decisions rather than waiting until it is made available.
Earning your license will allow you to use the MLS, one of the most useful resources for investors in today’s market.
Therefore, if you want access to a wide variety of deals, getting licensed may be a good option.
Here are a few more arguments for why you might want to pursue licensing.
Related Reading: How to Make Money in Real Estate – Find Out Here.
Why You Should Pursue Licensing In Real Estate?
1. You can earn more.
For serious property investors, getting a real estate license is like being given a chance to “print money.”
The ability to legitimately receive a commission on the sale of real estate can lead to substantial gains.
Believe it or not, some real estate agents in your region are making millions annually despite the widespread dislike with which they are viewed by investors.
Just about 5% of currently available properties are good options for an entrepreneurial investor.
Is there any plan for the other 95%?
Virtually everyone ultimately works with a real estate agent.
True, most investors don’t have time to serve as a typical listing agent or buyer’s agent.
However, they can still recommend the lead to another agent and split the commission with them.
It’s possible to haggle for a 25% cut of their 3% finder’s fee if you bring them the client.
If you generate a high volume of seller leads, the money you make from your referral commission could quickly add up.
Sometimes, it’s preferable to take the role of either the listing or buying agent.
In the grand scheme of things, 3% of a 1M is not petty cash.
That’s a pretty nice profit on the sale.
Commission income has the advantages of a wholesale deal, which is why it is so attractive.
You can be paid a commission without using any of your own money or credit.
Therefore, real estate brokers may be considered the progenitors of the no-down payment model.
What happens when a pal of yours decides to become a homeowner?
If you help a friend find their perfect home, you might expect a 3% commission.
It could be the simplest way you’ve ever made money in real estate.
Due to recent major changes, it is now much harder for resourceful real estate investors to achieve substantial gains through short sales.
Even while there are still chances to make a profit, the vast majority of short-sale approvals in the market today do not allow for a back-to-back flip.
In the vast majority of short sale transactions, the only actual money left on the table is the commissions.
Let’s say there are a few thousand dollars in “short sale negotiating” fees remaining on the HUD after the banks stopped approving them.
It is very tricky to retrieve those funds without a license.
However, licensed short-sale professionals are already reaping the benefits of this trend, as there are more short-sale offers available than ever before.
A lot of money can be made in the short sale industry, but not if you enter without the proper credentials.
Clearly, you get more options for making money in real estate if you earn your license.
There are many investors who focus on real estate transactions while still engaging in the occasional creative investment.
They’re doing pretty well financially.
2. You get access to real estate investment deals.
A real estate license could put you ahead of the competition in the investment market.
Access to the MLS is one of the perks of being a certified real estate agent.
Without a license, you’d have to rely on a real estate agent to find and convey this information.
With a license, you may focus on the finest neighborhoods and spot new houses on the market more quickly on your own.
You could also learn a lot about a property’s past by digging into its records.
The Multiple Listing Service (MLS) is a great resource because it provides data on:
- recent and previous sales prices
- comparable properties for use in making price comparisons
- and more.
Using MLS information, you may find out which areas have a higher turnover rate, which property types are in high demand, and which types of buyers should be targeted.
3. It’s a networking opportunity.
Maintaining a stable income as both a real estate investor and a successful real estate agent can be challenging.
Some people are reluctant to partner with this type.
Still, the folks you’ll meet as an agent outnumber these skeptics.
One perk of working in real estate is the possibility of making connections within banks, which could lead to preferential access to bank-owned properties.
You also have a higher chance to collaborate with other aspiring real estate agents.
By doing so, you can benefit from their knowledge and pick up tricks for completing specific tasks more quickly.
Brokers can give you guidance on how to deal with potential legal problems and provide information about contracts.
You can find trustworthy surveyors, appraisers, and lenders, among others, by asking other agents for referrals.
One of the best reasons to get your real estate license is the chance to broaden your professional network significantly.
The wider your network, the better your odds of making sales with each person you meet.
Any successful investor knows that a chance encounter with the right real estate agent or a visit to the right office can transform the trajectory of their career.
4. Educational Opportunities
Real estate education is invaluable and cannot be quantified in monetary terms.
More knowledge about the industry increases one’s odds of success.
You will likely work with a real estate agent in some capacity on every single deal you pursue.
Understanding the real estate market can help with contract drafting and even property selection.
By doing this, you’ll have a better understanding of what’s required to seal the deal.
Even if you’ve closed a few deals, you might not be familiar with the components of an addendum or what makes a contract lawful.
You’ll gain a new viewpoint as a real estate agent, one that could end up saving you a lot of time and money.
5. It minimizes risk.
Once you’ve obtained your real estate license, you’ll start working as an agent under the supervision of a broker.
There will be more eyes on your real estate company, which can be a good thing in terms of risk protection.
6. It makes you more credible.
Potential clients and customers may have more faith in investors who hold official real estate agent licenses.
Getting a license is an expensive and time-consuming process that requires dedication.
Anyone who has taken the time and effort to earn their license in the past can be safely assumed to be serious about their profession.
The act of obtaining a license alone might create a sense of comfort for folks who want to do business with you.
Related Reading: Why Join eXp Realty – Learn Here.
Why Getting A Real Estate License Would Not Be The Right Move For You?
There are many positive aspects of becoming a licensed real estate agent, but there are also some drawbacks you should think about.
1. You’re not willing to get a “real-world” education.
Some newbies think they absolutely need a license solely for education.
They learn too late that the real estate licensing prep course teaches you next to nothing about actually generating money in the industry.
According to the Bureau of Labor Statistics, while 1 in 10 real estate agents make more than $100,000, another 1 in 10 earn less than $23,000.
An item to keep in mind is that some real estate agents only work part-time.
When they were in school to earn their license, they weren’t taught how to make money; rather, they were taught how to pass the test.
Memorizing the definitions of terminologies will not help you put any money in your pocket in the real world of real estate investing.
Without a doubt, the process of obtaining your license will teach you something new.
But unfortunately, it’s not likely to help you achieve your goals.
The information will remain theoretical.
Some novices may be eager to enter into a 150-hour pre-licensing course because education is inside their comfort zone, but this could be hiding a more harmful motivation.
They avoid leaving the comfort of schooling because they are terrified of the outside world.
If you want to make the most of your time and money spent on education, you shouldn’t expect to learn everything you need to know about real estate success simply by earning your license.
Instead, consider it as the price you must pay to join the ranks of those who can make commissions.
You will still need to gain experience and learn out on the field.
2. You’re not that active in real estate.
I can’t stress enough that obtaining a license requires a significant investment of both time and money.
There may be several thousand dollars in total expenses (fees, Realtor dues, E&O insurance, and more).
The time commitment is estimated to be at least 150 hours.
You could spend well over six months preparing for your pre-licensing exam.
It’ll probably take another six months to pass the actual test and hang his license with a broker.
With all this preparation, you’d probably be losing money in real estate and missing out on a great moment to invest.
My recommendation (and experience) is to get out there and close some business.
Sell real estate and make some money.
Then, if you are able to devote the substantial amount of time needed, spend the money you have made from your first few sales to pay for your license.
Then, it’s crucial that you maintain your real estate operations.
The expenses to maintain your agent’s license are high, and so are the classes you must take to keep it current.
While the electives you pick may prove to be valuable, the required continuing education classes may feel like a chore.
Those that invest full-time are the best candidates for obtaining a license.
On the other hand, a license can help a successful part-time investor make the transition to full-time work.
It can generate steady income while they wait for larger projects to close.
3. Your only motivation is MLS access.
Even though the Multiple Listing Service (MLS) is a significant resource, it shouldn’t be the sole motivation for you to earn your license.
Getting a license to use the Multiple Listing Service (MLS) can cost a lot of time and money, and there are alternative ways to access the system.
For example, you could contact a helpful representative for access.
You can become a non-licensed assistant of a Broker in several MLS systems by attending a full-day seminar.
You could even get someone’s username and password to access their MLS account if you’re close to them.
And after losing anti-trust litigation, the Realtor organization in several parts of the country opened up its MLS monopoly.
This made most of the most significant MLS data available to the general public.
Is there any value in being able to post your own deals? Listings with a flat cost are frequently so inexpensive that they are essentially the same as those without.
Given the prevalence of flat-fee listing services, this is less of an advantage.
To compensate your broker for their time and effort, even if you list the deal yourself, you will have to pay them a commission at closing.
How To Get A Real Estate License?
If you decide that a real estate license would benefit you, here are the hoops you’ll have to jump through to get one:
1. Learn your state’s licensing requirements:
Get your bearings first.
Each state has its own set of ordinances regarding prerequisite classes and the application process for obtaining a license.
To find out the process you need to go through to get your real estate license, contact your local commission.
The vast majority of states require the following:
- College-level education in real estate basics
- Permanent residency in the state that you’re applying in
- Criminal background check
- Minimum age of 18
You can take classes online or in person.
However, the school you choose and the courses you take must be approved by your state’s real estate licensing authority.
Make sure a real estate school is recognized and accredited in your state before enrolling.
What if you’re already licensed but want to move across state lines?
Find out if your new state recognizes licenses from other states.
The new state must have a reciprocity agreement with the state where your license was issued.
It’s possible that you don’t need to go through the preliminary licensing steps if the state has a reciprocity agreement with yours.
Although you will still be required to obtain a license in your new state, you may be allowed to bypass some formalities.
Idaho, for instance, has agreements with neighboring states like Wyoming, Oregon, and Montana that allow for the free movement of professionals and goods.
Also, if you already hold a relevant degree or are a practicing attorney, you may be exempt from certain pre-licensing requirements.
2. Attend pre-licensing school.
There are pre-licensing programs that require you to attend a certain number of classes over a certain amount of time.
Others provide you the flexibility to complete the required real estate courses at your own speed.
Discover your range of choices and pick the one that best suits your needs and availability.
Pre-licensing classes have a similar range in price, from $200-$1000, depending on the school and the state.
3. Apply for the real estate licensing exam and pass it.
If you’ve finished your real estate classes and feel prepared to take the exam, you can apply to take it.
Paying an application fee and signing up for the exam through a third party, such as PSI Exams, is typically required at this stage.
It is not necessary for many places to have finished all of your schooling before applying for the exam.
You can earn credit hours toward your license while you wait for your exam application to be approved, cutting down on the total time it takes to acquire your license.
One thing to keep in mind is that this is not the same as applying for your license.
This will come later when you’ve passed this exam.
The test will consist of roughly 100 multiple-choice questions on topics like federal and state law.
Different states have different passing score requirements.
In most places, you need to get at least 70% to pass and get your license.
The time allotted to finish the license exam is 1.5–3.5 hours.
Fees for exams often range from $15 to $100.
In order to apply for a real estate license, you will need to provide a copy of your exam score.
This is in addition to an official transcript or certification of completion from an approved real estate school.
4. Apply for your license.
Submit your exam results, license application, and payments once you’ve proven your proficiency.
You should expect to pay between $50 and $250 for your license application and another $40 to $100 for a background check, depending on your state of residence.
See if having Errors and Omissions (E&O) insurance is a requirement in your state by contacting the real estate commission there.
Having this insurance shields real estate agents from financial ruin in the event of a lawsuit or other adverse event related to the performance of their duties.
E&O insurance is something that your brokerage may offer you.
If you don’t already have it, you might want to get it before applying.
The minimum age to apply for a real estate license is 18 in all 50 states, and you’ll need a high school certificate or General Equivalency Diploma (GED) to be approved.
The time it takes to receive your license after submitting an application is typically between one week and two months.
Related Reading: How to Sell My Real Estate Brokerage – Learn More Here.
It takes more than a desire to earn a real estate license to reap the benefits of having one.
Obtaining a license to practice real estate is a difficult process.
On top of this, there are application fees, costs, and yearly renewals to pay.
Even with all this red tape, a real estate license is typically worthwhile.
[I’m biased, as I’ve had a real estate license for 12+ years, and I’m an advocate of getting one. I didn’t want to mention this until now!]
Not all investors will require a license, but having one could really benefit your business.