Pros And Cons Of Obtaining Your Real Estate License
By Paul Esajian on June 7, 2019
No two real estate investors are the same. Something that works for you may not work for a fellow investor, even in the same market. It is important to make your own decisions and always do your own due diligence. This is especially the case when it comes to obtaining your real estate license. You can talk to ten different investors and five will proclaim it has changed their business, while the other five won’t be nearly as excited. Depending on how you run your business and your specific goals is can truly be a game changer. For others, it can become a burden and a much more expensive than you thought. Before blindly getting licensed weigh both sides and see if it is a true benefit to you. Here are a few pros and cons with obtaining your real estate license.
Pros:
- Access To The MLS: Regardless of where you find your deals, access to the MLS can change your business. For starters, the MLS provides instant updates and data on real estate within a specific zip code. As soon as a property is listed, it hits the MLS and is open to the public. This can be a great way to beat your competition to a property, find bank owned listings or contact distressed sellers. It is also a great way to look up comparable sales and current listings. Instead of having to speculate on a property value, you can look up the information right from the source. Without a real estate license, you cannot gain access to the MLS. For many investors, having access is worth whatever it costs to get licensed.
- Additional Income: Many investors are sick and tired of seemingly throwing away money to real estate agents. If you close even a half dozen deals a year the commission will quickly add up. With a real estate license, you can avoid paying a commission on the deals you close. Additionally, if you network with friends and family members you can probably pick up another handful of deals. With this you can make roughly 3-6% on these transactions that can add up to a sizable amount of income. The allure of either saving money or making more makes getting licensed worth it.
- Network/Contacts: Being a licensed real estate agent opens up a world of new contacts. For starters, you can network with all the other real estate agents within your office. If you go to a big company there can be thirty other agents you can network with to find deals from. Additionally, you can reach out to agents on the other side of your transactions or talk to at networking events. Having “licensed real estate agent” on the bottom of your business card, website or profile page can help you gain a few deals a year.
Cons:
- License And Fees: Getting licensed is not as easy as you may think. Even if you have been in real estate for some time, there are rules and guidelines that are specific to real estate. First, you need to take, and pass, the real estate salesperson class. This is usually a 30-hour class than can be done either online or in person. You need to pass the final exam to schedule your exam. The exam comes with a nonrefundable fee and requires hours of study time. Passing the class is far from a slam dunk, but if you do you need to find a brokerage to hold your license. There are also several fees for the application, license and access to the MLS. Some are one-time, but many are reoccurring on an annual basis. All told it may cost you anywhere from $300-$1,000 to hold your license every year.
- Dual Agency/Disclosure: There are many real estate specific laws when it comes to disclosure. If you are the owner of a property acting as an agent, you need to disclose this upfront to your client. Some sellers may not want an agent who has multiple interests in the property. The same is the case if you are buying a property and acting as a real estate agent. Without even knowing it there are a handful of rules and guidelines that are different as a real estate agent. Just one oversight can get you in trouble or give you a poor reputation.
- Commitment: Being a real estate agent is not as easy as you may think. You can’t just put your name on a contract and send a few faxes back and forth. If you are an agent for someone you know, you have a fiduciary responsibility to do everything you can to get them the best possible deal. Going to showings, pulling comps and returning phone calls can be time consuming and dip into investing business. You need to ask yourself if making a commission is worth losing a potential investment deal over. If you are slow this can make sense, but if your real estate business is booming this may not be the best use of your time.
Don’t let anyone tell you what is best for you and your business. Getting licensed for a fellow investor can make a world of sense, but for you it may not be as profitable. Always weigh the pros and cons before making any decision.