If you’re a real estate investor, you’ve probably wondered at some point whether you should get your real estate license. After all, it would be nice to eliminate the middleman and represent yourself on deals.
But while getting your license could give you a leg up, it also takes time and money and it’s not necessary to successfully invest in real estate.
So in this article, we’ll go over all the advantages and disadvantages of getting your license as an investor so you can make the right decision for you:
Pros of Getting Your License
Let’s start with the benefit of getting your real estate license. Here are the top ones:
- Immediate access to the MLS—The multiple listing service (MLS) is the official marketplace for finding homes for sale. As an investor, you rely on an agent for access. But if you’re your own agent, you get immediate access so you can identify, assess, and close deals faster. Plus, you can tour any property on the MLS with lockbox access.
- Learn more about the market—By facilitating more real estate transactions, agents learn more about the market and real estate in general. This helps you further your education and support your personal investing endeavors.
- More networking opportunities—As an agent, you’re exposed to a larger network. You’re constantly in contact with other sellers, buyers, investors, bankers, title companies, contractors, and more. Plus, you’ll be required to work with a brokerage who will have built-in connections you can leverage as well.
- More control over deals—When it comes time to close on your own deals, you have more control over them. There’s no middleman to slow down the process. Make quick offers on your own terms.
- Make extra money through commissions—On top of being your own agent, you get to help others close on deals and make a commission. This way, you can make some extra cash on the side.
- Build your credibility—The real estate industry is crowded. To stand out, you need to build your credibility among peers so they trust you enough to do business with you. Having your real estate license is another way to show your credentials. It’s like a badge that shows you know your stuff.
Cons of Getting Your License
That said, there are some downsides to getting your real estate license as an investor. Here they are:
- Cost—Getting your real estate license costs money. For one, you’ll need to pay for a real estate licensing class. This will run upwards of $100, but usually it’s cheaper if you choose an online course. Then you’ll need to pay for the exam and the license itself. This will vary by state, but expect to spend anywhere from $600 to $1,200. From there, you’ll need to pay for membership to the MLS and possibly even to the National Association of Realtors (NAR) if your broker requires it. They may also require you to insure yourself, pay realtor designation fees, and broker commissions. All this can add up quickly.
- Time commitment—Expect to spend anywhere from 60 to 90 hours on the real estate license course. Then remember that you’ll need to renew your license every 1 to 2 years, which adds about another 20 hours each year.
- Disclosure requirement—When you’re a real estate agent, you have to disclose that you are one everywhere. That means more paperwork and more rules to keep up with.
- More responsibility—As an agent, you’re responsible to the seller or buyer in every transaction. So you need to make sure that contracts have no errors. Otherwise, you risk getting sued and facing expensive lawsuits.
- Investing restrictions—Often, brokerages put restrictions on the types of deals that agents can get involved in. If you’re an investor, this could limit your options.
- Possible distraction—Being an agent may distract you from your investing goals. All the time you spend finding deals for others may be better spent finding, analyzing, and closing deals for yourself.
At the end of the day, getting your real estate license as an investor can be a smart decision for some. It all depends on your personal bandwidth and situation. If it helps you advance your investing career, go for it! If not, then put your time and money to work elsewhere.