Do you have to have a real estate license to invest in real estate?
For BiggerPockets, my name is Brandon, signing off.
Why You Don’t NEED to Have a Real Estate License to Invest
OK, fine. I’ll go a little deeper. But as I said, a real estate license is not necessary for investing in real estate.
A license gives you the ability to help others buy and sell real estate, but anyone can buy or sell real estate on their own without being an agent themselves.
Now, just because you don’t HAVE to have a license, does that mean you shouldn’t?
Is Having a Real Estate License Beneficial to Investors?
Having a real estate license can come in handy for an investor.
There are a few reasons that this is the case.
Perks of Being a Real Estate Agent and an Investor
In a competitive real estate market, the early bird often gets the worm. As a real estate agent, you can be the first to know of real estate deals that are listed.
I am not a real estate agent, but many of my investing friends ARE. And I’m often jealous of their incredible tools that make them faster than I can be.
A licensed real estate agent can get into almost any property that is listed for sale with a special key and lockbox. In other words, you don’t have to wait for someone else to go see a property.
If the home is vacant, you can head over anytime, assuming the home has the special lockbox present. If the home is not vacant, you can set up a time to view it without having to fit into another agent’s schedule.
When a home is sold, the seller usually pays around 6 percent to the agents who made it happen. This fee is typically split 50-50 between the agent who listed the home and the agent who brought the buyer.
Therefore, as a real estate agent, when you buy a property, you can represent yourself and use that commission toward your down payment, repairs—or a trip to Jamaica.
Downfalls of Being a Real Estate Agent and an Investor
Wow! That sounds pretty awesome, doesn’t it? But before you run out to get your license, let me explain a few of the downsides.
Well, for starters, becoming an agent is not as easy as signing a document. You have to take an extensive class (depending on the state, the class could be up to 120 hours in length), and you must pass a difficult test, which may require long hours of studying.
This takes away time from actually investing in real estate!
Then, there is the cost. And once you become an agent, you’ll find yourself paying several thousand dollars in fees each year just to hold onto your license. Of course, if you’re making money as an agent, maybe this isn’t such a big deal.
The more annoying thing, to me, is the increase in paperwork. As an agent, you’ll find yourself responsible for additional paperwork and disclosures in every deal. If you are representing yourself, you can’t simply let your agent do all the heavy lifting—because you are the agent!
And finally, the reason I’m not an agent: I want to focus on my investing.
Look, I’m already busy enough, between raising a toddler, investing in real estate, trying to pretend I’m a surfer, and hosting the top real estate podcast on earth with over 60 million downloads. I don’t want to add one more possible distraction to my life.
When it comes to real estate, I’m going to let my agents do what they are really, really good at doing, and I’m going to focus on what I’m really good at doing. Plus, I don’t need the extra income.
If I had a job I hated and needed to replace that income quick, you know what, I’d probably become an agent. And I’d learn how to be a successful one. Maybe that’s you? But maybe not.
So should YOU get your license? Really, it’s a personal decision. I know that’s a lame answer, but the truth is there are plenty of examples of individuals who have had a license and found success and others who achieved greatness without it.
I know that was about as clear as mud. But hey, I tried.
What else can I tell you about being an agent-investor versus being strictly an investor?
Ask me in the comment section below.