When new investors discover that I am a licensed real estate agent AND an investor, the usual question that follows is: “What are the benefits to obtaining a real estate license?” I then explain that there are both pros and cons to being a licensed agent AND an investor. In this article I will review both.
- Question: What do you get when you cross a used car salesman and a lawyer?
Answer: A real estate agent.
The stereotype is that agents are usually salesmen that will do anything for a commission. Therefore, when potential sellers learn that I am an agent there is an emotional wall that is immediately built. This division sometimes makes it difficult to proceed with a conversation about their property. Because of this, I have a reply that I use every time to overcome their objection.
- Another downside of maintaining a real estate license are the annual dues and fees. Every state has fees to renew the license. Additionally, costs for required continuing education, an MLS subscription, and dues to the various real estate boards can be in the thousands of dollars. Real estate investors without a license don’t have any expenses outside of normal business costs.
- A licensed real estate agent must use a state-approved real estate purchase contract. Therefore, with a license I am unable to draw up a contract with my own terms contained therein.
- With a real estate license and an active MLS subscription, properties can be found without the assistance of a third party. I can scour the MLS database for properties without having to wait for an agent. Similarly, I can submit offers directly to sellers or seller’s agents, again, without having to wait for an agent.
- Another positive is that any property I buy from the MLS to rehab or add to my portfolio will pay me a commission. Therefore, adding another possible stream for income.
- If, for some reason, the seller and I cannot come to terms for me to purchase the property, I can list the property on the MLS for the seller, thus earning a commission when the property is sold.
I have outlined a few of the pros and cons for having a real estate license AND being an investor. In the end, the decision to get a license is up to the individual or partnership. Final thought, it is not requisite for a person to have a real estate license in order to be an investor or even to make money in the real estate industry.