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Posted over 9 years ago

Should I get Licensed as an Investor?

One of the biggest ongoing debates is whether to get a real estate license as someone who focuses primarily on investments. After all, we're investors, not agents, right? And can't you just use an agent to source and vet properties for you? Doesn't a license detract from the overall goal of acquiring properties?

I can tell you that I have gone back and forth over this issue many times over my real estate career. After discussions with some very high-level investors, I finally decided to get licensed. Upon hearing the case for why a license is beneficial for investors, I'm kicking myself for not getting it earlier. Here's why:

Flexibility

Yes there are more disclosures involved with being an agent, but time is of the essence, especially in this competitive investment environment. When you are using an agent, you are at the mercy of their schedule and their motivation. Let's get real: no one cares about your deals more than you do. Being able to pick up the phone and talk to listing agents directly is a huge advantage to get deals moving. 

Furthermore, as a principal, you can forego some of your commission to the listing agent. This added incentive is just another tool you can use to push deals through. Will your agent forego their commission to benefit your deal? Probably not. 

Commissions add up, especially at the high-end

While the flexibility afforded by a license is probably reason enough to get one as an investor, the benefits are magnified if you deal with high-end properties. Simply put, higher price= higher commissions. 

As an investor who raises capital for flips, having a decent-sized commission provides an addition margin of safety for the inevitable vagaries of specific deals. In order to keep, say, first trust deed investors happy, you have additional capital to disperse that wouldn't be there if you weren't licensed. Happy investors are long-term investors and your biggest cheerleaders. 

First step to being a Broker

The most admirable position to be in as an investor is to have the very best deals come to you. I know this first-hand from watching investors far more successful than me. As a Broker, you in effect have birddogs working non-stop for you, which is priceless. While you have to manage people, the benefits of having employees incentivized (perhaps in a favorable commission split) to work for you is something to consider. 

There's also something to be said about the unspoken cache involved with getting professional certification. If you are credible in what you do on the investment side, being a broker or licensee can only help. It is a sign that you take your profession seriously. 

If I were advising a young investor just starting out whether to get a license, I would say: just do it. Yes studying obscure statutes is annoying and you won't use most of what you learn on the exam, but if you have grand visions of owning a successful real estate business, getting a license is one of the invaluable tools that can help get you there. 

I'm curious how many of you investors are licensed, and if so, did you struggle with the decision as well? 



Comments (18)

  1. @Moses Kim   I can only speak for myself, but I have reaped the benefits of having my RE license off of referral fees alone. I think what I have learned in the classrooms have helped me in my analysis as well. That is not to say it is required. There are people WAY more successful than me that have done this without a license. I believe it is your drive that is most important, and sitting in a classroom or holding a piece of paper won't give you that.


    1. @Jon Huber As I sit in my office on a Sunday making calls, I got to say, I can't agree with you more!


  2. Great post!


    1. Thanks!


  3. Each state should be different, but in Nevada I disclose that I am not representing the client and am buying the property personally for a profit. I have the and/or assigns clause as well. 


  4. Moses,

    What are the extra disclosures involved if you are an agent?

    Thanks.


  5. This is exactly why I am working on mine- to diversify my income streams! Also to be able to rely on my time and flexibility instead of someone else's. I agree that there is something to be said about professionalism and credibility in gaining all the knowledge you can in your industry!


  6. That's an interesting question. Highly successful investors I know at the very least want someone on their team with a license. From a wholesaling standpoint, a license will allow you to refer clients who want full market value to other licensees for a fee. Those are leads you normally would be throwing away, so even as a wholesaler I think it's worth it. 

    From a buy and hold perspective, a license is definitely worth it. I recently divested of a lot of properties I bought at the bottom, and the commissions relative to the work that goes into listing the properties and writing contracts is definitely worth it. Hundreds of dollars per actual hour of work. If you have an idea of what an hour of your time is worth, I'm quite sure listing your own properties will exceed that hurdle. 


    1. Moses, when you said as a real estate agent trying to wholesale you could refer them to another licensee for a fee. Does that mean, you can represent them by listing their property or just by referring them to another agent. Couldn't you list their property if they didn't want to wholesale it. Thanks


      1. @Carlos Ortiz You can do either. If you want quick and easy revenue, you can refer the lead, and if it closes, get a referral fee (let's say 25%). Of course you can always list the property yourself. It all depends on the structure of your business and whether wholesaling is your main focus, or if you're ok having listings as well. You just need to determine what the best use of your time is based on your unique business model. 


  7. I like a lot of the things you said. I am new to this but I had a quick thought (which could be completely wrong). If I was primarily going to do buy and holds and wholesaling and am getting my leads from marketing, such as direct mail, then a lot of the pros you mentioned really dont apply correct? 


  8. I know in Nevada you can get a permit if you're out of state to represent buyers from another state. And you need to be licensed under a broker and get paid directly from a broker only. If you just want access to the MLS, you can probably get access within a week if you connect with real estate agents. 


  9. Great post, thanks. But are you beholden to the state where you get qualified  or can you practice nationally? Do you need to work with a broker to use the MLS or do you just pay an annual fee? Thanks!


  10. Great decision! Best of luck!


  11. This was very compelling!  I'm working on my license now!


  12. You should. Here's David Lichtenstein


  13. Great post!


    1. Thanks!