{"id":93383,"date":"2020-04-29T09:00:00","date_gmt":"2020-04-29T15:00:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=93383"},"modified":"2023-03-20T13:54:03","modified_gmt":"2023-03-20T19:54:03","slug":"dont-get-real-estate-license","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/dont-get-real-estate-license","title":{"rendered":"Do You Need a Real Estate License to Flip Houses? Nope. Here’s Why"},"content":{"rendered":"

Having a real estate license isn’t as necessary as many people think it to be. In fact, look at the market and you’ll find thousands of successful real estate investors who don’t have a license. But if you search online, nine out of ten sites will tell you to take that test.<\/p>\n

They\u2019re wrong\u2014especially for investors. Do you need a real estate license to flip houses? What about wholesale, or for buy-and-hold investing? Absolutely not. If you haven\u2019t applied for a license or are wondering whether it\u2019s really that important, here are a few reasons to look the other way.<\/p>\n

Related<\/strong><\/em>: Quit Your Day Job and Find Financial Freedom: Here\u2019s How to Become a Real Estate Investor (Full-Time!)<\/em><\/a><\/p>\n

Real Estate Is a Full-Time Job<\/h2>\n

Do you want to be an investor? Or do you want to be a real estate agent? Because if you get a real estate license, you pretty much have a job\u2014selling other people\u2019s properties. That will be all you do. You\u2019ll prospect for someone who wants to list their house. You\u2019ll list their house. Then you\u2019ll work with buyers and lenders to sell their house\u2014and then you\u2019ll make a commission.<\/p>\n

You\u2019ll also have to abide by someone else\u2019s rules and regulations\u2014most likely, the broker. If you want to be a real estate agent<\/a>, none of these restrictions cause trouble. But savvy investors will likely find them cumbersome.<\/p>\n

Brokerage Restrictions<\/h2>\n

Just because you have a real estate license doesn\u2019t mean you can simply do every real estate deal by yourself. Many states require you to work under a brokerage firm or broker until you earn your brokerage license.<\/p>\n

Unlicensed, you can buy property from any brokerage. Things aren\u2019t so simple with a license: You must inform your broker before purchase.<\/p>\n

Laws and regulations exist, and they stink. You aren\u2019t free to conduct business in the way that you want to conduct business. There will be restrictions to what you can and cannot do.<\/p>\n

On top of that, every brokerage office has its own set of rules. Some require training hours; others mandate calling potential clients or holding open houses. Brokers also charge real estate agents a fee, depending on their organization and setup.<\/p>\n

Commissions Savings Aren\u2019t that Great<\/h2>\n

People who are focused on investing\u2014serious investors like fix-and-flippers with the goal to flip 10 or 12 houses a year or rental investors who are trying to have 10, 20, or 50 rentals\u2014might think they\u2019d save so much on commissions if only they had their license. That\u2019s not true.<\/p>\n

Let\u2019s look at a standard six percent commission. In a transaction, three percent of the commission is for the agent who represents the seller and three percent is for the agent who represents the buyer. So when you calculate how much you might save as an investor, you only save on one side of the transaction. Nothing to sniff at, sure\u2014but does it really balance the other expenses?<\/p>\n

Related<\/strong>: The Investor\u2019s Guide to the BRRRR Method: Buy, Rehab, Rent, Refinance, and Repeat<\/a><\/em><\/p>\n

Disclosure Problems<\/h2>\n

A real estate license comes with added responsibilities. First, you\u2019ll need to disclose to your buyers or sellers that you are a licensed agent\u2014and many investor real estate agents have found, to their dismay, that this negatively impacts their business and personal portfolio growth.<\/p>\n

Licensing Isn\u2019t Easy<\/h2>\n

You can\u2019t just call the state licensing commission and have them add you to a list. The process is lengthy and time consuming. In fact, if we break it down, you would need to put in about a 100 hours of coursework and plenty of studying before you take the exam\u2014which only qualifies you for a license. Once you are pre-licensed, your brokerage may request you take additional courses, too.<\/p>\n

Expensive Licensing Process<\/h2>\n

The process requires a lot of money, too\u2014from prep courses to exam fees. Depending on the state, you\u2019ll spend four weeks to three months listening to someone preach about how you should be a good salesman rather than teaching you anything about real estate. You\u2019re going to spend about three months\u2014and probably around $1,500 to $2,000\u2014to get your real estate license.<\/p>\n

And once you\u2019re licensed, the brokerage will require more of your time and money. Additional costs also include license maintenance fees, board memberships, multiple listing service (MLS) fees and subscriptions, ongoing training, errors and omissions insurance, internet data exchange (IDX) subscriptions, and local and real estate agent board fees.<\/p>\n

Some may say the money spent is worth it because you build your agent network\u2014but that’s just an excuse. Investors automatically mingle. The best return on investment I’ve ever had is buying folks a $3 coffee.<\/p>\n