Advantages of obtaining RE License?

14 Replies

Hey guys, I'm pretty new to BP & learning about REI. I'm curious if, when starting out, you find it helpful to get a Real Estate License? Assuming this answer is situational upon which route someone decides to take, I can tell you that I've been interested in SF holds, BRRR, and Duplex/Triplex/Quads.

Any advice around this topic would be very helpful! 

@Luke Grieshop ,

like you mentioned it depends on situation. Just FYI, getting/keeping RE license is expensive. IDK about AZ, but in NC it costs min of $2k to maintain your license if you want to get access to MLS. And the RE classes are time consuming and a lot of cramming.....

That being said having RE license is certainly helpful. For me, I got the license, because I want to be able to look at the properties in MLS without waiting on agents to reply back, because every minutes count in my market.

Also, since I am planning to acquire 2+ properties a year, it would make sense for me to get license, since the commission as a buyer agent pays more than enough for that $2k RE license fee/yr. 

I am a licensed agent.  I use it for comping and to list my own properties because it makes the negotiation process quick and easy. 

@Luke Grieshop

I'm in the midst of getting my license now and my primary objective is to save on commissions (which can turn a meh deal into a do-able one) and have access to properties without having to wait for an agent. As Roy had stated, becoming a realtor can be quite expensive. I only plan to stay as an agent to begin with and work my way up from there as I still have a 9-5 and do not plan to quit that anytime soon and spending the money to be a realtor isn't worth it to me just yet.

Thanks for the input, all! Really helpful

@Luke Grieshop - Pros:
- You can visit any property you want at any time.
- You can research detailed data on properties from within the MLS (its sales $$ history, old photos/descriptions, what else the owner owns, what the neighborhood properties are selling for, etc.)
- You can negotiate your own deals directly with the other agent vs losing information during the Buyer agent agent seller telephone.
- You pay yourself the commission when buying, selling and renting
- As a RE agent, you can get IRS active-passive tax breaks for greater than 750 hours a year in the business
- you may do deals with others that grow your experience.
Cons:
- You pay $1000-2000/year in MLS access, licensing fees, NAR Realtor fees, education, errors insurance, broker fees
- You can be fined thousands for saying something illegal like no kids on your self- rental advertisement.
- You cannot advertise $500 for a referrals like some wholesaler / cash for homes people do
- You have to disclose you’re an agent in casual conversations that lead to disclosure of real estate motivations
- If you’re part time or hardly doing any agent activities, you are likely worse at paperwork and negotiating than a full time agent. (You didn’t have the experience.)
- If not full time, you may not want to list your own property. Do you want to handle prof photos, open houses, staging, appraisal negotiations?
- You don’t get the benefits / insights of the full time real estate professional you would have hired. (Another pair of eyes to tell you it is or isn’t a good deal).

I believe the license is a big bonus. I have done several deals where the sellers felt more comfortable dealing with a licensee. Also you have other advantages. Can't buy it cheap enough to make sense? List it! 

@Luke Grieshop I got my license three years ago, and I am so glad I did. I did it to gain access to properties whenever I want (which is awesome!) and to be able to get commissions on deals. I ended up becoming an active real estate agent, and began representing other investors as well. This has become the primary way I use the license even though that wasn't my intention starting out. I also recently was able to purchase a 9 unit apartment building in Berwyn (right next to where I live), and I received over a 10k commission as a credit on the settlement statement! That is a nice side benefit for sure!

If I were you I would definitely pursue the license provided you can afford to carry the license for a while as you figure out what to do with it. 

Wow, so much great input. Thank you all! When you guys mention "paying yourself the commission" or "receiving a 10K commission", can you break down how that works when you're the agent? It's my understanding that, typically the selling agent takes a commission of, say, 6% and splits that commission with the buyer agent (if one is involved). In your cases, as agents, are you saying there are simply no fees and you're saving that money? @John Warren @Natalie Schanne @John Thedford

Also, for MLS access, I know a few realtors - couldn't they syndicate the listings my way for an indefinite period? Or are there restrictions on that?

@Luke Grieshop - So it depends on the property, but on average properties offer a 5-6% commission of the gross sale price. Sometimes properties are listed with a self-service, fixed-price agency so they might pay $1000 (to list) + 2-3% (buyer's side). So on a $100,000 house, on a 6% deal, the agent(s) get paid $6000. If the buyer is represented by you, you get paid half of the total or 3% or $3,000 in this example. Of that $3,000, the commission is split according to your contractor agreement with your brokerage. Keller Williams is 64% you / 30% local franchise / 6% corporate franchise. Berkshire Hathaway HomeServices which has few fees might pay you 50% of 94% (6% franchise fee off the top). So, of the $100,000 deal, you can expect to take home $1920 "paying yourself the commission" instead of hiring a buyer's agent. As I said before, there are all kinds of ongoing fees that will drive this number back down close to zero or negative. You have to make the right decision for yourself.

As for MLS access, the property listings you receive through a real estate agent in an email or in the website portal are exactly what's available in the market. So you can do a reasonable amount of active-listing due diligence with little effort. However, this is like the training wheels version of the database. There are lots of fields that you can't easily access through that portal. I can click on a property and within 10 seconds, see every time it was ever listed, those prices, photos, descriptions, etc. I can see mortgage data, property taxes, and flood zone info. You can find most of this public information for free but it takes more work. I have used Zillow's free data to quickly comp a property with its sold listings tab.

Originally posted by @Luke Grieshop :

Hey guys, I'm pretty new to BP & learning about REI. I'm curious if, when starting out, you find it helpful to get a Real Estate License? Assuming this answer is situational upon which route someone decides to take, I can tell you that I've been interested in SF holds, BRRR, and Duplex/Triplex/Quads.

Any advice around this topic would be very helpful! 

Sounds like all the major points have been hit. My only other value add here is to mention that having your license can create other job opportunities that you might not have previously considered. For example, it's a requirement in most states that you need to have a RE License to be able to be a property manager. I pursued my license to go into property management full time here in CT, but have helped out of state buyers from Seattle to New York purchase income producing assets. I then offer my management services, if they are interested. It often works out as a win for everyone because by the time closing rolls around, buyers have developed a sense of trust in your work.

I don’t want to hijack this thread but I have questions around doing this in CT as well. As I understand it, in CT, a broker has to hold your license and you have to work under them for a few years. I don’t want to do that. I only want to use as others have noted; essentially for my own use. What am I missing about the process?

@Luke Grieshop

Tons of benefits to getting a real estate license, here a couple main ones:

1) Save on commissions on both the buy and sell end if you're looking to use a realtor

2) Legitimacy when you network

3) MLS access for easy comps

4) See a house with a sign? Can contact agent and get an electronic lock box code sent to your phone usually and walk right in rather than wait for someone

5) If you ever want to put in lots of lowball offers, this is the only way. Most agents wouldn't want to waste time helping an investor do that since it's low probability.

6) Hard to find a good investor-oriented agent. If they are, they might pick up the best deals for themselves and you get the leftovers

7) My fav: Expanding your real estate toolkit - rather than just wholesale properties when someone answers your marketing, you can now service homeowners with quality homes. That means you'll offer multiple solutions to sellers rather than only being able to buy from distressed sellers. Being an agent means you can now earn a sweet commission from people who have the resources to fully renovate their house to sell for top dollar

Originally posted by @Cathie Kovacs :

I don’t want to hijack this thread but I have questions around doing this in CT as well. As I understand it, in CT, a broker has to hold your license and you have to work under them for a few years. I don’t want to do that. I only want to use as others have noted; essentially for my own use. What am I missing about the process?

Hi Cathie,
That is the scenario in most states. I believe one way to "skirt" this is by having an in house attorney, as they can serve as your broker of record for closings. 

The other option is to work with a broker who has agents that are already doing what you want to do. PM me and I can share a contact that does this in the greater Hartford area. 

Filipe

Really appreciate all of you guys participating in this thread and helping me out! Decision is yet to be made, but I'll be sure to take all of this advice into consideration. Thank you all 

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