FAQ Forum Question: Should I Get My Real Estate License?

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FAQ Forum Question: Should I Get My Real Estate License?

Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

Hello BiggerPocketeers!

In an effort to clean up the forums, we're creating an FAQ Forum, where the most-asked questions will be prominently featured, along with some really great answers.

I need your help!

Please take a moment to give me your very best answer to the question: Should I get my real estate license? Other variations of this question are What are the pros and cons of getting my license? and Do I need a license to invest in real estate?

Once I have some really great answers to this question, I will create a new thread in the new FAQ forum, and through the magic of computers, make it appear as though these amazing answers all came in order. So please give me your best answers to this very frequently asked question!

Thank you!

***Please note any posts offering agent services will be removed. This thread is to share advice and opinions on getting a real estate license for the purposes of investing.***

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
9y

5+ transactions per year, get your own license. 4 or less, its not worth the cost, time or liability.

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  • Damion Byros
    Mckinney, TX · Member since 2015 · 86 posts · 11 votes
    9y
    You don't need lic to invest although getting will give access to MLS and would allow you to purchase property right through the MLS and interact with other agents but you'd have to pay dues to the boards such as REALTOR DUES and other things monthly or yearly ... another thing too is when you get lic and do deals you will get the the 3 percent commission that the agent rep u would normally make
    2Reply
  • William BrownPro Member
    Wholesaler · Los Angeles, CA · Member since 2016 · 276 posts · 181 votes
    9y
    In regards to getting your license, consider the following: Pros: 1.) Access to MLS 1a.) You don't need an agent to list your flipped properties on the MLS. 1b.) You don't need an agent to let you into other houses for sale in your neighborhood. For example, if you wanted to gauge your comp's competition from the inside, you could call the listing agent and let yourself in. 1c.) There are great deals that get put up on the MLS that are scooped up quickly, if you don't have access you literally don't have a chance. 2.) Credibility 2a.) Attaining your license will grant you credibility and put you in preference over other free-lance/unlicensed investors. People love to see qualifications. 2b.) You can more actively and comfortably engage with other agents, growing your network and your sphere of influence. 3.) You can act as your own agent in deals! 3a.) In terms of efficiency, this is critical. Most agents (at least the good ones) are always busy and usually you aren't a reason for them to drop what they are doing and come close a deal right away. If you can represent yourself, if you will, you can save a lot of time, and a lot of what can seem like nagging and pressure. Cons: 1.) It costs money 1a.) Getting a license can cost thousands of dollars, BUT this industry is all about your ROI. How much will you save/gain from commissions in the long term if you don't have to take 3% or more out of your profits with every deal? 2.) It takes time 1b.)The class can take 40-80 hours. However, the class will consist of knowledge that is either directly or near relevant to specifically what you plan on going into. Besides being able to check the box and receive your license after you take the test, the class will contain loads of applicable knowledge and skills that you can carry with you and build upon your entire career. These are just my two cents gained from listening to podcasts and reading books and blogs. I have no physical experience with the topic and am not providing any legal advice, simply offering my views on the issue. I would love to hear what others have to say as well.
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  • Dan MackinBusiness Member
    Real Estate Agent · Erie, CO · Member since 2014 · 1k+ posts · 512 votes
    9y
    • Pros - 
    • Making your own offers. You don't have to wait for your agent and can only blame yourself if you lose :-)
    • Access to MLS. Not as important as it used to be due to companies like Redfin, but it's still helpful for further data and sorting.
    • More money in your pocket on deals you do.
    • Cons-
    • Many more phone calls from BS marketing firms trying to sell you something.
    • More regulation. When you don't have a license you can go off book more. Once you're licensed there is a regulatory body watching you.
    • Fees. These can be pretty low if you play it right though.
    • Time. Keeping your license active means you have requirements to do so. This can cut into your schedule depending on what they are.
    • You may not be nearly as good at negotiating as you think ;-)
    720-466-3378
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  • Account Closed
    Attorney · Richmond, VA · Member since 2015 · 17 posts · 33 votes
    9y

    There are many pros, but two cons that seem most prominent in my mind of the bat: 1) getting a license doesn't make you an expert out of the gate, even with MLS - an experienced real estate agent can guide you into an emerging market that you might not know about vs. an obvious, saturated market, for example, or explain why a comp only .2 miles away is actually no good for your prospective purchase, among other things 2) if any litigation were to arise in your r.e. business, having a license will almost undoubtedly mean you are held to a higher standard, probably with respect to any aspect of the deal.

    2Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    9y

    It's a very little thing, but every mortgage place I've worked at gives a little extra scrutiny to the transaction when the buyer or seller is themselves acting as their own agent. I've never seen it be a deal-killer, but in theory it could be the straw that broke the camel's back if it were a super marginal/borderline transaction, such as if there's already several other things already going on that are setting alarm bells off in the underwriter's head.

    It's similar to the extra scrutiny given to non-arms length transactions (by itself not a deal-breaker at all, but if there's already a bunch of other funky stuff going on that this is piled on top of...), but not as high a level of scrutiny as will be faced by someone working for their family that suddenly has their income double right before they apply for a mortgage.

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    9y

    5+ transactions per year, get your own license. 4 or less, its not worth the cost, time or liability.

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  • James MasottiPro Member
    Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
    9y

    Some great advice to consider so far

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    0Reply
  • Michael Ristom
    Fort Walton Beach, FL · Member since 2017 · 23 posts · 9 votes
    9y

    I asked this question in the form a few days ago and unfortunately didn't get any answers so this works out great! Here's the question: Since I'm an active duty military member I don't have a lot of free time to take off work. I'm new to real estate investment (closing on my 3 property in 5 years) and I'm going to get my license, I just can decide whether I should sit down in a classroom for 4-5 days or take the course online. If I do go the online route, does anyone have any recommendations?

    2Reply
  • Account Closed
    Ashburn, VA · Member since 2016 · 14 posts · 5 votes
    9y

    @Michael Ristom as a military veteran myself, i understand the demands of work commitments so it would make sense to consider the online course. Of course, this all depends on one's learning style. If a classroom setting is more suitable, you'd have to look at how best to work class attendance into your military schedule. Do what is best suited for you and congratulations on your 3rd home purchase.

    0Reply
  • Steve Theobald
    Real Estate Broker · Salt Lake City, UT · Member since 2015 · 145 posts · 150 votes
    9y

    My post on this very topic was a Bigger Pockets "Editor's Pick" for a few days. My contribution is at the link below.

    https://www.biggerpockets.com/blogs/8070/53499-squ...

    1Reply
  • Kent Chu
    Hayward, CA · Member since 2016 · 13 posts · 6 votes
    9y
    How come no body is mentioning the brokers cut on your 3%? Most brokers will take 25-40% of your profits as an agent.
    0Reply
  • Thomas Hickey
    Real Estate Investor · Peabody, MA · Member since 2013 · 304 posts · 91 votes
    9y
    What kind of increased regulations/ scrutiny are we talking about if you get an agents license?
    1Reply
  • Benjamin Small
    Rental Property Investor · Jacksonville, FL · Member since 2016 · 20 posts · 5 votes
    9y

    I am considering getting my real estate license more for the knowledge value than anything else.

    What are the thoughts on going through the training as an exercise in education and familiarizing yourself to what the agents and brokers are required to know as part of the licensing process? I would think that doing deals and coming to negotiations with a little more knowledge than I have had in the past could be very beneficial.
    3Reply
  • James Andrews
    Real Estate Investor · Charlotte, NC · Member since 2015 · 23 posts · 3 votes
    9y

    Whether you should get your license or not is totally dependent upon whether you want to list or sell property for other people. If you want to conduct transactions for your self, you do not need to. I am a licensed broker. The advantages I have are that I have MLS access without having to leverage anyone else and I can buy, sell and handle transactions legally without paying anyone else. Access to information and property are the major advantages, it allows me to also keep more of my funds in a transaction.

    1Reply
  • Kenneth Reimer
    Rental Property Investor · Sacramento, CA · Member since 2016 · 267 posts · 214 votes
    9y

    To invest in real estate, you do not need your real estate license. However, the more important question is whether or not it is most beneficial to get your real estate license and represent yourself. 

    1. Finding Deals- The argument in favor of obtaining your real estate license is most often the access to the MLS. If you are looking to get into SFR investing, MLS access may be important. However, in a competitive market where deals are transacted much more quickly (and often times off-market), experienced agents/brokers with wide, deep-rooted networks, that facilitate transactions for a living will more often than not have their eyes on most properties before someone skimming the MLS will. The value of acquiring a good deal is many times worth much more than the commission paid. This lessens the importance of having MLS access, although it is still a nice plus. If you are looking to get into commercial real estate, the point made previously is even more prevalent. Agents/brokers speak to owners for years before they decide to sell, and a hot market tightens the timeline between list and close even more. Great deals are snatched up very quickly, and an experienced agent can be the key component of getting the deal or not. However, this is not to say that an experienced licensee cannot do the same thing. Whether or not the licensee should spend time hunting deals brings me to my next point.

    2. The value of your time- The value of your time is arguably the most important point in the licensing debate. Take an investor with construction experience, for example. This investor's time is MUCH more effective in overseeing the rehabilitation process of his or her investments. The time spent to hunt his or her own deals (and save the money on paying a commission) is not worth taking his focus away from his/her money-making skill, construction oversight. This is the basic economic principle of comparative advantage. Our whole country operates in specialization, don't reinvent the wheel.

    When considering obtaining a license or not, one key question needs to be answered: what is my competitive advantage? A new investor should know exactly how they are going to bring value to the marketplace. Deciding whether or not you need a license to do this activity should be simple. Too many investors get into real estate trying to be the jack of all trades, and end up spending far too much time on activities that they are not good at, and do not make money doing.

    Find your competitive advantage.

    Pick your market.

    Dominate.

    7Reply
  • Jeff Filali
    Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    I considered getting my license, but this blog post kind of changed my mind:

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Jeff Filali  that blog was written by the Dingo he is from Downunder what does he know  .. plus he owns a real estate company... LOL

    All I can say is I would not be were I am today had I not had my license.. I have made so much money over the years with it... It has opened so many doors gotten me into high level meetings and the like.

    If you make a lot of money in your day job and just want to buy rentals.. that's fine.. but if you going to flip houses and such.. its mandatory in my mind.

    As to the higher standard.. whats wrong with that.. .. I have been licensed since 1975 and have pretty much spent my career buying distressed or undervalued asset.. one simple disclosure is all you need...  ( I am buying this for profit or loss and I am a principal in the transaction and a licensed agent in this state)  simple and never once had a seller balk at it.

    but any way each his own.... If you can actually make it as an agent ( many can't of course) and your in a good market ... income can be spectacular .. my wife sold 14 million last year.. do the math at 3%  a couple she doubled ended.. and she pays a flat fee of 12k a year plus 1,500 for board etc..

    what kind of business has a flat overhead of 15k a year with that kind of income potential.. ?

    I had a few referral fee's LOL... but my office does not charge me I get to hang my license for free its the star power I bring... :)  Plus they want my wife.. her signs are all over the place.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Jeff Filali  Plus Jeff you will love this.. She spends ZERO on marketing her business is 100% referral based at this point in her career .. she only takes on a client if its a referral..

    compare that to top wholesalers who probably spend 10k a month minimum on marketing and all the dud's they run into and time waisters.

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  • Jeff Filali
    Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Jay Hinrichs Thanks!!  I still haven't totally ruled it out, just weighing the options and ran across a lot of different points of view.  Don't have an issue with the higher standards as I spent several years in Life & Health Insurance.  Not sure if I'd use it enough yet to make it worth the time or money. 

    0Reply
  • Ujwal Velagapudi
    Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
    9y

    I got my license 2 years after investing. I had done only off market deals before, but now that I have my license I see that I am able to go and see a property the day it's been listed if I really wanted to. 

    I definitely do not think it's necessary to have a license to invest in real estate, but I think the pros outweigh the cons. For me, one of the biggest things I got my license was for is the education, knowledge it provided me with. The class was simple to comprehend since I did have a bit of experience already, but there was so much that I did not know, especially the legal aspect. There are many laws and regulations in real estate, which always makes you more equipped when you know what to do. 

    1Reply
  • Ron Dayley
    Clarksville, TN · Member since 2016 · 238 posts · 96 votes
    9y
    Cons that are getting ignored are; 1. You don't get the full 3% commission. Most agencies takes 40-30% out of your 3%. 2. You have to cary E&O insurance. 3. You have to "hang" your license at an agency. A) agency will charge you fees. B) you will be expected to make them money so you must spend a lot of time working on clients and their deals. 4. You must attend continuing education classes. 5. You are expected to attend company and your local and state commission meetings from time to time which eats up your time. 6. There are Sentriloc, state fees, local realtor association and national realtor association fees. 5. Fees to access MLS. If you aren't planning to work as a realtor, don't bother getting a license, just find a good one and work closely with them.
    3Reply
  • Rebecca Rasmussen
    Littleton, CO · Member since 2017 · 1 post · 1 vote
    9y
    Originally posted by @Kent Chu:

    How come no body is mentioning the brokers cut on your 3%? Most brokers will take 25-40% of your profits as an agent.

    Explore more options for hanging your real estate license! Especially if the main intent is to have the license to do your own deals. My employing broker takes 30% (15% for the employing broker, 15% for the mentor) on the first four transactions only. Ever. Not per month. Not per year. Ever. No floor time, no required quotas, no required meetings, and I get another set of eyes on every transaction looking for costly mistakes. Add on a $290/transaction fee and very low office fees of $25/month and I'm still way ahead in the "cost of having a license" side of things. Flip side: not much structure (but I love that part too.) Sure beats having to earn a quota each year to re-earn a better commission split and/or spending $1,000 or more a month in desk fees alone. 

    Back to the "should I get my real estate license" question: Some great answers have come across so far! Personally, I have some small background in architecture and construction, have my RE license (just now starting to do this full-time), am pursuing an appraisal license now, eventually will learn more about inspecting, and while I'm not yet an investor, hubby and I do plan to do so down the road once the other aspects bear fruit in the form of funds for same. 

    All that to say: all the experience you can gather, all the information you can learn, well, it certainly can't hurt. Hmmm, unless you opt for the learn and not do aspect. At some point, one has to get out there and DO! 

    But, make sure it's cost-effective for you to carry that license -- both monetarily and time-wise. If you're actively investing, you probably already know some of what they teach in RE school (rules, regs, etc.) and some (or a lot) of what RE brokers learn on the job (forms, comps, etc.) 

    Beyond that, it's the same in any field: years of experience and willingness to learn trumps all. One can do that with or without an RE license. 

    So ask yourself: "what it is it I want to get out of having an RE license" and go from there. :0)

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Ron Dayley    you did not mention mandatory floor time  :) 

    really everything you point out is so 1980.. simply not how the industry works today..

    are their shops that work like that certainly are their boutique shops that require NON of what state absolutely... other than continuing ed... MLS fee's there are brokers that charge as little as 199 per deal... not big cuts ... the bigger companies may but like anything just shop around..

    However if one is simply going to buy rentals then yes no license require if one is going to flip then I think people are totally foolish not to have it.

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  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    Many people equate getting a license and becoming a REALTOR as the same thing. They are quite different and each can be used to an advantage. For instance you can get your license (around me at least for $300-400 dollars then $50 every 2 years). This allows you to find a property and put signs up and ads in the paper and show people around. This also covers your hind end when working like a wholesaler would, except you don't have to get equitable interest, you are allowed to actually market the property to your list as well as anyone in public (as opposed to marketing the contract). If it doesn't sell you didn't lock them up. You can buy properties yourself and keep the buyers commission minus what your brokerage fees are. You however do not get MLS access just for that (at least in my area). If you buy 1 property a year then you most likely make up for this cost.

    In order to get the MLS access people discuss (at least in my area), you have to join the board which around me is about $1500 a year. Then you have MLS access and have more strict ethics rules to follow. Which may or may not be worth it for that price a year (how much are you buying and selling). If you are doing 4 + properties a year then it will most likely be worth it. If not then you may be better suited not to become a REALTOR.

    Best of luck!

    5Reply
  • Ron Dayley
    Clarksville, TN · Member since 2016 · 238 posts · 96 votes
    9y

    @Jay Hinrichs That is true but in our little town this is the norm and since this was about getting a license these would be new agents and as such, boutique agency typically don't provide a lot of training.  At least that is the case here. 

    0Reply
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