Should I get a realtor license?

Question

Been investing in RE for 12 years now (DC area). Started with a SFH renting bedrooms and now renting it to one family. Added 2 successive principal residences as I moved along. Nice portfolio because of low leverage but appreciation on former own homes is elusive (because bought at retail prices and nearby building frenzy). Eager to restructure the portfolio through 1031. My concern is transaction costs: if i were to sell all three and buy equivalent value, we're looking at 6% realtor commission each way.

Were I a realtor, I could be listing agent for my properties and save say 2% (listing commission 3% -half of the 6%- minus the broker's cut of about 1%) and possibly more if I were to work with a buyer not using another agent. On a $1 million portfolio, we're looking at anywhere between $20k and $120k (6% on the sale and 6% on the purchase). Nice chunk of change, not to mention I could possibly do regular deals for clients as well.

Does that make any sense? What's y'all's opinion? :)

TIA

Russell Brazil · Answer

$5k per year or so to just to maintain your license in the DC area. You are not keeping the full side of your commission. Its split with your brokerage. E&O insurance doesnt cover you when you are a principal to the transaction, so a lot of agents dont even sell their own homes, myself included. Just because you have a license, doesnt mean you actually know what you are doing.

Jacques Herve · Answer

Thanks KellyAnn, you make great points. I should have mentioned I currently split my time between managing my rentals and a side hustle in the car business. The latter occupies me the most right now. That proportion would be reversed if I went the realtor license route. Should the money be there, I could devote full time to the RE activity. I certainly have a realistic view of the latter. Not expecting a get rich quick outcome. Just concerned about saving on the transaction costs of restructuring my RE portfolio.

KerryAnn Fuller Rainey · Answer

Hi Jacques, are you a full-time investor, or do you have a full-time job and do the investing on the side? (Either way, well done!) One thing to keep in mind is the actual work that is involved in buying and selling real estate. It seems simplistic on the outside, but once in the trenches there is a lot involved and can be very time consuming. It is one thing to look at the numbers to see where you can cut costs, etc., and it is another to consider the time and money invested into getting your license, maintaining it, marketing, showings, negotiating, inspections, and so on, that actually get the properties listed, marketed properly, and sold. Can you do it? Absolutely! Reading your comment above there's no doubt you can make that happen.

The questions you really need to ask yourself is how does this lines up with your long-term goals, the value of your time, and if you truly want to invest that much time and money into becoming a real estate agent, versus what else you could be doing instead. If you have a full-time job, you might consider the cost of paying an agent part of your costs for doing business (having a professional that can give full-time attention to buying and selling your properties.) Kind of like paying someone to clean your home... can you do it yourself? Sure, but wouldn't it be a better investment of time and money to hire someone that is good and efficient at it instead of investing your time and sweat equity into it, when the professional is probably going to do a better job anyways all while you can spend that time on something else?  If RE investing IS your full-time job, and do have the time to spend buying and selling your own properties, then go for it! You have nothing to lose. You'll find that you absolutely love it, and it will fit perfectly into your business model, or you will absolutely hate it! But you won't know until you try. Good luck! :)

Jacques Herve · Answer

Thanks for the input. $5k cost, $20k plus savings, works for me.

E&O remark important, will look into it.

"Knowing what I'm doing" Restructuring will occur. I'm thinking (naively?) that  having a license won't detract from what I know.

David Maradiaga · Answer

There's Pros and Cons. I would in your situation, it would worth the effort to get the license. Hope it works out for you. Shoot me a DM if you ever need anything, I'm always glad to help.

Should I get a realtor license?

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