Should you get a real estate license as an investor? Let’s look over the benefits of having a license and how to get the same info without it.
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Market Data Access
Every real estate agent can join the local Multiple Listing Service, which houses most of the real estate data for your area. Everything you could ever want to know about the market can be found and easily processed through their website.
Here are some questions the MLS can answer for you:
- How many houses sold in the last year that meet my criteria for investing? Don’t waste time searching for something that doesn’t exist.
- What was the asking vs. sales price for properties similar to the properties you want to invest in? This will help you save money when putting in an offer.
- What are the seasonal trends in prices for a particular area or type of property? In Portland we can have fluctuations of $30-$50 a square foot from winter to summer in areas with good school districts. Parents don’t want to move their kids in the middle of the school year.
- How much do the owners owe on the house? If you plan on putting in a low offer, you can pull records that will give you a good idea what they owe on the house and if they can even afford to take less.
- How many days can you expect properties to be on the market? Do you need to put in an offer right away or do you have time?
- Who owns a property and what is their address if they don’t currently live there? You can send them a letter and see if they want to sell.
Some third party software, only available to real estate agents, will tell you the number of single and married couples in an area, average income, industries most people work in, number of kids and kid-less families, school ratings, voting preferences, and comparable properties recently sold by simply typing in an address and hitting enter. You can be a neighborhood expert in a few seconds and know who your future renters will be.
The MLS has private notes that include property defects and costs/income for investment properties.
You can set up a search for properties by financing type. If the owners are willing to finance the property (the owners are the bank), you will only know that by checking the MLS. Buying owner financed properties is a great way to get into investing if you can’t currently get a traditional loan.
Most online property websites (Zillow, Trulia, etc.) only have a handful of parameters for your search. The MLS gives you a few hundred search criteria so you can be very specific.
Months of inventory can be calculated for a particular type of property in a given area. In general 3-6 months of inventory will mean single digit appreciation for the next 6 to 12 months. If you have less than 3 months, then you can expect double digit appreciation. Greater than 6 months is a buyer’s market where you can get great deals. It’s a way of looking at supply and demand and predicting the near future.
Access to Properties
With a real estate license and a membership to the local MLS, you can get into any property you want. If properties are going quickly, you can go see it that day and beat the rush.
Know About Properties First
Most listing agreements are signed 2-4 weeks before the property hits the market. It’s expensive and time consuming to market a property, so most realtors tell their friends before it hits the market so they can sell it before spending a lot of time and money marketing. You want to be in that group.
Be More Knowledgeable
Knowledge is everything in investing. Did you know you can write escalator clauses into contracts? “Buyer to pay $1,000 more than the highest offer up to a maximum sales price of $300,000 with proof of highest offer.” There are lots of tricks of the trade that can help you save time and money.
Related: Is a Real Estate License Necessary?
Buying Your Own Property
Most real estate agencies will allow you to buy one property a year for yourself and keep all of the commission. If you were to receive a 2.5% buyer’s agent commission and purchase a $300,000 property, you would have made $7,500.
Costs of Being an Agent
Nothing in life is free. You can expect to pay about $2,000 to get all of your school and initial fees paid. You’ll also need to pay for insurance and membership fees (required), which total $100-$120 a month.
What do you think: Is it worth getting your license or can you get a good real estate agent to do all of this for you?
Leave a comment below!