Would Obtaining Your Real Estate License Benefit You?

At some time, all creative investors wonder if they ought to get a real estate license. It’s a very worthy question and regrettably, this subject is hardly ever talked about in the creative investing community. For instance, you might hear myths about how becoming a licensed real estate agent limits an inventive investor’s ability to do deals. In other cases, the substantial time and monetary expenses necessary to acquire and retain a license are not talked about. My hope in writing this is to be very upfront and honest straight so you can answer the question of whether or not to get a real estate license for yourself.

Even though eliminating one’s bias can create superior authorship, it can be challenging to be entirely objective. Hence, I’ll reveal right up front that I am a licensed real estate agent and have been for several years. I love being licensed. I consider it a license to print money. So now you know my bias quite frankly ☺

Nonetheless I’m not the only one. Just about every tremendously prosperous creative real estate investor I know is licensed. There are numerous reasons for this, which you’ll learn shortly. Typically, the so-called investing experts who aren’t licensed and teach that a creative investor shouldn’t get their real estate license, are usually not actively creatively investing. Instead, they are too busy working on their next ad or local seminar enterprise.

The Restrictive Myth

The common myth whirling around creative investing loops is that becoming licensed restricts one’s ability to do creative deals. Although it will hold you to a higher standard in your business practices, from my experiences, having a license has not limited any legitimate creative transactions. Plus, being held to a greater standard makes for worthy business. As we all know, hucksters don’t last while noble business professionals do. But could there be occasions where having a license did limit a resourceful deal? I’d love to know! Please comment at the end and share any circumstances where a real estate license constrained a creative deal.

When You Should Acquire Your License (and When You Shouldn’t)?

Here are the pros and cons of attainment your real estate license.

PROs to Getting Your License

1. More Money:

For active real estate investors, having your real estate license can be a “license to print money.” There is a lot of revenue in legally being able to accumulate a commission on the sale of a real property. Even though the investor community at large has a habit of turning up their noses at real estate agents, make no error, there are some agents in your region that are raking in $1M or more each year. Are you making that sort of annual income from your real estate undertakings? Precisely.
Our studies have revealed that less than 5% of properties for sale in the marketplace fit for a creative investor. What transpires of the other 95%? Nearly all will ultimately go through a real estate agent. And even though most investors don’t have the time to also be a traditional listing agent or buyer representative, you can surely refer the lead to another agent and receive a share of their profits. You can most likely negotiate 25% of their 3% commission for fetching them the customer. That referral commission can turn into some serious cash after a while, particularly if you are producing a substantial number of seller leads.

In a lot of cases, you may in fact want to be the listing or buyers agent. What’s 3% of a $1,000,000 listing? $30,000. That’s a nice-looking flip profit, isn’t it? And that is the magnificence of commission income, it’s a wholesaling-type transaction. You don’t need your own money or credit to receive a commission. So one could contend that agents were the originators of no money down real estate!

What about when one of your family members wants to buy a house? You might want to get paid 3% for helping a family member find their fantasy home. It might just be some of the most relaxed real estate money you have ever made. I have assisted many friends and family buy their homes and they believe in me more than any other agent they know because they know how many houses I have purchased in my life. They know that I have been in their shoes countless times. So not only is it good money, but you might also be the most competent person for the job.

If you are undertaking short sales, due to some new, substantial changes, it is much more problematic for creative real estate investors to make giant profits in short sales. Even though there are still prospects out there, the vast majority of short sale approvals these days do not produce enough room to do a back to back flip and still generate any revenues. The only actual money left on the table in the vast majority of short sale deals are the commissions. And now that the banks are no longer approving “short sale negotiation” fees on the HUD, even if there is only a small amount of money left on the table, without a license, it can sometimes be very hard to actually accumulate that money. Those in the short sale game that are licensed though, are cleaning up right now because there are more short sale deals vacant than ever before. But if you are in the short sale game without a license, you are leaving a ton of cash on the table.

As you can see, having your license will uncover more ways to put cash in your pocket from real estate. And as wild as this may sound, I have encountered lots of investors who now do a few creative investing deals on the side and for the most part, do real estate agent commission deals. They are making abundant cash, too!

2. MLS Access:

When you have your license, you can get complete admittance to the Multiple Listing Service (MLS). If you don’t at present have complete access to the MLS, getting it is a required step to taking your real estate investing to the succeeding level. Using non-MLS based comparable sales research, be them free such as Zillow or paid such as RealQuest, are a gag compared to the sort of information you can gather from the MLS. Numerous novice investors are probing in the dark, oblivious of what a property will truly sell for because they are using free tools rather than the real thing.

It is imperative to point out that as influential and useful as MLS access is, it single-handedly should not be the purpose for acquiring license. There are a number of ways to get access to the MLS without having to spend the vast amount of time and cash to get your license. This is possibly more appropriate for another blog post, but briefly, here are some ways to do it. You can get access through a kindly agent. In some MLS systems, you can go to one day class and become a non-licensed assistant of a Broker. Countless numbers of my mentees have done this. If you have a good friend or family member who is licensed, they might even give you the unthinkable (and perhaps against MLS policy) username and password to log into their MLS account. In some regions across the United States, much of the most significant MLS data is accessible to the common public due to some anti-trust lawsuits that the Realtor association lost and so they had to expose their MLS monopoly. Redfin.com gives you free access to closed MLS comps in quite a few key metropolitan areas across America.

Note:

Most houses in this country are sold through the MLS so when selling a property, it is nearly continuously a smart move to get the property listed. In the past, having your license got the added benefit of permitting you to list your own deals and thus saving money on commissions. But now, with the dawn of flat fee listing services, this is no longer a large benefit because these flat fee services are so cheap, it may even be cheaper to list through them then have to compensate your broker to list it yourself. Many creative investor licensees in fact use a flat fee listing service since it is cheaper than having to pay their broker his obligatory cut.

CONs to Getting Your License

1. Significant Time and Money:

When it’s all said and done, the cost can be a few thousand dollars (fees, Realtor dues, E&O insurance, more fees). The time obligation is going to be at minimum 150 hours, possibly more. I just spoke with a beginner investor that has been cutting away as best he can at his pre-licensing exam preparation course for over 6 months and it will most likely take him another 6 months to finish it, pass the test and then get his license hung with a Broker. He has 5-10 hours per week to dedicate to real estate investing and all of it goes to this mission to get a license. The issue is that he is not earning any cash in real estate and letting a great investing time period (right now), slip away. The guidance I give (which I did myself) is to go do some deals first. Make some money. Then, use part of the earnings from your first few deals to invest in getting your license, if you can jam in the enormous time commitment it burdens.
Then, make sure you stay active in real estate. The ongoing costs to remain a licensed agent are substantial and you are required to attend ongoing education courses. You can select some electives, which can be helpful classes, but the mandatory continuing education courses can be a total chore.
Investors that are an ideal fit for becoming licensed are those that are full time investors. Actually, if you are a part time, prosperous investor, making the dive to full time will be far easier if you are licensed because it can fetch good money steadily while you are waiting for larger deals to close.

2. Not Educational:

One of the main explanations some beginners use to rationalize why they “need” to get their license is for the schooling. The person I mentioned above fits into that category. Unfortunately, the course you take to pass the exam to get your license will teach you very little about making money in real estate. The typical real estate agent in this country makes under the poverty level in income and rents their home. They weren’t educated on how to make money when they got their license, they were taught how to answer the questions on the test. What’s a leasehold estate? Who exercises eminent domain? What is functional obsolescence? Who cares! Remembering the meanings of terms will not aid you in putting any money in your pocket in the real world of real estate investing. Surely, you will learn something new while going through the procedure of getting your license. The problem is, it most likely will not help you be prosperous. It’ll just be head knowledge.

Feasibly the more damaging, fundamental reason why some novices leap at the chance to dive into a 150 hour pre-licensing course is because education is well within their comfort zone. They are fearful of the real world and far favor the safe bubble of Education-ville. If you have no concern in making any money from the education you collect in life, then have at it and revel in learning about how English feudal law influenced the formation of present day real estate practice. But if you want to get a return on your time and money educational investments, then avoid viewing getting your license as giving your insight on how to be successful in real estate. Instead, look at it as a right of passage to obtain the ability to earn a commission.

I would love to hear responses and observations on this matter. Please share below!