One of the most highly debated topics amongst real estate investors is whether or not they should obtain their real estate license. In a perfect world, the answer is yes. However, getting a license is not as easy as it may appear initially. Between class time, licensing fees and exam costs, getting licensed is quite time consuming. The costs can quickly add up. Before you decide whether or not licensing makes sense, you need to evaluate your business and how you get your deals. If you are a volume investor, there can be quite a savings in getting licensed. On the other hand, if you only do a few deals a year, getting your license may do you more harm than good. Obtaining your real estate license is really dependent on the direction you want to take your business.
Getting licensed is more than just passing a test and getting a piece of paper. To get a real estate license, there are a series of things you need to do prior to even scheduling the exam. The first step is attending pre-licensing hours of education. Depending on what state you are in, this can be up to 170 hours of class time. At the conclusion of which you need to pass a state specific and federal exam. This is all before you can take your licensing test. The class is the first expense you will have, accompanied by a fee to take the exam as well. There are also a few minor fees for background checks and fingerprints.
The exam itself is as difficult as you make it, but there is certainly no guarantee that you will pass the test. You will need to put in a good amount of time studying and preparing yourself. If you do not pass, you must wait 30 days to take the test again, and pay the exam fee as well. If and when you do pass, you need to find a broker that is willing to hold your license. Again, there are different rules for each state, but you may have to work under the supervision of a broker for two years or a designated number of transactions. If you explain to your broker that you are an investor and are only looking to work on properties pertaining to your business, they may not want to hold your license. This is another small obstacle that you must face as an investor.
There are also annual fees for insurance, MLS access, NAR membership and continuing education. The total from your first class to your first deal could easily equal a few thousand dollars. Some of these are one time fees, but many of them are annual, reoccurring fees that must be paid to keep your license. This is why it is important that you know your business before you decide to get a license. If you don’t find properties on the MLS or utilize the commission discount, a license may not make a lot of sense for you.
If the positives didn’t equal or outweigh the negatives, no investor would ever get licensed. There are real benefits of having a license for the right business. The biggest reason is the savings you can get on every deal. Instead of paying a realtor commission, you can keep the money in your pocket. Additionally, with the MLS (multiple listing service) you can gain immediate access to new listings as soon as they hit the market. No longer do you have to wait for a realtor to contact you when they get around to it. If you are interested in the property, you can hop in your car and see it without having to wait for a realtor to meet you. If you can get just a few deals a year using the MLS, or by having realtor access, a license is well worth any fees or expenses.
You can also save money when you sell your properties. Just like with the buying commission, you can save money on the sell side too. Additionally, you can control the marketing strategy and reach many buyers you would have not normally been able to. There is also real value in having access to properties whenever you want. Your realtor may not have the time or desire to meet you at every property you are interested in. With your license, you can call the listing agent and go when you please. If used properly, your license can give you access to many more deals and offer a tremendous savings over the course of the year.
As many successful investors have proven, you do not need a license to close deals. If you are just starting out, it may not make sense to cover all of the fees and expenses without a real plan. If you are an experienced investor that has contacts and knows how and where they want to invest, a license can give you the push you are looking for. It is a good idea to look at where you get your deals and how much you pay your realtor before considering your license. You can never have enough resources and ways to grow your business. In the right situation, a real estate license can make a tremendous amount of sense, but they are not for every investor.