Do I Need A License To Flip Houses?

Key Takeaways:


Have you ever asked yourself the question, “do you need a real estate license to flip houses?”

Not surprisingly, you aren’t alone. Whether you should get your real estate license for flipping houses is often a heated debate among those in the investor community.

On the downside, actively using your real estate license can open you up to a little more liability than using another agent. It requires you to provide additional disclosures and can take up more of your valuable time.

Additionally, if you join the local Realtor association, you are held to a strict code of ethics and can increase your risk of having complaints filed against you. However, the upside offers huge advantages when it comes to flipping houses.

Should I Get A Real Estate License To Flip Houses?

You should get a real estate license to flip houses only if the advantages make sense for you and your house flipping business. According to Tony Martins, the founder of Profitable Venture, it is not necessary to have a real estate license to flip houses professionally.

“In all honesty, you do not need a real estate license to flip houses. It can be helpful in order to gain an understanding of property laws, but you can achieve the same thing by just studying in your own time, which will save you resources,” says Martins.

To obtain your real estate license, you will need to complete the real estate education mandated by your state. This form of real estate education will give you some insight into the legal and financial side of real estate transactions, but be aware it is of little practical use for flipping houses.

Having direct MLS access is one of the biggest benefits of having your real estate license. It can certainly offer big savings when acquiring homes for real estate investing. Even on a $100,000 property, the savings can easily amount to $3,000. Having your own real estate license also enables you to list your properties for free on the MLS. The MLS is credited with being responsible for around 80% of all properties sold and far exceeds other forms of marketing for flipping houses.

Fortunately, there is a way to get the best of both worlds; so that you can enjoy both the access and savings of having a real estate license without incurring the extra liability or adding to your real estate investing workload. For starters, once you have obtained your real estate license, you can legally get paid referral fees from agents while you are flipping houses.

This means that you can actually have another licensed agent do the work and have them give you back the bulk of the real estate commission. This puts more profit in your hands and can even give you more upfront cash when flipping homes. The other option is to use virtual assistants to use your access to perform the daily tasks involved in flipping houses. They can do everything from searching for properties to uploading listings and reviewing contracts.

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What Can I Do With A Real Estate License?

Investors who decide to obtain a real estate license will suddenly have access to a new realm of professional possibilities. Here are just some of the potential business opportunities associated with being licensed in real estate:

  • Sales Agent: Having a real estate license means that you can assist others in the buying and selling of property.

  • Broker: Real estate brokers are licensed to manage their own real estate agents.

  • Leasing Agent: Agents can also serve as leasing agents or property managers for commercial and residential properties.

Benefits Of Being A Real Estate Agent As An Investor

If you are considering getting licensed to invest in real estate, think about using these five benefits of a real estate license as a real estate investor:

  • Extra Income: It is entirely possible to make money as a real estate agent, in addition to investing in properties. While becoming a licensed real estate professional won’t necessarily help you retire next week, it is a great way to supplement the income you are already making flipping houses. The next commission you earn could be put towards your next flip.

  • Access To Deals: Obtaining your real estate license will give you access to deals you would have otherwise never known existed. Of course, you will have access to those on the MLS, but what about every other outlet that comes with being licensed? You no longer have to wait for a Realtor to contact you when a deal pops up; you will be the first to know. Sometimes the speed of implementation having a license offers you is all it takes to find a new deal.

  • New Contacts: Getting licensed will open up doors to networking events you probably never even knew about. As I am sure you are aware, real estate is a people business. It always has been and always will be. The sooner you understand this, the better. It just so happens that getting your license will allow you to meet more like-minded people and potentially find new deals in the process.

  • Education: Not only are you required to meet specific educational criteria to become licensed, but the industry itself can teach you a lot. The experience alone is enough to help you through the duration of your investing career. Don’t be surprised if you learn something new every day.

  • Commissions: You will be able to save money on the commissions that typically go to agents in every deal. The average commission for a buyer agent on a bank-owned property is roughly 2.5 percent. On a $100,000 purchase, you are looking at $2,500 that you would normally pay to your Realtor. That’s money you can save if you are the Realtor on a respective transaction.

  • Increased Trust From Potential Buyers: It is generally more common for those seeking to purchase a home to go through a real estate agent. According to the National Association of Realtors, 87% of homebuyers in 2018 purchased their home through an agent. Studies have also shown that homebuyers generally rely on real estate agents more than online sources among boomers and millennials alike. When asking yourself, “Do I need a license to flip houses?” you can guarantee that it puts you in a much more trustworthy position with potential buyers.


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Drawbacks Of Obtaining Your License

While becoming a licensed real estate agent comes with many benefits, obtaining a license may not benefit everyone. One must consider the amount of time and expense it takes to get become a licensed agent. Here are some of the drawbacks to getting your real estate license:

  • Cost: Depending on your state, the overall cost and requirements for getting your real estate license may vary. However, you can expect a high out-of-pocket cost in every state. You must expect several necessary expenses such as education, exams, professional memberships, and background checks.

  • Time: As you know education is required in every state before obtaining your real estate license. While this comes at a high cost, it also comes with a large time commitment. Online courses are offered in some programs, but they are not guaranteed. Expect around 60 – 180 hours of education time.

How Do I Get A Real Estate License?

The exact requirements for a real estate license vary state by state, with different coursework and testing depending on the area you live in. That being said, the general process looks the same. Read through the steps below for a better understanding of how to get a real estate license:

  1. Determine Eligibility: Step one is to make sure you are eligible for consideration. For the most part, this means you are over the age of 18, have a high school diploma and U.S. citizenship. Again, this can vary by state, so make sure you look up whether or not you are eligible.

  2. Take A Pre-License Course: Earning a real estate license is not a typical “college” experience, though there are courses required to become eligible for the exam. Aspiring agents should enroll in a pre-license course to meet the required training hours in their state. This can range from 60 to 150 hours, depending on your area.

  3. Pass The Licensing Exam: After finishing the real estate licensing coursework in your state, the next step is to register for the exam. It is typically administered online and asks about both state-specific and nationwide practices. There is a fee associated with taking the exam, which again will vary depending on your state.

  4. Activate Your License: Once you pass the licensing exam it’s time to activate your license through your state. This can cost anywhere from $200 to $500, so prepare for these fees as you go along. This is also a good time to determine whether you want to become certified with the National Association of Realtors (NAR).

  5. MLS Membership: The last step to gaining your real estate license isn’t really a step at all. Instead, it can be thought of as a benefit for all of your hard work. Using your activated real estate license, pay the annual fees to access the MLS in your area.

To learn more about the process of gaining your real estate license read our guide, here.

Do I Need A Contractors License To Flip Houses?

Getting a contractor’s license to flip houses is usually not necessary. Although, many investors may find it useful. Different states enforce various regulations relating to what permits and licenses are required to flip homes, so investors should research what type of permits are required in their area. Because of the various permits and licensing required, investors often find that having a contractor’s license can be useful.

What Can I Do With A Contractors License?

Real estate investors are under no obligation to obtain a contractors license. It is entirely possible to flip houses without being a licensed contractor. It is worth noting, however, that obtaining a contractors license has become synonymous with several benefits:

  • Lower renovation costs

  • Lower permit costs

  • Better renovation cost projections

  • Limit dependency on unfamiliar contractors

  • Stable income when not flipping real estate

Summary

For those of you who ever wondered, “do you need a real estate license to flip houses,” hopefully by now, you will have a better understanding. As you can see, there are plenty of pros to getting a real estate license. If you are willing to invest the time and money it takes to get licensed and are ready to take advantage of all the perks of being a realtor, then it could be the right choice for you.


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Real Estate Investing Strategies
Real Estate Investing Strategies
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Real Estate Investing Strategies
Real Estate Investing Strategies
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