Is it worth it to get a real estate license?

Question

I am just starting out and still in the educational phase, but my goal is to acquire 10 buy and hold rentals over the next 10 years. I would also love to do some fix and flips, but that is still up in the air.

My question is, do you think it’s worth the time, currently 180 hours in Texas, to get my license? If so, is there any reason to wait until I have some deals under my belt or should I just go for it?

Erik W. · Answer

The question I would ask is "What does being an agent gain me?"

Probably the most common answers would be one or more of the following:

1) Saving on the commission for listed properties.

2) Insider access to the MLS for pulling comps.

3) A "reputation" as a real estate agent (although this could also be perceived negatively by some)

4) Formal ties to a brokerage that could provide you with additional contacts and leads.

Of the above, you can 2 & 4 without a license.  A competent agent who knows how to work with investors will already be pulling comps on your behalf and networking your name to their clients and colleagues.  They can bring you pocket listings just as easily as you trying to solicit your own.  We'll leave the dubious nature of that practice for another thread, but safe to say it happens.

As others have said, the savings on commission is not worth the effort unless you're doing large deal volume or unless you intend to be a salesperson in addition to an investor for added income.

I held my license briefly from 2000 - 2002, then let it expire.  I was basically a part-timer during the Summer when I was off from teaching high school.  The amount of hassle, expenses, continuing education, etc. aren't worth it unless you're closing at least $2 million per year.  One lady in my office was excited when she finally got over that hump: it was her first year earning over $30,000 net income after all splits, fees, and taxes.  The agents I know who make a good living off it close $5 million+ / year and have a team.

Regarding honesty about value of a home: I see nothing wrong with telling Ma and Pa Kettle, "Your home could have a market value of $90,000 - $100,000 based on these comps, but I am offering to buy it from you today as is / where is for cash and close in 5 days or less for $65,000."  Have them sign the comps to prove they saw them along with your offer if they're interested.  There are tons of reasons why people sell for below "market value".  Maybe they need cash now to pay for something they really need or want, and the last thing they want is tire kickers and looky loos traipsing thru their house for 3-6 months with no guarantee of a sale.  Therefore, buying for a discount should not be viewed as being inherently dishonest.  Give them a full disclosure of accurate information, explain in writing that your offer is below the potential market value and give reasons for why (guaranteed sale, all cash, quick close, no repairs, no inspections, no contingencies), then let them choose.

Russell Brazil · Answer

In consumer friendly states, the agent retains great liability whether the member of the public is your client or not. I operate across several states, and about half of them, you could face severe consequences for taking advantage of a member of the public even if everything is disclosed, and the other half, it would be more in line with what you are saying.

Angelica M Garzon · Answer

Hi Stephen,

I think this decision solely depends on your end goal. Are you planning to maximize your real estate license for income ? How will the license play in your investing career?

I say this because it cost between $1,200-3,500 to acquire a real estate license, you want to make sure you have a good return on investment and can pay yourself back in a decent amount of time.

With that said here are three pros and cons:

Pro: 1. Sell real estate - investor or not, you might run into someone who you could help sell or buy a home and make 3-6% commission.

2. Get an automatic 3% reduction on any property you purchase on the MLS.

3. The class will be a great educational experience

Cons-

1. Big out of pocket expense

2. Legal responsibilities to buyers- sellers- tenants

3. Yearly continuing education renewal- $$$

Hope this helps and good luck!

Jon Reed · Answer

@Stephen Beckwith

Yep, lets say you came across a nice older couple who wanted to sell their home for $50K and they ask you how much you think the house is currently worth. If you know that home is worth $100K as-is but did not tell them that then they could take you to court since you are a real estate agent. If you are not an agent in that situation you do not have any legal consequences... you would just be bit sleazy haha.

As for making an extra 2-3% per deal for just 2-3 homes... I would say it is still not worth it. Even if you sold three $250K properties per year and got 3% seller side commission that would only gross you an extra $22.5K... half of that would then go your RE broker so now you are down to $11.25K.. Now half of that will go to taxes.. now you are down to about $6K net per year. So for $6K a year would you want to do all your own open houses, property showings, property photography, mls listing, phone call screening, contract writing, real estate agent banter/negation, and so on? I would hope not.

A good full time realtor can make you more money than you could ever save in commission.

Kevin Sobilo · Answer

@Jon Reed, just to correct one thing. Yes an agent does need to disclose that they are an agent, but they do NOT need to act in the best interest of the seller unless that seller is a client (aka you list their property).

So, your scenarios are mostly without merit. You should not lie as that could affect your license or garner you a fine from the state, but since these people are NOT your clients they would have no recourse to sue you.

As an agent, you do need to disclose and you do need to be honest. That is about all. Even if you aren't an agent you should be honest!

Jon Reed · Answer

@Stephen Beckwith

There are only two reasons (in my opinion) that you should get your real estate license if your goals is to be a real estate investor.

• You want to become a full time real estate agent as your main income source and use those funds to acquire investment properties.
• You are buying such a large quantity of investment properties that your full time job becomes finding and purchasing your own properties.

Getting your RE license will not give you a leg up when you are starting off... if anything it will hold you back because if you try to find an off-market deal you must disclose to them that you are also a real estate agent and you have a fiduciary responsibility to act in the best interest of the seller.

Russell Brazil · Answer

I had my license for about 10 years before becoming a full time agent and investor. I have very little doubt that it cost much me more than it made me. However when I went into sales full time, it did help since I had no learning curve like most people.

Account Closed · Answer

Hello again Stepen!  Only an Agent can be usually sued for not being honest with the buyer or seller if you represents them.  If you are doing that part time and not dependent on real estate investing and in no big hurry to make extra money, that could be the way to go (getting a license) if you can sell at a discount from your ROI when necessary as opposed to retail in that subject area.  That really depends on your motivation and when you are not dependent on that investing income.  Best wishes!

Account Closed · Answer

Hello again Stephen!  Time and distraction from income production in investments on the sale if you spend too much time on the selling plus the type of your thinking and the disclosures you are suppose to make when selling.  Agents usually list at retail on the MLS.

Account Closed · Answer

Hello Questionaire!  From what I've seen it depends mostly who you talk to.  Licensees are usually for it and non-licencess usually say "no".  I'm an exception to the biased opinion and I was licensed as a broker in Texas for about 30 years and your needs and location and time might make the decision differently.  It's definitely a learning process but not mandatory to be an investor.  If you can afford it, have the time, your age, and its location matters.  Be careful to see it as a way to save or make money because it might harm your production as an investor.  You should be smart enough to buy yourself and use an Agent to sell if you are having trouble with a particular one.

Good luck to you!

Is it worth it to get a real estate license?

Most Popular Reply