Should I get a real estate license if I want to buy and rent out?

Question

As the title suggests, I'm currently finishing up a Business degree (1 more year) and after that Ill be out in the real world on my own. I have had some paid internships, which means that I can come out of school without any student loans hanging over me, but it will take all my money to do this.

My plan after school is to work a little bit while getting more into real estate. Ive read Rich Dad Poor Dad and my goal is to do something along those lines (Buy properties and rent them out), however I dont know if I can achieve this without a real estate license. I'm not very knowledgeable in this field yet, so even if I dont need a real estate license, would it be worth taking it for the knowledge factor?

Thanks everyone!

Dustin Erlewine · Answer

I got my RE license in 2009 in Missouri to work as a agent, by mid 2010 I was done working as a agent and accepted a W2 job.  When I started as an agent it was near impossible for me to obtain a loan without a track record of income. I had two stellar deals fall in my lap and I wasn't educated enough with alternative financing to put it together. The cost of getting the license, paying the desk fee, board fees, etc. wasn't cheap for a guy living off commission. Getting a RE license isn't a magic wand of knowledge.  The 38 yo me would tell the 27 yo me to find a mentor, read more books, and ask more questions.  Those two deals with the help from a mentor would of well funded my start. Find a mentor.

Jonathan Bombaci · Answer

@Lawrence Mak my suggestion would be to use your degree to go get a good W2 job and save as much money as possible. Once you get your feet under you at your job you can then assess if it makes sense to get your license and start practicing real estate part time. You don’t need your license to start investing but if it’s interesting to you then go get it! You may still want to use a buyers agent for your first purchase since you’re still learning but you can make that division then

I always suggest investors start by househacking a 3-4 family if it’s possible. Make sure you keep the W2 job until you know real estate is your path, it will make you a strong borrower. Since real estate agents only make commission it will take 2 years of solid earning to become a qualified buyer. W2 income is much more desirable from a loan perspective. welcome and the first step is the hardest and will take the longest amount of time. But if you do it right it will snowball quickly! best,

Jon

Aubrey Maldonado · Answer

@Lawrence Mak, I agree with those who have already answered. If you have to depend solely on your income to close a deal, it would be most advantageous for you to get a W2 job. It's extremely difficult to finance properties as an agent without at least two years of tax returns to show a lender or someone else providing the financing.

To your question about needing a real estate license to manage rentals, I would check the license laws of your state. In North Carolina, you don't need a license to manage your own properties. You only need your real estate license to manage properties for someone else.

I decided to get my real estate license because my husband and I had already gone through the process of purchasing two single-family properties with experienced agents and we have my husband's consistent W2 (military) job to get financing. With the expenses & time required to get licensing--not to mention the networking and transaction experience needed to get deals done as an agent--I'm not sure I would do it if I were attempting to accelerate a real estate investment portfolio on my own.

On the other hand, if you like working a sales-type job and don't mind waiting a bit to prove your income (or get creative and partner with people), being a real estate agent can be a good way to gain knowledge and connections in real estate.

Peter M. · Answer

@Lawrence Mak Don't do it unless you really want to be an agent. You will burn through any money you have saved up and end up worse than you started. Its expensive to be an agent and there are a lot of upfront costs before you start to see money trickling in.

Shawn Mcenteer · Answer

@Lawrence Mak its whatever you put into it.  You can go the license route and you can go without.  Something I find to be completely under valued about having your license is the time saved not having to rely on someone else to show you a property.  I was able to see over 100 MFR on my own prior to putting an offer in our fist house hack, no way would that have been possible if I did not have my license.  The best part is I aligned myself with someone who was investing the way I wanted to invest, he is an agent as well.  So I had guidance when I first started.  Fast forward 8 years later... Thank goodness I got my license but I am willing to do the work to make it worth my while.

Don-Carlos Moniz · Answer

@Lawrence Mak, I will join the choir in saying that being an agent is not necessary to be an investor and can actually be a hindrance.  We had a rental property long before I had a license.  The only way we could afford for me to get licensed now is because I have a steady income from my military retirement.  If you are not actively using your license to generate income, it can be a costly piece of paper.

I got licensed in NC last year, and it cost about $800 for the pre-licensing course.  Then there is a background check which was another $150 or so.  Once you add in exam fees, MLS fees, and a few other miscellaneous fees, there is another $300+.  Every month I pay about $150 in desk fees and Supra access (digital lockbox).  In NC, you have to take post-license classes within 18 months of getting your license, which is another $800.  Of course, you have to eat, cover transportation costs, and keep a roof over your head as well.  If you consider that it takes most agents 3-6 months to close on their first deal, it can be a very rough start for the ill-prepared.

Getting my license has postponed our next property purchase while I build a business, but I would absolutely do it again.  I can represent myself in deals, have access to the MLS, and all of the forms and tools that come with being an agent.  If it is something that you want to do, I say go for it, but have a plan, and understand the costs.  If you have any questions, don't hesitate to ask.

Jim Blackburn · Answer

@Lawrence Mak

A real estate license is good to have a plan on doing multiple transactions… It’s also good if you want to refer buyers to other agents and get paid a referral fee. If you just planning on buying one place maybe to you don’t necessarily need to jump through all the hoops of getting a license.

Should I get a real estate license if I want to buy and rent out?

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