Getting a Realtor License to Invest?

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Should you get your real estate license to invest in real estate?

There are pros and cons to this idea. Find out if the pros outweigh the cons or vice versa.

Here are the pros:

1. You can list your own properties when selling and potentially save ‘some’ money. I say you can save some money because you're not going to save on the entire real estate commission.

Here’s how commissions work typically:

The seller, which is you in this case, pays the selling broker, the listing broker, and the buyer's agent's broker. When you're paying the buyer's side, that portion doesn't go away, you still have to pay that. And then on your side, you still have to pay your broker who takes a cut of the commission. So you're only going to get a portion of the listing side commission. You're only going to save a little bit of money when you're listing the property.

2. You can potentially get a buyer's broker commission when you are buying your investment properties. In some rare cases, some sellers, typically banks, and in some short sales situations, will have verbiage in their contract that says that, if you are a principal or someone that's related to the person that's actually buying the property, they won't pay your commission. So, keep that in mind.

3. You have access to the MLS. And with this access, you're able to do your own comps, and schedule house tours yourself.

Here are the cons:

1. It takes a lot of time to take the classes, study for the exam and pass the exam. After you get that done, you still have to get licensed and get set up with a brokerage. So my question is, how much is your time worth? Is it really worth all that?

Because all that stuff is probably going to take you about, at the very least, eight weeks of time. If 40 hours a week, that's 320 hours. How much is your time worth? And is it better for you to leverage another person's time instead of getting your license?

If you haven't already, watch my leveraging other people's time. In that video, I go over why you shouldn't be mowing your own lawn. And it really applies here too. Maybe you shouldn't be doing your own deals as a real estate agent.

2. There are the setup costs, with the exams and the classes and everything, and ongoing costs for being a real estate agent even if you don't do a single deal ever. The classes, exam, license, and registration fees are your initial startup costs. Then, some ongoing costs are going to be your CE courses, your ethics training, and license renewals. You will also have to join a realtor board membership, pay MLS fees, cards and signs, and your domain and website expenses. Depending on the brokerage that you join in, you have a monthly desk fee, training fees, franchise fees, and other fees, E&O fees (error and omission fees). There are tons of costs involved in just having your license, even if you don't do any work. So, that's a big drawback of getting it.

3. You're going to be navigating and negotiating these deals yourself as a new agent. The savings in the listing commissions and the earnings as a buyer agent for yourself will be wiped out when you get out-negotiated by a more experienced agent.

As an experienced agent, I know where and when I can beat up a seller when representing a buyer. I know when and where to get money out of you. On the listing side, I know when those opportunities are to get money. So what I do is I mitigate what can be negotiated and sometimes, I just shut the opportunity down from the beginning.

As a new agent, you're not going to know all of them. You're not going to know how to handle the situations and possibly lose money. You're going to be paying for your education in the form of either a higher sales price on the buy-side or a lower sales price on the listing side. I speak from experience.

So, should you get your real estate license to invest?

Unless you want to dedicate the time to learn and to serve other people, to get the reps necessary to actually be a decent agent, I don't think you should get your real estate license to invest.

Instead, I think you should leverage the experience and knowledge of someone who already put in the time and money to be good at this profession. If you're a buyer, it's a free service to have an agent represent you in almost all markets in the United States. The only place I can think of where a buyer actually pays their agent is in New York and in some commercial transactions.

If you're a seller, an experienced agent will know how to sell the house for a higher price than you could as a new inexperienced agent. And that could easily be more than what you're paying in the listing side commission.

So, after hearing all that, if you still are interested in becoming a real estate agent, feel free to reach out to me. Just know that what real estate agents do is active work, while real estate investing is more passive in nature. They're two different businesses.

Watch the video: CLICK HERE