Years ago, I debated whether or not I should get a real estate license to invest in homes that I could rehab and resell. Since my state didn’t require it, the decision was up to me. Ultimately, after doing some research, I decided against it. The consequences of that decision surprised even me. And, now that I’ve been investing in real estate for over two decades and frequently mentor new investors, I’m often asked if I think that decision helped or hindered me. It’s a good question and not one that’s always easy to answer with a simple yes or no. Still, if you’re interested in starting a career in real estate investing and have also been wondering if you need a real estate license to flip houses successfully, I’ll do my best.
Do You Need a Real Estate License to Succeed at Flipping Houses?
Few states require you to have a real estate license to flip houses and many may even regulate how, and when, you can represent yourself in a transaction should you get one anyway. But, your state may require you go get a license just to practice real estate. So, before making your final determination, be sure to check your state laws. But, more often than not, the decision will be up to you just as it was up to me.
Assuming it is up to you, here is a quick list on how getting a real estate license may or may not help you turn flipping houses into a good business faster, and more easily, than not getting one.
You will gain some knowledge
Though getting your real estate license won’t teach you how to flip houses, it can give you a baseline education on the industry itself, local and state laws, and good customer service practices. And, if you’ve never worked in real estate before, that’s not a bad place to start. You may even be able to learn methods for analyzing and evaluating real estate investments and gain a deeper understanding of how the foreclosure process works through the continuing education courses you’ll qualify for later. You will certainly have the opportunity to build your confidence by expanding your knowledge.
Unfortunately, since you won’t actually learn how to buy and renovate houses to resell, the number of hours, and the amount of money, you’ll need to invest in the classes to get your license may not be worth it. After all, you’ll still have to figure out how to flip houses. You’ll have to pass the licensure tests, too, as well as pay to take them in the first place. And, whether you’ll truly benefit from them or not, you will also have to take continuing education courses to keep your license current—when you could be flipping houses.
You can get access to leads
As a licensed real estate agent, you could have access to a fair amount of distressed homeowner leads. Of course, you will be able to use the Multiple Listing Service (MLS)—which is available only to licensed agents—to search for undervalued properties actively listed on the open market. And, you can use the MLS to help you find comparables for those homes you’re thinking of buying, too. Once you build up a few relationships around the office, you may also get first dibs on off-market deals that some of the more established and connected agents bring in.
But, to realize the best possible returns on the biggest number of investment opportunities, you’re going to need a way to find off-market properties on a regular basis. So, the occasional in-house deal—no matter how great it is—won’t likely be enough. Even then, in all probability, you’ll face some stiff competition from colleagues who might also be investors themselves or who have a few in their back pockets. You will most certainly face competition from both investors and traditional home buyers when trying to buy houses that are listed on the MLS. If you’re successful at purchasing one of these properties at all, with so much competition driving the price up, the amount you ultimately pay may be too high to yield decent returns.
You could save money on transactions
With a real estate license, it’s possible to save money on what you could pay in commissions by representing yourself in your own transactions. Since selling agents can get paid upwards of 6% of the closing price on a deal, half of which is usually split with the buyer’s agent, you stand to save around 3% in fees by handling your own sales. You won’t necessarily earn 3% by representing yourself on the buying side, though you may gain some negotiating power by saving the selling agent and their client some money. But, every time you sell an investment property, you do potentially save yourself several thousand dollars.
What you might save in commissions, however, won’t always offset the other costs you could accrue as a licensed agent. Most brokerage firms take a large percentage of what their agents earn in addition to the other fees and dues they may levy for sponsorship. And, since most states require that you are sponsored by a broker, these expenses aren’t optional. In fact, you may have to contribute monthly to attorney’s fees, insurance coverage, and administration costs whether you are buying and selling property or not. Over time, these can add up—and have you spending, not saving, your money.
You could have more control
By being a licensed real estate agent, you have more control over certain aspects of each transaction, but that is not always a good thing. Sure, since you can deal one-on-one with other agents, appraisers, lenders, and anyone else involved in your transactions, you will always be on the front line communicating—and, possibly, controlling—how deals go down. But, being so close to a deal can cloud your judgment and prompt you to make mistakes, like overlooking a critical detail about a property that’s buried in the mounds of paperwork you’ll be shuffling. And, if that piece of information can break—and should have broken—your deal, you could find yourself later wishing you’d had the expertise of another agent guiding you toward making a good investment property decision, not a bad one.
I chose not to get a real estate license when I started buying, renovating, and selling homes. And, what you might have already guessed is that my business has been doing just fine without it. But, I didn’t just jump into flipping houses without thoroughly learning about the industry and how to succeed at professionally investing in property. I simply took a more direct approach with my training as a real estate investor and, if you want to get out there flipping houses as soon as possible, you should too.
Learning to Flip Houses Whether You Are a Licensed Agent or Not
Investors come from all walks of life, but we all tend to have an entrepreneurial spirit generally and a passion for real estate specifically. I use to be a comptroller at a large manufacturing firm and I have a colleague who once worked in human resources. But, after years of being dissatisfied at our desks, neither of us could wait to get out of our old careers and into our new ones as investors. And, it was by becoming independently owned and operated HomeVestors® franchisees that we found the transition easier than if we’d gone another route.
Since 1996, HomeVestors® has trained independently owned and operated franchisees to be the most informed and ethical real estate investors in the industry. Thanks to the initial comprehensive week-long investor training program—and the ongoing one-on-one mentorship we receive from our Development Agents—we’re able to open our investing doors and start buying, rehabbing, and reselling property quickly. Of course, once you start investing, you’ll have to work hard at it. But, you probably won’t have to get a license to do so.
If you want to learn how to invest in real estate quickly, go directly to HomeVestors to see if choosing to become a franchisee is the right approach for you.
Each franchise office is independently owned and operated.