If you are a first-time Capitol Hill single-family rental property owner or are an experienced investor, you may have wondered if you should get your real estate license. As an investor, long-term success would depend on your ability to reduce costs wherever you can. You could also be thinking about the value of insider information, especially in competitive markets. But, you can’t just have these reasons as your basis for getting a real estate license. Getting a real estate license as an investor has both advantages and disadvantages that you must consider before you make that decision.
The most likely reason investors have for getting a real estate license is to save on commissions. Most of the time, paying someone else a huge percentage fee can be unpleasant. And, if you plan to sell a lot of properties — like flipping houses — you could save some money.
However, those savings are an illusion for Capitol Hill rental property investors who plan to buy and hold properties. The truth is that it is usually the seller who pays real estate agent fees, and not the buyer. Real estate agents must also work under a broker who would charge a flat fee or percentage of your commission with each transaction. These fees will further reduce any perceived savings.
In addition to saving money, investors also want the real estate license to have access to the Multiple Listing Service (MLS). Because this is such an important resource for properties on the market, it is a very coveted service. Although there is a free version of the listing service, it does not contain the comprehensive data that makes the MLS appealing to investors.
However, if gaining access to the MLS is your topmost reason for getting a real estate license, you should think twice. As a licensee, you might be subject to new rental property laws that you were not subject to when you were a private investor. Even as a real estate agent, you don’t get free access to the MLS. There are fees you have to pay, including those for the required licensing course, the licensing test, and the license itself. Other costs include fingerprinting, brokerage fees, Association of Realtors dues, state fees, and so on. You also have to pay for MLS access. With all of these, your real estate license could cost you thousands of dollars. You could recover some of the costs over time, but many of these costs are ongoing and should be included in your plans.
After all has been said and done, you have to ask yourself how much is your time really worth. Can you afford to spend upwards of 100 hours taking a pre-licensing course and studying for the licensing exam? In many states, even the minimum number of hours required to certify can take months to complete. Getting a real estate license can take a toll on your already busy schedule running your investing business. In addition, every hour spent on licensing is an hour not spent on growing your investment portfolio. If you see real benefits in getting your real estate license, it still might be worth the investment in the short term. But the bottom line is that you must calculate all the costs and be honest about your plans before getting into something that might not give you the returns you desire.
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