You already know that Tarek and I are licensed real estate agents; that’s how we got into house flipping and how we made money for our family even back in 2008 when the housing bubble had just burst. Seeing what we do with our flips and how we work, a lot of new real estate investors wonder whether they should get their licenses and become real estate agents, too. Becoming a realtor does involve a lot of real estate training, though, and real estate school is an investment in itself. You definitely don’t have to do it, but let’s take a look at some of the reasons you might want to.
Get Access to the MLS
The MLS (multiple listing service) is only open to licensed real estate agents, and it has a lot of really useful information that can help you make the right decision about a flip. Tarek spends a lot of time surfing around on the MLS when we’re looking for leads on properties, but he doesn’t just use it to find the properties themselves.
He also spends time looking at other listed properties in those areas, how long they stayed on the market, what they sold for, how big they were, and all kinds of other information about them. Basically, by looking at the MLS, we can tell before we head to an auction whether the starting bid is a good deal or not.
Save on Commissions
If you are your own real estate agent, you won’t ever have to worry about paying a realtor’s commission. Commissions are usually around 3%, so if you sold a flip for $100,000 you’d pay your realtor $3,000. You have to factor that commission into every purchase you make, along with all of the repairs. And you know from Tarek’s infamous low-ball estimates on repairs that rehabbing a house is usually more expensive than you originally assume. That 3% can really break you if you aren’t careful.
Get Access to Some Properties Before You Buy
With a real estate license, you can also get access to some properties that you wouldn’t otherwise have been able to see before buying. Promising flip properties listed on the MLS and properties for sale by wholesalers won’t necessarily have open houses, but real estate agents can sometimes schedule a tour. Tarek and I have been able to get into some of the flips we’ve bought and gotten a pretty good idea of what we’d be looking at before we made our offer.
It Takes Time and Energy
Now, you’re probably thinking, “That all sounds great! Where do I sign up?” But stop right there. Getting your license involves a serious time commitment for real estate training. In most states the licensing process requires you to go to real estate school and complete somewhere in the neighborhood of 170 credit hours. That’s pretty much a two-year degree just to get your license.
Not only do you have to take all of the necessary courses, but then you have to take the exam (and pass it). Then, to get access to the MLS, you’ll have to pass a background check, as well. Once you’ve done this, most states will require you to work under an employing broker for about two years. This comes with desk fees, which can vary a great deal.
As a real estate investor, if you’re planning on staying in the business for the long haul and making a career out of it, you’ll want the most real estate training possible. Getting a license is worth it for many investors, but because of the commitment and cost of real estate school and all of the requirements for getting a license, a lot of investors would rather swallow a realtor’s commission and work with an expert instead. With or without a license, you can be successful flipping houses if you’re dedicated and you get the right help and training in the business.