Should an Investor Get A Real Estate License?

I am frequently asked by investors whether they should obtain a real estate license. There is no black-and-white answer to this question. Many successful real estate investors do not have and do not want to have a real estate license. Many other successful investors do. Some have had licenses in the past; some without a license have partners with a real estate license. 

So clearly, having a real estate license is not critical to your success as a real estate investor.

I cannot say that I had any great plans to obtain my real estate license. I just kept taking real estate credit hours until one day, along the way, I became a Managing/Associate/Designated Broker (Back in the day, new licensees were known as “Agents,” and those who owned or managed a brokerage firm were known as “Brokers.” Now, the NWMLS calls everyone “brokers,” a change that was mystifying to me, but I digress).  I now operate my own independent real estate brokerage, through no divine plan of thought.

There are many advantages of having a real estate license. It allows the investor to place herself squarely in the “path of progress,” by dealing with real estate professionally on a daily basis. If one is serious about real estate, having a license and getting credit hours keeps one well-educated about the topic. 

A real estate license allows the licensee access inside all listed properties. It also makes it easy to find comparable values for unlisted properties in the local marketplace. The investor can make or save money on real estate commissions, when handling real estate transactions for themselves or others. These are some of the biggest benefits.

The disadvantages are that the licensee is held to a higher standard as a real estate professional. There are legal and ethical considerations and disclosures. Most importantly, the licensee must disclose early on and in print advertising that they are indeed a real estate license-holder.

 Direct mail campaigns offering to buy a property can be awkward, as the recipient realizes it is coming from a broker. Some recipients may feel it is a ploy to solicit a listing. And if you do not want to buy the property after further investigation, it is unlikely that it will lead to either a listing or a referral (although I will usually say something along the lines of “This doesn’t work for me to buy, but I would be happy to list at the market value or refer you to another broker”).

Most real estate agents do not make a ton of money, and most leave the industry within five years. Many complain about the unanticipated costs of joining a brokerage, joining the MLS, paying for marketing, paying for credit hours, transportation costs, and so on.

Foolish me. I thought having my own brokerage might save me money, and that I would get to keep more of those hard-earned real estate commissions.

However, having your own brokerage means renting your own office space, hiring your own bookkeeper, generating your own leads, processing your own transactions, providing your own insurance and legal guidance, developing your own marketing materials, buying and troubleshooting your own office equipment, answering your own phones, finding your own training for credit hours, paying higher brokerage fees to NWMLS/CBA, getting your own CRM and website, and identifying and negotiating your own coverage when you want a night or weekend off....

If you are willing to do all of these things, then down the line, having your own brokerage may be a good thing. In the mean time, a new licensee is paying for this expertise, training and support under the tutelage of their Managing Broker. There is much value in paying that desk fee or commission-split, so look closely at the benefits and training offered, if you are a new licensee looking for a place to hang your license.

So think long and hard if the benefits of having a license are worth the time and expense necessary to obtain and maintain it – or whether it might be easier, as a novice investor, to pay someone else for their expertise in that arena.

If you are thinking about getting a license, or have recently acquired one, I am looking for a few good brokers in the Seattle area. Please contact me at HomeLandInvestment@gmail.com or leave a message on my recorded real estate hotline 888-621-4999.

Happy Investing!