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!
