Should I get my real estate license?
What’s required? Does it make financial sense?
Many times I hear this question when folks start investing in properties and start looking to reduce their expenses and bottom line. Most often, the first thought is to eliminate the real estate commission as it is a large expense and it’s an expense most people feel they can do themselves with a little bit of time and readily resources. But is that the case? Let’s talk about the process.
There’s no national real estate license, so you’ll have to meet your state license requirements. Requirements and reciprocity vary from state to state; however, we will be sharing Indiana’s information as an example. You can visit your state’s licensing website for your licensing requirements.
In Indiana, a 90-hour course is required either in person or online, pass the final course exam, pass the Indiana Real Estate Exam at 75%, Affiliate with a Real Estate Broker, & Complete your Real Estate Broker License Application. The average cost of the course currently is around $600.00 – sounds easy right? What a simple and low-cost way to cut a large commission expense – but wait, there is more, a lot more…
Outside of the cost of the real estate course your time the expenses have just begun. There are expenses with joining the real estate board and fees for your state’s multiple listing service (MLS), affiliation with a brokerage, applying for your application, continuing education requirements each year (which you will learn about in class) startup cost, signage, business cards, errors and omissions (E&O) insurance, and much, much more. And you have yet to even learn the business.
Most believe completing the real estate course and passing the class will set you up for success but that is a myth! You will know absolutely nothing about how to sell real estate. You will only have an understanding and general knowledge of real estate math, the vocabulary, and scenarios, but it does not teach you anything about how to sell real estate, current market conditions & trends, contracts, and setting yourself for success as an agent/investor. So now what?
House Flipping Seminar: Property Management
Before you invest in signing up for a real estate course interview with a broker and have many conversations with top producing agents in your marketplace. Ask questions and be curious about how they built their investment portfolio. Ask the brokerages their expectations of your affiliations, time, and expenses.
Only when you can have a clear understanding you can make an informed decision if it is worth a true investment of time, energy, and money to invest in the real estate course, or potential discuss a future partnership with your current agent or branch off on your own as an independent agent. Becoming an expert as a true real estate agent and investment advisor takes time and experience.
You don’t know what you don’t know, and HGTV isn’t the best place to get your advice. Make sure any books or podcasts you read are true sources who are licensed and have sold real estate. Not every source you may find is accurate. The best advice, take your time by asking may questions and educating yourself through the process to lead you to the best decision for your future investment and decision.
If you want to get your real estate license, affiliate with a brokerage, join your local real estate board, and pay for membership to your state’s MLS database, here are some pros and cons to consider:
- Valuable Education
- Access to your state’s MLS for property research
- Potential savings from acting as your own agent
- Potential additional income if you become an agent for other people buying and selling properties
- Additional resources through a brokerage such as networking, knowledgeable people, marketing, and access to additional software and tools of the trade
- Access to standard legal forms for real estate transactions
- Compliance with law for certain real estate related activities
- Takes time and money to get your license
- Takes time and money to maintain your license with continuing education and renewals
- If you are a new real estate agent you will miss out on using a seasoned real estate broker with years of experience to help you price your properties and navigate the buying and selling process
- Requires disclosures when advertising and performing other real estate related activities
- Additional fees and requirements (such as quotas) of the brokerage that holds your license
- Other costs such as E&O insurance
Additionally, if you are licensed, you will be held to higher standards of conduct. While this may sound like a negative, increased professionalism and credibility is always a good thing.
Note that many states have specific laws about being licensed if you manage properties, so check the rules in your state to be sure you are in compliance. In most states, you’re required to have either a real estate broker license or a property management license to rent, lease, and manage properties, but the specific requirements vary.
For example, if someone is a full-time salaried employee of a licensed broker, they may be allowed to manage properties in some states under the supervision of that licensed broker. Some states require licenses for managing seasonal and short-term rentals while others do not. Also, an individual who owns and rents a single family home may not need a license in most cases, but real estate investors who own and manage multiple properties or properties that contain more than four units may need to be licensed.
Other types of licenses, such as a business license, may also be required in your state for real estate investing and property management businesses.