In this post, we’re breaking down the pros and cons of getting your real estate license as an investor so you can make an informed decision about the best option for your unique situation.
But first, let’s discuss what a real estate license is and what the process of getting a license looks like.
What Is a Real Estate License?
A real estate license is a state-issued authorization to conduct real estate-related activities on behalf of others, in exchange for compensation. You need to be licensed to represent property owners or buyers in transactional tasks like:
Buying or selling real estate
Leasing real estate
Marketing a property for sale or lease
Negotiating a real estate deal
However, you don’t need to be licensed to perform these actions on your own behalf. You can represent yourself as a buyer, seller, or landlord without having a license. Of course, you can also hire a licensed real estate agent to represent you if you prefer.
How Do You Get a Real Estate License?
The exact process of getting a real estate license varies by state, but typically follows the following steps:
Make sure you meet the basic requirements for your state. These may include being 18 or older, residing in-state legally, having a high school diploma or GED, and having a background free from criminal convictions.
Complete the state-mandated real estate training. You don’t need a college degree, but you do need to take the state-required real estate class(es) through an approved course provider. In most states, you can take the course(s) online, often completing them in just weeks to months.
Pass the state exam. Every state requires licensure applicants to pass a real estate exam, proving their knowledge of the subject.
Pay the fees. There may be background, exam, and licensing fees associated with getting your license.
Find a broker. Most states require licensees to “hang their license” with a real estate broker. The broker supervises your work, typically in exchange for a monthly fee or a share of any compensation you earn from transactions.
You’re also responsible for completing continuing education courses and renewing your license every few years.
The Case for Getting Your Real Estate License as a Real Estate Investor
Here are some of the reasons investors may want to get their real estate license:
Direct access to Multiple Listing Service (MLS) data. The MLS provides more detailed and timely market information than public real estate websites. However, some subscription-based real estate databases (like PropStream and PropertyRadar) now offer comparable data sets to local MLSs.
Earn commissions on your own deals. If you represent yourself in the purchase or sale of a property, you may be able to receive the commission that would otherwise go to another agent.
Create an additional income stream. You can represent buyers and sellers, earn commissions, and generate income between investment deals.
Build industry connections. Licensed agents often have access to industry events, which can introduce you to lenders, contractors, wholesalers, title companies, attorneys, and other investors.
A greater knowledge base. Licensing education and ongoing experience can deepen your understanding of contracts, disclosures, negotiations, and local market conditions.
Potential credibility boost. Some sellers, lenders, and partners may view licensed investors as more knowledgeable about the transaction process.
The Case Against Getting Your Real Estate License as a Real Estate Investor
However, there are also a few reasons to skip the real estate license as a real estate investor, including:
Time and expense. Licensing courses, exams, continuing education requirements, and brokerage obligations require ongoing effort and costs.
Broker affiliation requirements. New licensees typically must work under a broker rather than operating independently. Brokers may be hesitant to oversee licensees who don’t intend to work as full-time real estate agents.
Additional disclosure requirements and potential fiduciary obligations. States generally require licensed investors to disclose their license status when buying or selling property, which can affect negotiations. You may also find yourself with a conflict of interest or other ethical challenges as an investor with a license.
Less privacy. Your license information (plus any complaints against you) may be publicly available through state licensing databases.
Situations Where an Investor May Benefit from a Real Estate License
A real estate license may be worth the time, effort, and additional responsibility if:
You buy and sell multiple properties each year (as is often the case with the house-flipping strategy)
You also want to build a career as a real estate agent
You have an extensive network and want to earn compensation by referring other investors to other real estate agents (this would position you as a referral agent).
How to Invest in Real Estate Without a Real Estate License
Buy-and-hold rentals. You can purchase a property (with or without an agent) and find qualified tenants to rent the property. You can serve as the landlord yourself or hire a property management company to oversee the day-to-day operations.
Fix-and-flips. While getting a license would allow you to earn a commission on each transaction, you don’t need a license to buy property, renovate it, and resell it.
BRRRR (Buy, Rehab, Rent, Refinance, Repeat). When done correctly, this strategy allows you to grow a portfolio of properties quickly. You can represent yourself with or without a license in each deal (or hire a licensed agent to represent you).
House hacking. House hacking is when you earn rental income from your primary residence (by renting out a room or storage space, for example). As the property owner, you don’t need a license to lease out the space.
Real estate crowdfunding and syndication. One of the most passive real estate investment strategies, crowdfunding and syndication allow you to buy into pre-vetted real estate deals and share in the proceeds. No license, legwork, elbow grease, or ongoing capital required!
Is a Real Estate License Worth It for Investors?
A real estate license can offer benefits like MLS access, commission income, and industry connections, but it’s not required for most real estate investing strategies.
If you plan to buy and sell properties frequently or work as an agent alongside your investing business, a license may be worth considering. Otherwise, many investors successfully build wealth through real estate without ever becoming licensed.
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