Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to [email protected].
Question. John from Asheville, NC writes: Hi Brian. As an investor for 6 years, I’ve done most if not all of the activities a real estate agent performs. I’ve scoured the MLS, arranged for contractors, done my own marketing, scheduled closings, etc. I’ve flipped 5 houses while holding a day job but this summer I’ve decided to work full time as an investor so I can take on more projects. Hence, the reason I’m trying to decide if I should get my license. What’s your take on this?
Answer. Hello John. There are definitely pros and cons when it comes to investors obtaining a real estate license. It mostly depends on your investing style and how you personally want to work. After all, being your own boss is one of the big advantages to being an independent investor. My personal opinion is that most investors should have good working relationships with several top agents but most investors don’t actually benefit much having a license themselves. Here are some of the key pros and cons to help you decide what’s best for you.
Pros for investors having a real estate license. Direct access to the Multiple Listing Service (MLS) is a top reason many investors have for wanting a license. Almost every real estate investor has access to the MLS in one fashion or another. Some investors work closely with a couple of real estate agents who feed the investor information from the MLS on a regular basis. Others obtain direct access to the MLS without an agent's license by signing up as an agent's assistant or something similar.
The problem with the MLS is that everyone is looking there. While it’s the largest pool of available properties, trying to find a good deal can be like trying to find the proverbial needle in a haystack. For investors, the MLS should be one source of deals while equally pursuing others such as investor clubs, birddogs, estate attorneys, classified ads, etc.
Still, some investors don’t like being dependent on a real estate agent. Concerns include not receiving information in a timely manner or other clients of the agent somehow gaining an upper hand. Many of these investors never regretted becoming a licensed agent themselves.
The other reason some investors want a license is to earn commissions as a traditional agent working retail sales with the general public. If this is your desire, perhaps you should focus primarily on being an agent and make investing a sideline. If you're a full-time investor, I don't recommend that you get your license to help the public buy and sell homes.
Cons for investors having a real estate license. For investors, full access to the MLS and marketing channels creates conflicts of interest if you’re competing with your own clients. There are ethical standards that you’ll need to closely adhere to. Also, working full or part time as an agent takes a lot of time away from your investment business.
Time and costs are big factors. Depending on your state, it costs you several hundred dollars in fees ($1,000 to $1,500 is common) and probably a hundred hours taking required courses and exams. There are also ongoing costs like the fee for MLS access and required continuing education. This is before any additional training your broker might require (at a minimum, internal processes and systems). Additionally, a brokerage firm requires a big chunk of your time manning the office phones, holding open houses, filling out weekly reports, and more. Finally, you'll also be doing the paperwork that your agent currently does on your behalf.
From a professional investor’s point of view, the most challenging responsibility can be full disclosure. I believe in full disclosure, however having a license adds a disclosure requirement that can work against you. In every state I’m aware of, you’ll be required to disclose to all buyers and sellers that you have a real estate license. When brokering deals for other people, this works in your favor by enhancing your professional standing. But not so much when buying or selling your own investment properties. That same enhanced professional stature leads many buyers and sellers to believe you have an upper hand that works against them in personal deals – even when it’s ethnically not true. This is an important part of understanding your primary goals when deciding if you should get a real estate license.
John, answering the question “Should an Investor get an Agents License?” really does start with understanding if your primary goal is becoming a real estate investor or a broker. If you plan to work out of a real estate office, you will be added to the company webpage and receive marketing training along with generic marketing materials. But it will cost you a lot of time and money. That’s time and money that may be better spent learning from other well-established and successful real estate investors.
Without knowing you personally and your specific circumstances, it’s impossible for me to give you a definitive Yes or No answer to the question. Ultimately, this is both a personal and professional decision.
Please comment with your thoughts and experiences about an investor’s need for a license. Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to [email protected].