Copyright 2010 Lex Levinrad, Distressed Real Estate Institute
One of the most common questions that I am asked on a daily basis from new real estate investors is whether or not it is beneficial for them to get their real estate license. I spent many years as a real estate investor wholesaling, rehabbing, fixing, flipping and renting without getting a real estate license. Ultimately I decided that it was beneficial to get my real estate license and that having a real estate license does not hinder your ability to operate as a real estate investor.
If you are thinking about whether or not you should get your real estate license then here are some points for you to consider:
‘¢ Why are you thinking about getting your real estate license?
‘¢ Are you required to get a real estate license?
‘¢ How will having a license benefit or hinder your ability to operate as a real estate investor?
The first question you should ask yourself is why you are thinking about getting a real estate license. If the answer is because you want to be a real estate agent and show properties to buyers and sellers in exchange for a commission then obviously you need a real estate license. However for most real estate investors that are interested in investing in real estate for themselves the lines become much more blurry.
The second question for you to ask yourself is if you are required to get a license? Many real estate investors are not aware of when and if they need a real estate license and often assume that they don’t when they do. If you are a full time wholesaler and you assign contracts to other investors for an assignment fee or you double close your own transactions for a profit then you probably do not need to get a license. However you must have beneficial interest in the property meaning that you must have a valid contract indicating that you are the buyer of that specific property and that you have equitable interest in it. If you do not have beneficial interest then this means that you cannot find buyers for other wholesalers.
If you are an active wholesaler with an active buyers list then you probably network with other active wholesalers in your area. If you do then invariably you will find yourself in a position where you know buyers that are looking for a house in a certain area and one of your wholesaling associates might have a house under contract in that area. In this scenario you would be stepping over the line since you do not have an interest in that particular property and you are marketing it. This would require you to be licensed. Keep in mind that this applies regardless of whether or not your associate gave you permission to find a buyer for their deal. Do not rely on joint venture agreements or beneficial Interest agreements to help you to get around this regulation.
The local real estate licensing authorities might ask you for proof of your beneficial interest and they will be looking for your name on either the deed or the contract. So in summary if you are marketing your own deals you don’t need a license but if you are marketing other people’s deals then you do. If you do not have a real estate license then you cannot find buyers for other investors. You also cannot help other investors sell their properties. or a property for someone else (with a few exceptions).
The final question that you should ask yourself is how having a license will hinder or benefit you as a real estate investor. If you only wholesale your own deals, manage your own properties or fix and flip your own properties then you do not need a license. However, the more active you get as a real estate investor the more opportunities there will be for you to benefit from having a license. You will be able to list properties, manage properties for others, wholesale other investor’s deals, find sellers for other investors, find buyers for other investors, save money on purchases and sales and get access to the MLS. In short there are a lot of benefits to having your real estate license.
What are the negatives to having your license? I don’t really see any. You will have to disclose that you have a license and you will be bound to act ethically (which you should already be doing). Having a license will give you more opportunities to make money and if you are considering being a full time real estate investor then having a license will benefit you in the long run.