Whether to become a licensed real estate agent/broker in connection with your real estate investing is a question many new investors ask. To help you in getting to an answer, let's just look at what a real estate investor does in the course of their investing business.
First though, let's take one state's requirements and memberships to get an approximate cost to maintain a license. Because real estate is licensed by state, the cost to hold one can vary a lot. However, in most states, these are approximate costs annually after the cost to get education and pass the licensing test:
- Annual renewal, not including any requirements for new fingerprinting or background checks, can run around $100. In the state for this study, the license is renewed every three years for $270.
- Errors and Omissions insurance is required in this state as in many others, and the premium in this case is $310.
- Local MLS, Multiple Listing Service annual membership renewal in this case is $100.
- The local MLS charges the agents $30/month for access to the MLS, so $360/year.
- Many MLS locals require membership in the National Association of Realtors, currently a $120/year cost.
Right now this adds up to $960 per year to maintain the license, but then there is another cost. Every state requires ongoing Continuing Education to renew licensure. In this state it's 30 hours, plus an additional mandatory class that you pay for but is not credited toward the 30-hour requirement. An education package from one provider runs $269, but divided over three years for renewal, that's $90. So, now we're at 1,050.
Okay, that's not terrible, but it is a cost of doing business. Now let's look at what a typical investor doing some flipping, wholesaling and rental property investing does and how a license may help.
- Buying homes for your own rental inventory - If you're buying from another investor, a license doesn't help at all. If you're buying through a real estate agent and can get the buyer side commission, this would add some dollars to your profit.
- Wholesaling to investors - Here you get no advantage with a license, as it isn't needed and there are no commissions involved.
- Buying & rehab to sell to investors - Again, no advantage here for holding a license.
- Buying & rehab to sell at retail - Here you'll either have to list with a real estate agent and pay a commission or list yourself if you have a license. You'll still have to pay the commission to the agent who brings a buyer though. And, you'll have to market the home, so you'll have an expense there.
Overall, there really isn't much of an advantage financially to hold a real estate license for your investing. There is a definite negative aspect as well. In most states, holding a license places you in a different category of buyer or seller, someone with extra expertise. This means you pick up more liability and must abide by certain rules and regulations not a burden on an unlicensed buyer or seller.
Make your own decision, but all considered a real estate license isn't a big addition to your investor business.