Do You Need A Real Estate License To Flip Houses? Pros/Cons
You do not need a real estate license to flip houses. In fact, most house flippers do not have their real estate license or even a contractor’s license. The real estate licensing exam is all about laws and regulations and has nothing about investing or flipping houses for a living.
Although there’s no law that says you need a real estate license, there are some pros and cons if you do. Below I’ve listed the pros and cons of getting a real estate license so you can decide for yourself.
7 Reasons Why You Should Get Your Real Estate License To Flip Houses
When you get a real estate license you can save on fees, gain access to the MLS, and make more money on flips. In my opinion, it’s worth it to get your real estate license if you’re flipping houses full time or you do more than 3 flips a year.
No Agent Commissions
The biggest benefit to getting your real estate license is that you don’t have to pay agent commissions. You will save 2 1/2 to 6% on every single flip you do. That can be a lot, especially when the average gross profit for a flip is 10 to 15%.
Learn Real Estate Rules and Regulations
In the process of getting your real estate license, you will have to learn real estate rules and regulations in order to pass the final test and get your license. This will give you confidence if you are new and it’ll also keep your legal liability down.
More Accurate Valuations
As part of being a real estate agent, you get access to the multiple listing service, or MLS, with historical sales data. You will be able to access prices of comparable houses that have sold nearby and you will be able to create a market analysis for more accurate valuations. When you have more accurate valuations you’re less likely to lose money and you’ll have a better idea of what you’ll make on a flip.
When you have access to the multiple listing service (MLS) you can also create listings that get sent out to hundreds of websites and have a way bigger audience than if you were selling “for sale by owner”. Every real estate agent has access to the MLS and your house will get sent out to thousands of agents and potential buyers.
As part of being a real estate agent, you get the chance to network with people in your area. You get to know other real estate investors, contractors, and other agents that will help you with your flips and could even be a potential buyers.
Higher Selling Price
For sale by owner houses sell for an average of 26% less than houses sold by an agent. When you’re an agent you get access to more marketing opportunities, are perceived as more trustworthy, and get help from your broker.
Extra Income Opportunities
When you have a real estate license you have the opportunity to make money by listing other people’s houses. I personally have people asking me all the time to list their house for them even though I don’t have a license. This can help hold you over in between long flips, especially for full-time investors.
5 Reasons Why You Shouldn’t Get Your Real Estate License To Flip Houses
You shouldn’t get a real estate license to flip houses if you’re worried about the cost, time, or extra regulations. I personally don’t have a real estate license to flip houses because of the extra rules and confusion when it comes to buying deals and advertising.
Becoming a real estate agent and keeping up with board fees will cost you on average 600 to $1,200 a year. this can be a big expense especially if you are just starting out.
It can take a few months in order to study and pass the real estate exam. Not to mention the time commitment needed from your broker.
Depending on the broker you hang your license with, you’ll have rules you have to follow in how you can conduct your business. Most brokers will require you to include their logo on all of your advertising, represent yourself in a specific way, and may restrict the type of deals you can do.
Added Laws, Regulations, & Paperwork
When you are a real estate agent there are added laws, regulations, and paperwork that you will have to follow. You will have to use the state-approved purchase contract and there are specific rules to follow when it comes to negotiations, which can be detrimental if you are trying to get the best price.
When trying to buy houses, sellers will get confused about why you’re talking to them. A lot of them will think you are trying to get a listing and not actually buy the house for yourself.