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Should A Real Estate Investor Get An Agent’s License?
No matter how seasoned an investor you might be, or how resourceful you truly are, there is a side to real estating that you will never be able to comprehend unless you get into the agents’ circle.
It is like a businessman being able to negotiate better financing deals with banks because he had previously been a private banker. Or a tech entrepreneur being better able to deliver a working product at a low budget because he had previously been a programmer.
When you know the ins and outs of how a particular business or industry operates, you are better positioned to take advantage of it. And sometimes even legally exploit it by identifying loopholes.
In the world of real estate investing, there is something that investors choose to ignore while fully knowing that the topic can fully supercharge their investing success.
And that is getting a real estate license themselves.
So should you put on that studious hat that’s gathering cobwebs since high school and get a license for yourself? Here are some main pros and cons that might help you decide for yourself.
Benefits of getting your real estate license
You might find that getting that license looks less of a chore when you realize the below advantages.
1) Access to MLS
While you can get access to the MLS by relying on agents, colleagues or friends, what you can do is very limited. People will not always be 100% comfortable with letting you into their systems.
Having your own legitimate access allows you to do things related to MLS anytime anywhere.
Imagine a million-dollar idea pops up in your head in the middle of the night. Are you going to call up an agent and reveal your idea? Do you like having to wait till the next day for access? What if time is of the essence?
You won’t be able to invest under the radar.
MLS access allows you to conduct search queries to find properties that meet your requirements. But more than that, you will be able to sieve out historical data that can make a big impact on your deals.
From a bigger picture point of view, MLS access will allow you to:
- Determine locations and areas to focus on
- Identify the types of prospective buyers to target
- Pinpoint what type of properties to invest in
- Navigate the type of deals that work best
You don’t need to be an old bird in real estate to see the benefits in your dealing with the above advantages.
2) Make and save more money
Few real estate investors can make it in the long run without being a scrooge with money.
It’s just the way it is in this business. The more generous you are with money, the more nervous you can get each month when the mortgage bill arrives.
Moreover, you don’t need to be a superstar investor to realize that agent commissions take up a significant portion of transaction and closing costs.
Commission charges can vary widely between 1% to 6%. Sometimes, maverick agents even go as low as half a percentage point.
Although these numbers can appear small on the surface, taking into account the transaction price of houses and apartments often run into the hundreds of thousands or even millions, the actual dollar amount can really add up.
When you sell a house through an agent, you can spend as much as 6% of the sale price on agent commission. And when you buy, the cost can go as high as 3%.
This can be especially costly for flippers who buy and sell frequently.
Why not keep the money for yourself by being a licensed agent?
3) More control
I once overheard a disturbing conversation between 2 agents discussing strategies of how they can get a deal closed by not informing the seller that a higher offer has been offered by a new prospective buyer.
Because the deal is close to being done, a new entrant into the bidding party could delay or jeopardize the deal. This left the seller with the lower priced deal.
I’m just thankful that I’m not the client they were chatting about. But who knows what kind of hanky-panky does go on on my dealings.
By being your own agent and representing yourself, you pretty much take full control over your purchasing and selling dealings.
No unscrupulous agent will be able to sabotage your bottom line behind your back.
You can negotiate and submit your own offers with listing agents. You can deal directly with lawyers, lenders, appraisers, and any other party involved in real estate transactions, without feeling out of place.
What’s more. You have total control over how you want to market your houses.
In all honesty, you are usually the best person for the job to sell your house.
4) Other agents would love working with you
Because you are actually an investor and have now entered the inner circle, other listing agents will absolutely love working with you.
There’s nothing more challenging to agents than to handle challenging clients.
Because you now have in-depth knowledge of what needs to be done, how to do them, with the authority to execute them, you become the ideal buyer or seller to other agents.
You would make their jobs so much easier!
Done be surprised when you rise to the top of the queue whenever great deals are ready to hit the market with “inside” information of what is needed in order to close as quick as possible.
Drawbacks of getting a real estate license
It’s not all nice and dandy in getting your license. There are of course… disadvantages as well.
1) Getting the license
The most obvious hassle is the process of getting the license itself. This can be a tedious commitment to embark especially if you are still a part-time investor with a full-time job.
In the course of getting your license, get ready to commit up to 150 hours for studying, homework, exams, etc.
On top of that, it is not as if you are done once you obtain the license. Because you will need to find a broker to work under so that you can actually get access to the MLS. This will definitely mean additional fees to pay and responsibilities to take up.
That’s not all!
Getting the license is one thing. Keeping it is another.
You will have to attend continuing education courses and workshops each year in order to renew. But these activities shouldn’t take up more than 12 hours in total for the entire year.
It’s a small inconvenience of landing your hands and eyes on the MLS.
2) Documentation and paperwork
It goes without saying that you will now have to do your own paperwork since you are your own agent.
The time spent on this can really stack up if you are very active in real estating. But look at it from the bright side. The more documentation you are busy with, it means the more deals you are closing.
Real estate agents like to give us the impression that the amount of paperwork involved in transactions can be overwhelming.
It can be substantial. But definitely not like being rained on with a ton of bricks.
Anyway, if you don’t like this part of being an agent, you can always “outsource”.
Other agents who have nothing on the table are often more than willing to do the paperwork for you for a small fee. Newbies especially, can be very welcoming of the paying job you are giving them. They can use the documenting experience to help help their own development too.
Many investors feel that having to declare themselves as agents can put them in a losing position when negotiating.
This can be true sometimes. But you can usually get around this as long as you hide your teeth when acting like a shark when buying and selling.
Any investor should be able to see the valuable benefits of getting a real estate license for themselves.
The problematic issue is always the commitment of personal time and resources.
Taking into account that you could really get a leg up over other investors competing with you in the same space, getting a license might actually become the difference-maker in getting ahead of them.