Should A Real Estate Investor Get Their Real Estate License?

I received a question by email the other day that I get asked about 6-8 times per year.

“Should I, as a real estate investor, get my real estate license?”

Let me just begin this post by saying that I am not a substitute for sound legal advice. (Does that make you think the answer could really matter?) When you get your real estate license there are certain legal obligations you have to fulfill. So before making a final decision feel free to contact your real estate attorney.

Advantages

  1. Certainly, as a real estate agent you can get first crack at quite a few properties. Once you learn how the MLS system works you can set up searches that allow you to monitor for homes that fit your criteria.
  2. People know you are “in the game.”
  3. Access to Board approved real estate contracts.
  4. You can save or earn a commission on deals that would otherwise go to the agent involved.

Disadvantages

  1. As a state licensed real estate agent you are now held to a “higher” standard. You have laws to comply with and the Code of Ethics to follow.
  2. You must notify any buyer and seller you are working with that you are a licensed real estate agent.
  3. If it ever went this far, who do you think a jury would side with? The person who ended up selling their home at a deep discount or the licensed real estate agent who knew the true value of that home that was for sale?

Generally, I tend to recommend to people to NOT get their real estate license if they are going to be a full time real estate investor. I believe the liabilities and compliance issues outweigh the benefit of saving the occasional commission.

Having said all of that, there is absolutely nothing wrong with being a real estate agent who also owns investment property. For instance, the investment property I own is for my security and my benefit. It is not, at this time anyway, my primary source of income. It is my nest egg and wealth growing vehicle.

So ask yourself: What will my point of emphasis be if I get my license?

4 Comments

Filed under Misc. Real Estate, Real Estate Investing

4 responses to “Should A Real Estate Investor Get Their Real Estate License?

  1. Christohper Smith

    I agree with your assessment; getting a license isn’t worthwhile for investors. Actually, all four of the “advantages” that you list can be yours as an investor without getting a license.
    – I have access to the majority of the information that my Realtor via public sources…and things are getting more and more transparent by the day.
    – People know you’re “in the game” through your networking and contacts
    – I have forms coming out of my ears, for free
    – The game is changing with regards to commissions; as an investor I pay for the services that I need and don’t pay for those that I don’t need.

  2. Chris Lengquist

    You are exactly right in every way.

    And transparency is why. A few short years ago real estate agents held all the cards for information. Boy, has that changed for the better and in a big way.

  3. Geoff Green - Arizona Real Estate

    I have been a Realtor for years and am an active investor. I think your list is right on. But I think you may have missed some items. How about the person who calls because they just “have to sell now!” How about networking with other realtors for pocket listings? I’ve found it’s just easier to get comps if I don’t have to use a realtor who knows I don’t want to pay full price.

  4. Chris Lengquist

    Geoff – very valid points. One thing about comps – some cities are making them available to everyone. I think that is the way to go. For instance, KCMO anyone can now find out what a home sold for right over the net. That should help investors tremendously.

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