One of the most common questions I get asked on a daily basis by new investors is whether it is in their best interest to get their real estate license. I spent many years as a real estate investor wholesaling, rehabbing, fixing up, remodeling, and renting without obtaining a license. Ultimately, I decided that it was beneficial to get my license and that having a license does not hinder your ability to operate as an investor.
If you are thinking about whether or not you should get your license, here are some points to consider:
- Why are you thinking about getting your license?
- Are you required to obtain a license?
- How will having a license benefit or hinder your ability to operate as an investor?
The first question to ask yourself is why you are considering getting a license. If the answer is because you want to be an agent and show properties to buyers and sellers for a commission, you obviously need a real estate license. However, for most investors who are interested in investing for themselves, the lines become much more blurred.
The second question to ask yourself is whether you are required to obtain a license. Many investors don’t know when and if they need a license and often assume they don’t need one when they do. If you are a full-time wholesaler and assign contracts to other investors for an assignment fee or double-close your own transactions for a profit, then you probably do not need to obtain a license. However, you must have a beneficial interest in the property, which means you must have a valid contract stating that you are the purchaser of that specific property and that you have an equitable interest in it. If you don’t have a beneficial interest, this means you can’t find buyers for other wholesalers.
If you are an active wholesaler with an active buyer list, then you probably connect with other active wholesalers in your area. If you do, you will invariably find yourself in a position where you meet buyers looking for a home in a certain area, and one of your wholesale partners might have a home under contract in that area. In this scenario, you would be overstepping the mark, as you have no interest in that particular property and are trading it. This would require that you have a license. Note that this applies regardless of whether or not your associate gave you permission to find a buyer for your deal. Do not rely on joint venture agreements or beneficial interest agreements to help you circumvent this regulation. Local real estate licensing authorities may ask for proof of beneficial interest and will look for your name on the deed or contract. So, in short, if you’re trading your own deals, you don’t need a license, but if you’re trading other people’s deals, then you do. If you don’t have a real estate license, you can’t find buyers for other investors. You also cannot help other investors sell their properties. or property for someone else (with some exceptions).
The final question to ask yourself is how having a license will harm or benefit you as an investor. If you only wholesale your own deals, manage your own properties, or fix and trade your own properties, then you don’t need a license. However, the more active you are as an investor, the more opportunities there are for you to benefit from having a license. You’ll be able to list properties, manage properties for others, wholesale offers from other investors, find sellers for other investors, find buyers for other investors, save money on buying and selling, and get access to the MLS. In short, there are many benefits to having your real estate license.
What are the negative aspects of having your license? I really don’t see any. You will need to disclose that you have a license and you will be required to act ethically (which you should already be doing). Having a license will give you more opportunities to earn money and if you are considering being a full-time real estate investor, then having a license will benefit you in the long run.
