Should I Get My Real Estate License?
By JD Esajian on February 26, 2018
As you are just getting your investing business going you may be looking for ways to earn secondary income. Even if you have a successful business there are things you can do to maximize your earning potential. One of the best ways to earn money inside of the real estate business is by getting licensed. On the surface having a real estate license will allow you to get paid on your rental properties, working with buyers and on the properties you own. This really can be a great way to earn extra money while staying inside a business you know. However, a license alone does automatically equal extra income. There are trade-offs in getting & staying licensed that may not make sense for every investor. Before you spend time and money there are a few things you need to know about getting your real estate license.
- Time. Just because you know the business doesn’t mean you can get a license. There are a few main hurdles in getting a real estate license. The first item you need to acknowledge is that it is going to take some time. For starters there is a class that you need to pass. Fortunately, this is something you can do online without having to physically sit in a classroom one night a week for two months. However, it will take at least a few hours, with some courses a minimum of eight hours. Once you take the class you need to prepare for the state exam. Even experienced realtors have trouble with the test without proper preparation. When you pass the class, you must spend some time finding the right broker to hold your license. Not every broker will be open to having a part time real estate agent/investor. Individually these items wont bog you down for months but they will be a focus for at least a few weeks.
- Money. In recent years there has been a change in the licensing procedures for real estate agents and mortgage brokers. In the past the barrier of entry was nothing more than a small licensing fee. Today, the costs and fees are a definite consideration. For starters, you need to pay for the classroom portion of the process. This will run you anywhere between $400-500 depending on the class and the website you use. Next, you need to pay for to take the test. This may be part of the class but if not, there is another fee around $100. Once you pass the test there are a series of small fees including application and background checks that can total another $100, or so. Finally, after you pass your class and find a broker you need to pay your real estate dues and MLS fees. These will cost roughly $800, and in some cases even more. Any way you slice it you are in for over $1,000 before you talk to your first client.
- Contacts. Once you pass your test, find a broker and pay your MLS dues you can start closing deals. Regardless of your experience level one of the most challenging aspects of real estate is finding new deals. Even if you only plan on using your license to save money on commission it may not be enough to justify getting licensed. You should plan on using your license to generate income at least a few times a year. Prior to closing a deal or finding a client you are in the hole well over $1,000. To find some deals and drum up some business you should start by reaching out to your personal network. Email or call your friends, family, co-workers and anyone else you know that may have an interest in real estate. Through your personal contacts alone you can probably find a handful of deals, but it won’t be nearly as easy as you anticipate.
- Network. Finding real estate business is similar to how you would find investing opportunities. It is important that you put yourself out there and reach as many contacts as possible. Go to the local networking group and talk to real estate agents in your office. You may not want to switch careers, but you need to justify the expense of your license. There are many people in your market that may want to sell their home or can use a real estate agent. In most cases the strength of your network will determine your success. If you aren’t willing to spend a few hours a week building your real estate business getting licensed may not make sense for you.
- Closing deals. It is important not to discount just how much work is involved closing deals. You may have been on the other side of a real estate transaction and assume their work is easy. The reality is that real estate agent work is a grind. You need to coordinate the deal with the buyer, seller, mortgage broker and attorneys. You should be prepared to spend several hours getting everyone together. This will take away from your investing opportunities. In time you will figure out how to balance both but in the beginning, you will struggle. As obvious as it sounds closing deals is where you make your money.
There is nothing wrong with getting your real estate license but you need to know exactly what you are in for. For some investors it is a great way to earn residual income but for others it is more time and expense than it is worth.