By Than Merrill
Investing in real estate has grown in popularity over the last decade. With more visibility in the real estate investing community, competition has increased as well. It is now more important than ever to separate yourself from the competition. That said, there is one thing at the top of everyones’ mind, especially when it comes to gaining an edge: becoming a licensed real estate agent.
Not surprisingly, real estate licenses have become a hot commodity of sorts, especially in the investing landscape; it offers investors a way to get ahead of the competition. But there are certain things you must consider before making the commitment.
In deciding whether or not to obtain a real estate license as an investor, the real question isn’t if it will help your efforts, but rather if it would be worth it. If for nothing else, becoming a licensed agent can’t hurt your real estate investing prospects. It is important to note, however, that becoming a licensed real estate agent will require a bit of an investment on your behalf; therein lies the dilemma most people are confronted with. Is the amount of time and money you will need to invest in becoming licensed worth more than simply working with agents on future projects?
In deciding whether or not getting licensed is worth the time and effort it will require, investors must first determine what they want to accomplish. After all, it’s entirely possible to invest in real estate successfully without a license. However, there are definitely perks to getting licensed that may be worth your time. If, for example, you don’t want to work with a partner, getting your license will grant you access to one of the best tools for investors in today’s marketplace: the multiple listing service (MLS). Therefore, if your goal is to have access to a great amount of deals, getting licensed may be worth it. Let’s take a look at a few more reasons getting licensed may be worth your while.
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Let’s take a look at three questions that can help clear up whether or not you will want to get your real estate license:
In a word, yes; having a real estate license can open up a world of opportunities to investors they never even new existed. Becoming a licensed real estate agent can grant you access to properties on the Multiple Listing Service (MLS), result in high paydays through commissions and simultaneously increase your network of professional acquaintances. Not one real estate investor, at least that I am aware of, would say that either of these are a bad thing. However, there is one caveat: you must weigh the benefits of becoming an agent yourself with the prospect of simply working along side of one.
I want to encourage aspiring investors to become licensed real estate agents, but that is not to say it is for everyone. In fact, becoming an agent yourself and working with one each correspond with inherent benefits. On the one hand, becoming an agent allows you to personally take advantage of benefits without having to rely on another individual, but you must be prepared to commit. That said, working with a licensed real estate agent gives you access to everything I have already mentioned, you simply aren’t privy to it all without their help, and there is the added cost to consider.
In short, becoming a licensed real estate agent can help you as an investor, but so can simply working with a qualified agent. It is up to you to determine which situation best suites your needs. If you are short on time, perhaps working with an agent is best for you. If you want to make a little extra money in commissions, consider getting licensed.
Not surprisingly, becoming a licensed real estate agent isn’t free, nor is it void of commitment obligations. While the criteria for obtaining a real estate license can vary between state lines, you can expect licensing laws to enforce upfront fees and periodic renewals.
More often than not, aspiring agents will need to pay to gain access to the MLS. Those intent on becoming licensed may be required by certain associations to join the National Association of Realtors (NAR) for another annual fee. What’s more, it’s not uncommon for state laws to require bonding and/or insurance to practice. In all, some states may have licensing requirements that add up to somewhere in the neighborhood of $1,500 a year. Again, each state is different, and some are considerably less, but it is in your best interest to mind due diligence and find out what your particular state requirements are.
Outside of the financial obligations that have become synonymous with becoming an agent, licensing will require a time commitment. Again, while very state is different, you will be required to continue your education. Continuing Education requirements can amount to as much as 30 hours in class a year, which are typically mandated by the state you intend to practice in.
In deciphering the criteria required to become licensed, only one thing is certain: every state will come complete with their own standards. I encourage you to find out the requirements that will need to be met for your particular state before you determine whether or not becoming licensed is worth the investment.
Even with everything that will be asked of you to become a licensed Realtor, it can be very beneficial to practice investing while also moonlighting as an agent. I only ask that you become familiar with what it will take to do so before committing to the process.
Most states will allow real estate transactions to proceed without the presence of a licensed agent. However, one thing is for certain when you don’t enlist the services of a licensed real estate agent: anything that happens is entirely on you; the responsibility is yours, and yours alone. That said, everything changes once you get your real estate license. Not surprisingly, the title of a licensed real estate agent comes with some responsibility; you will have a distinct advantage over the other party involved in the deal.
If for no other reason than the fact you are a licensed agent, more responsibility is placed on your shoulders. Your title means you are now subject to complaints with the state, and even litigation in extreme cases.
It is important to note that investing in real estate coincides with an inherent degree of risk, and getting licensed as a real estate agent is no different. It is not out of the realm possibility for buyers or sellers to bring about litigation, based on both statutory or common law. That said, it is entirely possible to mitigate said risk. If you do choose to become a licensed real estate agent to further your investing career, be sure to familiarize yourself with what you can, and most importantly, can’t do. Simply follow the rules, and you will find that litigation rarely troubles those that are scrupulous in their efforts to do good on their part.
Above all else, educate yourself. The more you are familiar with the laws of real estate transactions, the less likely you are to face trouble. Understand that if you do choose to get a real estate license, your responsibilities will increase, but that doesn’t mean your risk will. As long as you follow legal procedures, you will find that having a real estate license is extremely beneficial.
Is it worth getting a real estate license? Are investors who spend the time and money it takes to get licensed really better off than those who don’t? Unfortunately, there isn’t a universal answer. The truth remains: some investors will benefit from getting licensed while others may not need to. To answer the question for yourself, you’ll first need to identify what it is you hope to accomplish as a real estate investor. Then, if getting licensed will get you one step closer to your goal, it’s something you may want to consider. If not, you can always partner with an agent to gain access to the benefits I hit on above.
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