Should You Get A Real Estate License? Why I Gave Mine Up
Here are my thoughts about investors having a real estate license.
Do I need a license to become a real estate investor?
I cannot tell you how many times I get this question. Many people think they can’t buy and sell real estate without a license. I don't really know why they think that because if that were the case, realtors would be the only ones who could end up buying or selling real estate. Obviously that isn't the case. Then everyone would have to be a realtor if they wanted to buy and sell their own houses. So I assume the root of the question is, should you get your license? Is it beneficial to get your license? Will it help you out? Is there liability?
Those are what people are wondering about whether to get a real estate license or not. I'll tell you the answer is yes and no. Yes, I think it is beneficial for most people, but no, you do not need it to get started.
Let me start off with the no. I see too many people not start real estate investing because they think they have to get their license. They're not taking any action towards their real estate investing career because they're so focused on making sure they get a license and by the time they do, they realize they don't wanna do this real estate investing thing. But now they have their license and wasted all this money all this time and it was useless. So do not be that person, do not worry about getting your license. If it is going to stop you from investing, investing is the priority. The license is there to help.
Now let's talk about why I think you should get a license.
There are a few reasons I really like people getting their license.
- The most important reason is MLS access
Having your own MLS access is a really big deal for a real estate investor. You should never, ever, ever rely on other people's comps. You need to be able to comp yourself on the MLS. Redfin or Zillow is not good enough. I don't care what website or what software you use. They ain't good enough. You need to have the MLS to give you completely accurate comps.
The other reason is the MLS is great for auto searches. Auto searches are searches you can set up so that you get notified every time a potential deal hits the market. By getting notified before everyone else, you're gonna have a leg up on all the people who are on Zillow waiting to find deals. It's much easier to set up through the MLS. The way that I do it personally in my career, I've probably bought over a hundred deals off the MLS, just using those methods. So obviously having access is very much worth it.
So let's say you are using my auto search methods. You can now get the buyer's commission when you make an offer. A lot of deals I've bought off the MLS would not have penciled out unless we had the commission crediting us. If we had to pay the realtor that commission, we wouldn't have been able to do the deal. So having the ability to get buyers commissions on deals you buy off the MLS is huge.
Even if you never use your license to actually represent other clients. If you're a true real estate investor, having it just for that purpose will pay for itself. Also, when you're trying to buy deals off the MLS, you usually have to make a ton of offers. We make at least five offers a day on the MLS. Most agents are not gonna wanna do that for you. So you have to do it yourself or you have to get someone on your team to do it like I do. So having the ability to make a lot of offers on the MLS makes your license worth it.
Not to mention if you're flipping houses, you can then go and list your own properties. Now, if you're only doing a few deals a year listing your properties is probably a good idea. You'll save that listing agent commission. But once you get to do any type of volume, it's probably not worth your time to list. In fact, you can go hire a listing agent who will probably do it for 1% or less because you're giving them volume. But until then, especially if you're just starting out, listing your properties is a good savings. Here’s one thing to think about, if you are inexperienced, you may wanna let somebody more experienced, list your property by you trying to save money and listing it yourself. You may actually cost yourself money because you don't really know what you're doing yet. So it's not always in your best interest to list even when you're able to.
- You can now monetize all of your leads
For the real estate investor. Once you start spending money on marketing, it gets very costly. We spend tens of thousands every single month on marketing. If the only thing I can offer a seller is a cash offer at a discount. I'm throwing away a lot of leads, a lot at market value. If I'm a realtor and I'm able to go and get that listing, I can make a lot of money with my marketing because I'm not just boxed into the cash offer. I can now go list these two, $300,000 houses and make $6,000 to $9,000. Just converting one person to a listing could pay for all of your marketing and then all the deals you flip or wholesale end up being pure profit.
I'll tell you, most people starting out don't have a lot of money. So having the ability to go list properties and truly monetize your leads is extremely important. Also for people who are tight on cash, being able to go represent buyers and sellers is a huge deal. You want to have multiple streams of income. If my friends ever want to go buy or sell a house, and I have the ability to represent them as an agent, that is a big win for me, starting out. It's almost virtually risk free. When you're able to go get referrals from friends and family and go represent them and not spend any money, that's a big deal when you're starting out. So I love that aspect of it as well.
So you're probably wondering, “Ryan, are you licensed?”
And the answer is no, I actually got licensed in 2010 when I was 21 years old and I held my license for about eight years. During those eight years, I was a pretty crappy agent. I didn't represent many friends or family. I mainly used my license for the MLS deals I was talking about earlier. I was getting commission credit and I was just using it so I could flip. I used to also list my flips before I eventually started getting too many and I had to delegate that off. Once I delegated my listings off, stopped working with buyers and sellers completely, handed off my MLS duties, I literally had no reason to have a license anymore. The only thing it was bringing me was liability.
I hear that question a lot from people who want to flip or wholesale, they say, “I heard that your license gives you all this liability. That's why I don't want to get it.” My response to that would be anything in business has liability, whether you're licensed or not. People can sue you just because for any reason at all, that's just the way America works. So not having your license will not prevent you from getting sued or getting in trouble. Even if you do everything right, you're still gonna get sued if you do enough deals. Yes, when you are a realtor, you must be held to a higher standard.
So once we started doing really heavy volume in 2018, like a hundred homes a year, I realized I didn't want this governing body, the Realtors association to be telling me what I can and can't do.
My business still runs the exact same way, whether I'm licensed or not. But as I said, I'm a unique case. I think for 90 plus percent of people having the license will be beneficial. I don't believe you're gonna have any extra liability that you otherwise wouldn't have. I think it only becomes a liability issue once you start doing massive volume. So don't let the liability parts scare you. And even when it comes to liability, you have to look at the risk versus the reward in almost everything in business. Maybe your license makes you an extra $100,000 a year because you're able to represent people, but then it gets you in trouble one time. That costs you $10,000. Well, you still made $90,000 more by having your license. So at the end of the day lawsuits are a cost of doing business.
Every single big business goes through them. When you just do a large volume of transactions and you're dealing with people on a daily basis and you're dealing with a lot of money, which real estate is. There's always complainers and there's always people who look like they're gonna cause a problem. That's life.
Getting your license is a great thing. I think if you're starting out, you should get it, but do not let it prevent you from starting. You can start real estate investing right now without your license. And you can work on doing both. You can work on your investing game and work on getting your license and then you become deadly once both of those merged together.