A 6% commission on a $200,000 property is a huge expense to cut out when you’re flipping houses.
After all, your listing agent did little more than take a few photos! And you have to shell out $12,000?!
And doesn’t being a Realtor bestow countless blessings and advantages upon you as a real estate investor?
The thought crosses nearly every new real estate investor’s mind:
“Should I get my Realtor’s license to get direct MLS access and save money on agent fees?”
But the answer isn’t quite that simple. Here are the pros and cons of getting your real estate license as an investor and how to decide if it’s a good fit for you.
Pro: You Can Save (Some) Money on Realtor Fees
When you go to sell a flipped house or a rental property, yes, you can list your own property for sale without the aid of a certified Realtor.
This, in turn, will help you save some money, but not as much as you may assume initially.
Let’s assume a 6% Realtor fee. First, half of that fee will likely to go to the buyer’s agent, leaving 3% for the listing agent (you, if you get your license and list your own properties).
Yes, you will still need to pay the buyer’s agent — even if you list your own properties. (That’s simply how modern real estate works.)
Nor is the buyer’s agent commission the only cost you’ll incur. As a licensed real estate agent, you will need to work underneath a broker. That broker will take some of your listing agent fees.
How much? That depends. Brokers can take up to half of their Realtors’ commissions.
Or, they may charge a “desk fee” – a flat monthly fee simply for having you on staff and providing you essential resources to help you list and sell properties (e.g. leads, software, print collateral, etc.).
Or, a broker may charge both a flat fee and a percentage of their agents’ fees. And in some states, Realtors are required to be a member of the local Realtor association. (Spoiler alert: It’s not free.)
As a general rule, the more training, marketing, and other support that brokers provide, the more money they’ll charge their agents — something that’s well within their right.
The point is thisL If you get your real estate license, you will be able to save a decent chunk of money on listing fees … but it may only be a fraction of the total commission charged.
Pro: You Can Gain Direct Access to Your Local MLS
This pro comes with fewer qualifications.
Having direct access to the Multiple Listing Service (MLS) is a genuine boon. You’ll be the first to know when new deals hit the market and have access to more, detailed information at your fingertips about listed properties.
Granted, this advantage is not as vast as it was 20 years ago. Today, websites like Zillow, Trulia, and Redfin offer every Tom, Dick, and Harry access to view publicly listed properties for sale.
Having said that, these sites don’t show the same depth of information, and, oftentimes, direct MLS access displays new listings faster.
Pro: “Earn While You Learn” the Real Estate Industry
Ready to quit your job and dive headfirst into the real estate industry, but worried that your income as a real estate investor will be too inconsistent to pay your monthly bills?
Becoming a real estate agent can help supplement your income while you learn the business.
Your first flip may take you six months (or longer!) before you actually see the paycheck. It takes time to find a good deal, get it under contract and financed, settled, renovated, marketed it for sale, and settled for a second time.
And we all know that building rental income is not an overnight phenomenon. It’s effective, but it takes time to stack up streams of consistent rental income.
If you know that the real estate industry is your calling and want to quit your current day job pronto, the commissions you earn as a Realtor can help sustain you while you polish your skills as a real estate investor.
Con: Getting Licensed Takes a Fair Amount of Work
Scoring a gig as a Realtor takes more than just showing up at a brokerage and saying, “Hire me.”
You have to, you know, actually get licensed.
That involves taking a lengthy course, followed by passing at least two exams (one based on federal laws, the other on your state’s housing laws). Most states also require ongoing education requirements.
This raises a separate point: The courses don’t teach you a single piece of practical real estate knowledge. They only teach you about legal compliance — something every agent worth their salt needs to know backward and forward.
In other words, they don’t prepare you one bit for the nuts and bolts of working in the modern real estate industry. No marketing strategies or negotiating tactics are taught — just the tedium of complying with Fair Housing laws.
The actual skills you’ll need in the real estate business you’ll need to learn on the job.
Con: You Need to Be Hired (and, Ideally, Trained)
We’ve already touched several times on how Realtors need to work under a licensed broker.
That means you need to find a broker willing to hire you when you have no experience — not the easiest task.
If you’re only interested in becoming a real estate agent for the side benefits (like direct access to the MLS) and don’t actually want to do much work as a Realtor, getting hired may pose a challenge. After all, how many brokers want to hire agents who won’t produce any clients or revenue?
Then, there’s the training we mentioned above. Don’t expect any practical training from your course or exams – practical skills come from your broker and senior agents who can mentor you (sometimes for a price).
And brokers who provide quality training expect quality results (a.k.a. lots of closed deals).
Con: You Need to Disclose Your License as an Investor
Think you’re going to become some kind of stealth real estate investing ninja, scoring deals without anyone knowing your secret Realtor superpowers?
It doesn’t work like that. Legally, you have to disclose to sellers that you have your real estate license.
That means every seller will know that you’re a pro and that your offer probably isn’t for full market value.
Likewise, when you list your own property, you’ll need to disclose that you’re both the seller and the listing agent.
The Verdict: Should Your Get Your Real Estate License as an Investor?
There are good reasons to get licensed and master the skills of both a Realtor and an investor.
In addition to the advantages outlined above, a greater understanding of the marketing and selling side of the business will help you score better deals as a flipper.
If you’re genuinely interested in building a real estate agent business, then yes, absolutely get your real estate license. Start with a brokerage deeply committed to training and developing new agents, so that you can learn on the job as quickly as possible. Even if that means paying half your commission to your broker.
As you grow in skill and develop a wider client base, you can negotiate with your broker for a better commission split. Or you can simply move to a brokerage with a better compensation package.
Earn money, soak up knowledge, maximize the advantages offered in being a combination Realtor-investor.
But if you only want to save money on listing fees? Forget it – getting licensed is just not worth the hassle.