6 Advantages of Real Estate Licenses for Investors

A real estate license is not required of an investor. After all, if you're purchasing rental property for your own business, there are better ways to spend your money than hanging a certificate in a broker's office and paying monthly dues.

It's a long-standing controversy whether or not to obtain a real estate license, and you might have been debating it yourself. The solution is more complex than it first appears.

6 benefits of getting a real estate license

While some experienced investors recommend against doing so, there are potential benefits of becoming a licensed agent.  

1. Earn a commission

When you buy real estate without being licensed, you’re potentially leaving money on the table. As a rule of thumb, a real estate commission is split evenly between the seller’s agent and the buyer’s agent, who just happens to be you!

To illustrate, if you purchase a single-family rental (SFR) for $150,000 and the commission is 6%, you could earn a $4,500 commission. That extra cash could go a long way toward paying for expenses like closing costs and prepaids like a reserve account or annual insurance premium.  

2. Access the MLS

While the MLS is traditionally the go-to source for people buying and selling their primary residence, it can also be a good resource for finding investment deals when you know what to look for.  

A home whose price has been reduced multiple times, or that has been repeatedly taken off the market and relisted, could indicate that the seller is becoming increasingly motivated. The MLS is also a great source for accessing historical data on properties and neighborhoods and running comparables. If you have your eye on a specific area, most listing services will send you an auto-alert the minute a property hits the market.  

Agents listing homes for sale on the MLS must abide by the National Association of REALTORS® (NAR) Code of Ethics and Standards of Practice, which may help investors reduce the risk of buying a problem property.

3. Learn as you earn

Working as a real estate agent with a good broker can be an excellent way to learn the ropes of the real estate industry. Brokers must supervise their agents and review all paperwork in a transaction, so you’ll gain some protection against potential legal issues that you may be unaware of.  

Brokers can also be a good source for referrals to trusted tradespeople, such as heating, ventilation, and air-conditioning (HVAC) contractors, plumbers, electricians, mortgage and insurance brokers, and title companies offering investor discounts on closing costs.

4. Network with other agents

Joining an office with many agents could help you keep your deal pipeline full. Once other agents know you’re an active real estate investor, they’ll be more likely to send opportunities your way in exchange for a referral fee or a commission split.  

You can network with other agents working for different real estate firms to broaden your network of investor-friendly agents. For example, you may run into other active agents at free educational events sponsored by a title company or by negotiating a deal on an investment property that another agent has listed. As the saying goes, the real estate investing business is about what you know and who you know.

5. Earn referral fees

Speaking of who you know, most people will assume that you’re interested in working with homeowners because you hold a real estate license. Although that may not be true, there are plenty of agents in the real estate business who help the general public buy and sell their homes.  

Instead of saying no to the leads that fall into your lap, you could refer them out and earn a small profit when a home is purchased or sold. Many real estate offices have a form to register a referral to another agent. Once the referral paperwork is entered into the system, the broker will automatically pay you the referral fee when the transaction closes.

6. Continuing education

Once you’ve received your real estate license, you’ll be required to attend continuing education classes when renewal time rolls around.  

Many companies that depend on real estate agents for their livelihood, such as escrow officers, mortgage brokers, insurance agents, appraisers, and home warranty companies, frequently sponsor free continuing education classes, often with a meal included.  

In a way, it’s like getting paid to learn skills that real estate investors need, such as marketing and advertising, writing purchase and sale contracts, avoiding common mistakes, and negotiating skills to take your business to the next level.  

How to get a real estate license

Here are the general steps for getting a real estate license:

• Research the requirements for your state.
• Attend a prelicensing course or take classes online.
• Pay a fee to schedule and take the state real estate exam.
• Pass the prelicensing quizzes and final exam.
• Submit to fingerprinting, a background check, and a criminal history report.
• Pay the state real estate license fee.
• Find a broker to hire you and activate your license.
• Join the local real estate association to gain access to the MLS.
• Attend any orientation and new-hire classes that your new broker or real estate association may require.

Final thoughts

Although it requires an investment of time and money, the barrier to entry for getting a real estate license is low compared to other professional licenses. Real estate investors may find that getting a real estate license is an excellent way to create an additional revenue stream, find more deals, and learn more about the business of real estate investing.