Believe it or not, you don’t actually need a real estate license to sell, buy, or invest in real estate. Licensure is only required if you’re representing someone in the purchase or sale of a property, which is exactly why some investors tend to feel conflicted when it comes to the idea of getting their licenses. Because most investors are only involved in the industry for the supplementary profit stream sourced through passive income.
Yet for investors who, over time, have become more deeply involved in their personal real estate investment initiatives and perhaps now manage multiple properties but are still looking to take their business one step further, the licensing debacle tends to arise–to get a license or to not get a license?
When most investors arrive at this crossroad between investorship and agency, the easiest solution might seem to be to just go ahead and embark on the licensing journey. What harm could being ultimately overqualified do? Well, while there are pros to being a licensed agent compared to an unlicensed investor, such as commission benefits, MLS access, network growth, etc., all of these perks come at a price consisting mostly of your precious time and money. In this article, we’ve consolidated the five most important things to consider prior to pursuing the licensing process.
- 1 The licensing process will likely be more drawn out & time-consuming than you think.
- 2 Being a real estate agent isn’t a feasible side hustle in the same way that investing is.
- 3 Getting your license will be a financial investment in itself.
- 4 You’ll be exposing yourself to increased liability and compliance risks.
- 5 Don’t expect to be facilitating sales right off the bat.
The licensing process will likely be more drawn out & time-consuming than you think.
The number of completed pre-licensing course hours required in order to be eligible to apply for the licensing exam itself varies between states. On average it can take between 4-6 months to satisfy the prerequisite education courses. And that doesn’t even take into account exam preparation and then the exam itself. Again, the length of the exam varies by state of licensure but typically it can be up to 3 hours long. So actually obtaining your license is a process that takes several months, also assuming that you nail the exam on your fist go-around.
Being a real estate agent isn’t a feasible side hustle in the same way that investing is.
Most real estate investors, both amateur and seasoned, typically find themselves in the business of buying and managing rental properties as a side hustle. Investing in income properties has proven itself to be an incredibly lucrative way to maintain a relatively hands-off profit stream. But don’t anticipate the same level of passivity if you plan on becoming a part-time agent. In fact, if you aren’t dead set on using your license to become a full-time agent, it’s probably in your best interest to remain on the investment side of the industry. Being partially on the clock, and then off, can prove to be especially difficult to maintain as a real estate agent when trying to cater to the schedules of buyers, sellers, brokers, lenders, etc.
Getting your license will be a financial investment in itself.
Expected an upfront investment of at least $1,000 in the licensing process. Course fees, exam preparation, materials, and the test itself can cost you around $400. You also need to anticipate any dues or hidden fees from regional and federal liaisons. There are also free real estate classes available, but these usually don’t award you any credit and won’t serve you to get a real estate license. On the other hand, it’s always worth to educate yourself more in the field for both active or prospective agents. Check our own list of top free classes here: https://www.zilculator.com/free-real-estate-classes/
You’ll be exposing yourself to increased liability and compliance risks.
Once you receive your license and begin working with a specified brokerage, be prepared to commit to regulations that you might not be familiar with if you’ve only ever been working as an investor. While investors typically exercise the freedom to switch between brokers per each property transactions, agents are actually employed by the selected brokerage and therefore somewhat bound to be allegiant to said brokerage in a way that investors don’t have to worry about.
Agents are also held to different disclosure obligations than landlords, so to avoid any inadvertent legal breaches, but sure to be well-versed with mandated disclosure documents in your state.
Don’t expect to be facilitating sales right off the bat.
Once you receive your official license, you’re not going to automatically be a hot commodity to prospective clients. You first need to earn your place in the local industry by building a reputable name in your community. Here just some of the first steps you’ll need to take to build your real estate brand from inception to scale:
- Select a fitting brokerage agency
- Establish a marketing budget
- Build your network as much as possible
- Consider becoming a member of the NAR
Despite being an exhaustive process, getting your real estate license can be a really rewarding process. As long as you’re sure that becoming an agent is a path you’re committed to for the long-run, becoming an agent can bring an edge to your real estate involvement that part-time investment can’t contend with.