Flipping houses is exciting, and it can be profitable. However, it is important to consider every step of the process carefully. For example, do you need to pay a real estate agent when I flip your house? The short answer is, you don’t have to pay a realtor, however, with the help of a realtor you may do the work easier.
In this article, we are focusing on the role of a realtor in the house flipping process. Here is everything that you should know, including whether you have to pay a real estate agent to finalize the job.
When do you need to pay a real estate agent?
You need a licensed realtor whether you plan on selling a home once or flipping properties in the long run.
Since a real estate agent is required by the law, you have two options:
- Hiring an agent
- Getting the license
If the exact question is whether you have to pay a real estate agent when you flip a house, the answer is no. You always have the alternative of getting that license and completing the job yourself. It is up to you to decide what is the better option for you.
Those who don’t want to enter the flipping business and are only there for a one-time project might be better hiring a real estate agent. It is cheaper and easier than obtaining a license.
However, if you plan on being in the house flipping market for a while, acquiring a real estate license can be the right move. That way, you will avoid paying an agent for every transaction and save significant money in the long run.
Depending on the realtor’s price and other project specifics, the agent’s fee might go up to 6% of the total property cost. For example, if the house costs $100K, their charges might be up to $6K. However, your selling profit might only be $10K, which means an agent will take more than 50% of your projected earnings.
Why Should You Consider Getting a License To Flip Houses?
If you become a licensed real estate agent, you won’t only be able to flip houses. Realtors can also act as:
- Sales agents – you can purchase and sell properties for others for profit.
- Leasing agents – licensed realtors can manage rental properties and act as leasing agents.
- Brokers – it is possible to gather your team and start an agency.
Many real estate investors decided to acquire an agent license since it can be quite useful in the flipping business. We singled out the critical reasons why you should consider passing a licensing exam.
No Commissions to Other Realtors
It depends on the property, but a real estate agent might take up to 5% of the total house cost per project? That might make sense for a single project, but what if you have to pay $5K or more per every house you flip? You could face profits reduced by $50K after flipping only several houses, which doesn’t sound like a smart business strategy. You can check out this article to learn more about how much house flippers make.
Additional Income Options
You probably haven’t considered it, but having a license allows you to try your luck in different real estate markets. Instead of giving someone agent commissions, you will earn them. Even if you consider this a side gig and handle several projects yearly, you can still profit up to $10K or more. That is not a sum any investor should neglect.
Learn the Basics of the Industry
You will need to prepare yourself and attend licensing courses before passing a test. That might be a hassle, but you will learn more about the market. Knowledge can be beneficial for your future investing endeavors. As long as you pick up a few tips and tricks, you might be able to maximize your profit with every project.
Get Access to Fresh Deals
Having a real estate agent license means you will have priority access to new deals. You don’t have to wait for an agent to inform you, but you might come across tempting deals sooner. That shortens the time and increases the odds of finding a potential buyer quickly.
Is It Simple to Obtain a Real Estate License to Flip Houses?
When it comes to the United States, the regulations vary depending on your location. The process of getting a real estate license starts by determining that you comply with the legal requirements. Most states demand those who want to take the licensing exam to be at least 18 years old. They might also need to have US citizenship and a high school diploma.
Here are the steps to take to obtain a real estate agent license:
- Sign up for a course – the courses vary from one area to another, but attending at least some classes is required. The entire coursework might take up to 150 hours, but you will have plenty of options to learn new things during the course.
- Pass the exam – you will take the exam that you need to pass to obtain your license. Depending on the situation in the state, you might take the exam online.
- Activate the license – this basically comes down to a fee that you have to pay. It can go up to $500, and you will need to renew the license regularly.
Once you have the license ready, you can enter the house flipping market. Another expert tip is to consider the Multiple Listing Service. This MLS is a reliable source of information whether you plan on buying or selling homes.
Is Flipping a House Difficult?
Everything seems simple for house flippers – they purchase a property, enjoy decorating it, and sell for a higher price. However, once you scratch under the surface, you realize this is not a scheme that will secure you to get rich quickly.
According to the reports, you shouldn’t expect a gross profit margin larger than 10-15%. However, the small margin means you need to move carefully when repairing the home. If you don’t predict the required repairs properly, you can even stay without profit in that project.
The data provided by the investors shows that an average return can be anywhere from $60 to $70K yearly. You want to consider that this is the return on investment, which means pure money that stays in your hands.
Here is an example of a house flipping project:
- You purchased a home for $100K.
- All the repairs and other expenses cost you $30K.
- You sold the house for $140K.
If you do the math, you earned $10K from this project. This is only a single example, and you can see that the profit is 10% of the initial house cost. That indicates real estate is a smart investment in 2020.
The critical thing to do is to assess all expenses properly. It will directly affect the potential income, which is why you should be careful when listing these costs.
Whether you need a real estate agent or not depends on your intentions in the house flipping market. If you flip the house for a single deal, it might be smarter to hire an agent. Hiring an agent is cheaper than paying for a license yourself. But if you want to invest in real estate in the long run, you can benefit from getting a realtor license. It might be costly in the beginning, but you will save a lot of money after several projects.