As a real estate investor and house flipper, I frequently get asked if I need to have a real estate license to flip a house. The quick answer is no and there is no law that says you need to have a real estate license to flip houses. It can be beneficial to have a real estate license because you can sell a deal without paying commission to an agent.
A real estate investor buys property with the intent of making money, either through passive cash flow or adding value by improving the house. In neither case do you need a real estate license, but it can be helpful for a fix & flipper to have one.
For example, I personally have a real estate license, and that’s given me helpful experience in the industry. I often don’t sell the house myself, but I could if I wanted to, especially if my profit margin is tighter than I would like.
Here’s a quick run-down of a fix & flip:
Fix & flip is when you buy a property in need of some repairs for a discount. You spend 60-120 days repairing the property, usually by hiring a contractor to do the work. Then it’s time to sell your fixed-up property at a higher price because you’ve added value to it.
Check this video for a quick overview:
When a Real Estate License is Not Needed
If you want to start fixing and flipping, you don’t need to be a real estate agent. Instead, you can hire a real estate agent to sell that property for you after flipping, especially if you don’t want to deal with the selling process. If you end up hiring a real estate agency, here is the list of questions to ask your realtor.
You can also sell the house yourself—called for sale by owner—which means you don’t need a real estate agent at all. I recommend against this, but it’s an option.
When a Real Estate License is Needed
Although you are not required to have any type of real estate license in the fix & flip process, having a real estate license has many benefits. I know many real estate investors and house flippers. Many of them (including me) have a real estate license especially when they do house flipping full time.
When will you want to get a real estate license vs working with a real estate agent? There are several scenarios here:
1.When you want to list your property on the MLS
MLS is the multiple listing service for properties, meaning that it has the largest database for available properties. Although you don’t need a real estate license to access houses on sale, you do need either a real estate license or work with a real estate agent to list your properties there. Listing your properties on the MLS exposes your house to a larger amount of potential buyers and has a higher chance of closing your sale.
2. When you want to save some commissions
When you hire a real estate agent to sell a house for you, you will need to pay commissions when the deal closes. It’s typically 5-6% of the sale price. If you have a real estate license yourself, you can save that commission. Again, you are paying a premium to someone else for not doing it yourself.
3. When you want to understand real estate rules and regulations
The process of obtaining a real estate license is a learning process. You’ll be surprised at how much knowledge in real estate you will learn. If you want to invest long-term in real estate and you’d like to further your education, spending some time to get your license wouldn’t be a bad idea.
4. When you want to network with contractors for long term partnership
Getting a real estate license will open your door to network with local contractors. When you know more good contractors by word-of-mouth recommendations, it’s easier for you to start and complete your flip projects, which is an essential part of your house flipping business.
How to Get a Real Estate License
If you understand the benefits of getting a real estate license and would like to invest time and money to get one, here is a step-by-step guide to obtain one:
1.Check Your Eligibility
The requirements to get a real estate license vary from state to state. You need to check the requirements in your local state. In general, you need to be a US citizen to become eligible to register for the exam.
2.Take a Pre-license Course
Take a pre-license course to help you prepare for the exam. A minimum number of hours is required to pass the exam, so check your local requirements.
3. Pass the Licensing Exam
The next step after you have finished the course is to take the exam. You need to sign up to take the exam on the local testing site and it usually consists of two exams, one for state and one for national regulations.
4. Activate the License
When you pass the exam and need to activate your license, you’ll usually need to pay a one-time activation fee between $200-$400.
5. Get MLS Membership
To list properties on the MLS, you’ll need to get access to it first by becoming a member. An MLS membership costs several hundred dollars each year, depending on the state. When you pay the membership fee, you’ll be all set to start listing your properties on the MLS!
Common Misunderstandings for Starting Fix &Flips
If you want to start real estate investing, the very first step is actually not to get a real estate license. Lots of people say “I’m just going to get my real estate license first.” In reality, the more important thing to do is to jump in and start looking for deals. Waiting for your license is a delay tactic.
To make deals happen, you need to do lots of research to find good deals on the market, make offers, negotiate a fair price, rehab the house, and then sell it. Our blog has lots of information about house flipping which can help you get started with fix & flips easily.
In summary, a real estate license is not required to be a real estate investor, nor is a real estate license required for you to sell your own property, but we do recommend hiring an agent when you are selling your property because their expertise is worth it. Plus, you can start on your next project while your agent deals with the sale.
However, we don’t recommend you run out there and just go get your real estate license. If you already have it…great. If you don’t have it, you can still be a great house flipper. A real estate license is something to think about as you get further into your investing.
Check out our blog and our Youtube Channel to learn more tips about real estate investing!