If you’re interested in real estate investing and are looking to own real estate, become a house flipper, or buy an investment property to rent out, you might be asking yourself: “Do I need a real estate license to get the job done?”
Investment sales requires a license, real estate rental brokerage requires a license, and being a lender requires a license. But, what about flipping houses?
Well, you’ve come to the right place.
If you are someone who wants to become a successful real estate flipper and buy good real estate investments either as a side hustle or a full-time gig, you must understand the ins and outs of the business. And, that first step is understanding the license requirements - if any - needed to crush it in the house flipping business.
Let’s dive in.
You can definitely flip houses without a real estate license. You don't need a real estate license to flip a house.
When you purchase a house to fix and flip, you become the legal owner of the property. Real estate owners receive a bundle of rights or legal privileges to their property, including:
Among these property rights, the right of disposition preserves property owners' right to sell the property and transfer ownership permanently to another party, with respect to any outstanding liens such as mortgages.
A real estate license is a document issued at the state-level by each states’ Department of Real Estate. The license allows an individual to mediate a real estate transaction between two parties in exchange for a sales agent commission.
Typically, a license is used to gain access to the Multiple Listing Service (MLS) marketplace and have the lawful ability to help homeowners and buyers negotiate a price for a sale.
Who is required to have a real estate license? Any individual acting in the capacity of a real estate broker, real estate agent, or property manager on behalf of other individuals generally requires licensing.
Usually there is a buyer's agent representing potential buyers and a listing agent representing the seller.
The only barriers to become successful in flipping houses are education, grit, determination, and access to money - not licensing.
However, although it isn’t required, you might want to consider getting a license anyway. Read on to learn the benefits of having a license as a real estate investor.
The difficulty associated with getting a real estate license varies from state to state. For the most part, the qualifications, time, and effort aren’t too difficult or time-consuming. You’ll have to study the material - likely for a minimum of 3 to 6 weeks - and take a licensing exam. That’s it!
If you pass you become a licensed agent.
Well, what does that mean for flipping houses?
To actually conduct a flip, it doesn’t mean anything. But, you’ll still want to consider getting one.
Why? With or without becoming a real estate broker you’ll be able to oversee construction, purchase the materials, hire the staff, and sell the finished product.
However, if you have a real estate license, you’ll be able to have access to the MLS, broaden your network, forgo any listing commissions paid during the selling process, and be able to list your own property without any help.
When flipping houses, it is essential to keep expenses to a minimum and profit margins high. Having a real estate license and saving on costs could potentially make or break that investment. At the very least, it can juice up your overall deal profits.
We’ll discuss the benefits in more detail below, but for now, just know there are very real, tangible benefits associated with taking the time to get licensed.
Great, so a license isn’t necessary, but it’s a good idea - what about other certifications?
There are none. Anyone, with the proper education, can flip a house as there are very few barriers to entry.
The market is ripe for disruption and froth with potential. Crunch the numbers and dive in, because all you need is the right opportunity - no certifications necessary.
Yes! Not only can a REALTOR® flip a house, but it would also be financially prudent to do so.
Why? Because they can reduce or eliminate certain expenses associated with flipping houses.
Like what? Brokerage commissions.
Nine times out of ten, buyers and sellers use a Realtor to help list properties on the MLS. If the property sells, Realtors can rack in 3% - 6% of the purchase price just in real estate commissions.
If you are a Realtor, you can forgo these costs entirely and just be your own agent, or list the property at a reduced rate for yourself or other investors.
When dealing with flips, every ounce of savings will directly impact your return on investment (ROI).
Being your own Realtor could truly make or break an investment viability and allow you to bid on a higher sale price and still make more money than your competition.
There are a handful of ways you can make money with a real estate license. We’ll boil them down into two separate categories:
Investment sales is the business buying and selling of real estate properties for others. A real estate agent gains clients through cold calling, networking, and canvassing buildings and gains a commission by finding a buyer and representing the seller in the transaction.
Typically, investment sales real estate agents will earn as much as 6% on a transaction. If you sell a $1,000,000 home, that’s $60,000 right off the bat.
Not bad at all!
Although investment sales is a great way to make some cash, the choppiness and unpredictability behind the industry often deters agents away from that line of work.
It could take as long as six months to lock in a deal.
Rentals - such as multifamily investment properties and single family homeowners looking to lease-up units - are another great avenue to put a real estate license to use.
Agents represent buildings or list their services on companies like Zillow, Naked Apartments, and Street Easy in exchange for a small commission. If the agent finds a tenant for the rental owner, the owner will typically pay out a percent commission or one-month fee.
Although the payouts are smaller, they are a lot more consistent and predictable.
Brokers can also manage other peoples’ rentals to ensure tenants are happy and taken care of.
Using your services in the rental market can be a great way to make steady income with a license.
There are tons of benefits for being a real estate agent as an investor. They include:
As mentioned above, real estate agents typically charge 3% - 6% on any given sale. By being your own agent, you can avoid this entirely.
In a world where you are looking to secure a nice profit, being your own agent can put more money into your pocket to funnel into more opportunities down the line.
The flipping industry is a game of volume and numbers. A successful investor needs to score the market for the right opportunity and pounce as soon as it surfaces.
Having access to the MLS will provide more opportunities than the typical Zillow and Trulia search.
Being an agent will give you access to these opportunities and increase your likelihood of finding the right property exponentially.
Networking is essential in the real estate world.
Being an agent will give you access to other agents, databases, and investors. These contacts will be invaluable to you as you bounce ideas off them and score the markets for potential opportunities.
Knowing other agents will put you in a great spot to source more properties and, in turn, make more money.
Finding the right agent with the right drive to earn money can be difficult.
In flipping, every minute that goes by is a minute wasted. If you elect to list the property yourself, you don’t have to wait around for the right agent to field phone calls and inquiries for you.
Taking out the middleman can mean a much quicker selling process for you and your properties.
A much quicker process is, more often than not, more money and a quicker turnaround for you.
If you want to list your house on your own, you’ll have to get the requisite paperwork in order. Sometimes they can cost upwards of $500 to get the right contracts set up.
However, if you are your own agent, you’ll get access to all the necessary documentation for free.
It seems like a small benefit, but if you are flipping multiple houses and contracts a year, the fees can add up tremendously.
The real estate industry is one of the most fast-paced industries. Keeping up with your education on latest trends, data points, and markets is essential in being successful.
As a real estate agent, you’ll get access to educational resources, courses, and training that can help you and your pursuit for professional excellence.
Referral commissions are when a licensed agent refers a client to another agent or broker, then gets a percentage of the commission the other broker earns on the sale (usually 25%).
This can be on the listing side or the buying side.
As a real estate agent you’ll likely meet other like-minded agents working in the surrounding market. As an agent, you can assist them in their broker services by referring various clients to them that might not necessarily meet your particular area of expertise.
Perhaps you specialize in one city and they specialize in another.
Referring a client to them could end up being very lucrative for both of you without having to do much extra work.
This extra cash can be used towards other flips on the horizon.
Check out this video on the job of a real estate agent. It focuses on Maryland, but the laws are very similar from state-to-state.
If you are selling real estate for another party, then yes, you’ll need a real estate license to sell houses.
When you are the owner of the property that is being sold, a license is usually not required.
In some real estate markets like Michigan, if you sell more than a certain number of houses in a year, then you'll need a license.
Check with your state regulations and always do your own due diligence because being a part-time agent and flipper can be very lucrative - assuming you are doing everything by the book and inside the law.
Read Also: Is Wholesaling Real Estate Legal?
So, you don’t have to be a licensed agent to flip houses, but what about getting a general contractor license?
You don’t need a general contractor license to flip houses. However, if you can manage the rehab process of a flip on your own - i.e. being your own general contractor - you’d save a lot of money.
General contractors facilitate the renovation process. They hire the staff, order the materials, and conduct the renovation. If you have a trustworthy contractor - great - but if you don’t, you might want to learn how to manage the renovation on your own.
Watch out for expensive contractors with tons of red flags! They can be costly.
In the process, you’ll save a ton of money on renovation costs.
You definitely don’t need a business license to run a house-flipping real estate business. The playing field is wide open for the taking.
If you’ve got the money, dive right in. No business license required.
That said, a best practice in flipping houses is to use a business entity, such as a Limited Liability Company, also referred to as an LLC.
Using an LLC to flip houses has a range of benefits, from protecting an individual's assets by keeping them separate from the real estate business to allowing tax-deductible expenses not available to individuals.
You don’t always need a permit to flip a house. Permits may be required depending on local building costs and the extent of the renovations being done.
Work such as adding square footage or additional structures, adding bathrooms, bedrooms, or making significant changes to plumbing and electrical typically require permits.
Check your county zoning laws to ensure you aren’t building an illegal structure - i.e. a multi-family or office in a single-family home area.
But, other than that it’s unlikely you’ll need any permitting to conduct a typical flip.
No, a real estate license is not necessary to be a landlord!
Being a landlord is a great way to make monthly residual income by renting out properties to tenants.
Flipping houses often requires managing major renovations on multiple properties over the course of several months to result in a large payday.
Being a landlord can be a great alternative if you are looking for more consistent cash flow generation without doing a ton of work.
No license necessary to be a wholesaler!
Wholesaling houses is one of the best ways to make money as a real estate professional with little to no money down.
Don’t worry about licensing - take one of our wholesaling courses and dive right in.
You'll be selling homes and flipping contracts in no time.
No, you won’t need a license to flip a house in California.
California has been an incredibly hot market over the last five years.
With big technology companies making waves in Silicon Valley and Palo Alto, real estate prices have gone up tremendously.
If you can snag a nice house flipping opportunity, pounce on it because the opportunity won’t likely last.
Check out the California Department of Real Estate for all the requirements to obtain your California real estate license.
Like California, Texas does not require licensing to flip a house. However, it might still be a good idea to get a brokerage license to save costs.
Over the years, Texas has been going through a massive real estate growth phase.
Austin, San Antonia, and Dallas have turned into hubs for millennials looking for cheap housing and bustling city life. Large companies have also begun to make the push to the state to access some of this young talent.
The market is hot and will likely stay hot for a while.
If you can find a flip, seize the opportunity quickly because it won’t last long.
Flipping houses is one of the most lucrative opportunities in the real estate field.
Although you don’t have to get licensed as an agent, contractor, or business to get started, you might want to consider it to save costs.
Bottom line, the real estate game is a game of numbers.
If you can find an opportunity that’ll set you up for financial freedom, it might be the right move to get your real estate agent license to be quicker, smarter, and more cost-efficient than the competition.
But, at the end of the day, if you’ve got the determination to succeed, that’s all you’ll need.
Go get ‘em.
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