Do You Need a Real Estate License to Flip Houses?<\/span><\/h1>\n

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About the author:<\/i><\/b> G. Brian Davis is a real estate investor who has owned dozens of investment properties over the last 15 years. He\u2019s also the co-founder iof SparkRental.com, an online resource which provides free landlord education and video series for anyone looking to build passive income from rentals.<\/p>\n

As someone who teaches real estate investing, it\u2019s a question I hear all the time : \u201cDo I need a real estate license to flip houses?\u201d Often followed by its close cousin: \u201cDo I need a contractor\u2019s license to flip houses?\u201d<\/p>\n

The answer to both is \u201cno\u201d, as most real estate investors don\u2019t have either license. The real estate licensing exam has more to do with laws and regulations than it does the business of real estate. It certainly doesn\u2019t cover the fundamentals of how to invest in real estate or how to form a house flipping business plan.<\/p>\n

However, that doesn\u2019t mean the licenses aren\u2019t useful. Quite the contrary, in fact! Here are some of the benefits of a real estate license for house flippers, along with the drawbacks, to help you make the right decision for your own real estate investing business.<\/p>\n

About the author: G. Brian Davis is a real estate investor who has owned dozens of investment properties over the last 15 years. He\u2019s also the co-founder of SparkRental.com, an online resource which provides free landlord education and video series for anyone looking to build passive income from rentals.<\/p>\n

As someone who teaches real estate investing, it\u2019s a question I hear all the time : \u201cDo I need a real estate license to flip houses?\u201d Often followed by its close cousin: \u201cDo I need a contractor\u2019s license to flip houses?\u201d<\/p>\n

The answer to both is \u201cno\u201d, as most real estate investors don\u2019t have either license. The real estate licensing exam has more to do with laws and regulations than it does the business of real estate. It certainly doesn\u2019t cover the fundamentals of how to invest in real estate or how to form a house flipping business plan.<\/p>\n

However, that doesn\u2019t mean the licenses aren\u2019t useful. Quite the contrary, in fact! Here are some of the benefits of a real estate license for house flippers, along with the drawbacks, to help you make the right decision for your own real estate investing business.<\/p>\n

What can you do with a real estate license?<\/h2>\n

Licensed real estate agents have access to the Multiple Listing Service (MLS), the online platform where homes are listed for sale. Only licensed Realtors can list properties for sale on it and can collect a commission for supplying the buyer for a real estate transaction.<\/p>\n

Beyond being a seller\u2019s agent or a buyer\u2019s agent, licensed real estate agents often work in property management as well, combining their skills and ability to earn. They may advertise vacant rental units, screen new tenants, collect rents, oversee repairs, and of course, list the property for sale when the owner decides to sell.<\/p>\n

While websites like Zillow and Trulia make most data from MLS listings public, they don\u2019t have full access. Their access is also delayed, often by as much as a day or more\u2014a long time in the world of finding deals as a real estate flipper.<\/p>\n

4 benefits of a real estate license<\/h2>\n

Before deciding whether to get a real estate license for your house flipping business, here are a few of the benefits of a real estate license.<\/p>\n

1. MLS access can help you find deals<\/h2>\n

One of the greatest challenges in flipping houses is finding good deals. But direct access to the MLS means you\u2019re the first to be notified of new listings, making it far easier to find houses to flip.<\/p>\n

When a bargain-priced property lists on the MLS, often it goes under contract within hours. Speed is one competitive advantage that house flippers can cultivate, especially with the aid of a real estate license.<\/p>\n

2. Multiple sources of income<\/h2>\n

It\u2019s hard to quit your job and flip houses full-time in the absence of experience. But new investors can ease their way into flipping houses by getting their realtor\u2019s license first, and using their real estate agent commissions to help cover month-to-month expenses while they start flipping houses.<\/p>\n

After all, flipping a house takes months, and flippers only get paid at the very end. It makes for uneven and irregular income!<\/p>\n

3. Networking<\/h2>\n

Real estate investing is a team sport, and the more people you know in the local real estate industry, the better.<\/p>\n

As a realtor, you\u2019ll meet not only other real estate agents, but also investors, contractors, appraisers, home inspectors, wholesalers, and other industry players that can only serve to help your house flipping career as well. The old adage that \u201cyour net worth depends on your network\u201d proves doubly true in the real estate investing industry.<\/p>\n

4. Lower closing costs<\/h2>\n

When most house flippers go to sell, they pay a listing agent to market their home for them on the MLS.<\/p>\n

One reason to get a real estate license to flip homes is that you no longer need to pay a listing agent \u2013 you can list your own properties for sale. That can reduce your soft costs by thousands of dollars, and create another competitive advantage for you. You still need to pay the buyer\u2019s agent however, usually 2.5-3.5% of the sales price.<\/p>\n

Keep in mind that you also need to do the marketing work, such as distributing flyers and hosting open houses, that you would otherwise be delegating to a Realtor.<\/p>\n

Should I get a real estate license to flip houses?<\/h2>\n

Earning a real estate license costs time and money, which may be worth it to you, or may not.<\/p>\n

The mandatory course usually takes months to complete and covers very little in the way of practical knowledge. I know\u2014I\u2019ve taken it.<\/p>\n

Most of the course and exam materials cover state and federal housing laws. Upon passing the exams, you must then obtain a position working underneath a licensed broker in order to practice as a real estate agent. Expect to learn the practical skills of real estate marketing on the job, not in a classroom. Also, bear in mind that you need to disclose your status as a licensed Realtor when you buy or sell properties.<\/p>\n

So, do you need a real estate license to flip houses? You don\u2019t need it, and becoming a knowledgeable agent may require a nearly full-time commitment from you, but it can also help you hone competitive advantages for your house flipping business.<\/p>\n

Do I need a contractor\u2019s license to flip houses?<\/h2>\n

As with real estate license, you don\u2019t need a contractor\u2019s license to flip houses, but it can be another type of competitive advantage for you.<\/p>\n

Before the overwhelm sets in, don\u2019t feel obliged to get both licenses, or either one, until you know you want to pursue a full-time career in real estate. Instead, spend some time shadowing people who do it full-time. Get to know the industry before committing to a license.<\/p>\n

The most important point is not to let licensing questions prevent you from investing. Don\u2019t sit under the spell of analysis paralysis because you feel so overwhelmed with all these licenses!<\/p>\n

With that said, here are a few pros and cons of getting your contractor\u2019s license to help you make your decision.<\/p>\n

Lower renovation costs<\/h2>\n

If you do the renovation work yourself, you can save thousands of dollars on labor costs. Of course, you also have to do the work, which you may not have much time for if you keep a separate full-time job. Remember, the longer you hold the property, the higher your soft costs and the lower your velocity of money.<\/p>\n

But for those who love working with their hands, renovating your own flips can be both fun and rewarding. Finally, you can avoid markups on costs like materials, since you\u2019ll be buying them directly rather than paying a contractor to buy them as part of the scope of work.<\/p>\n

Lower permit costs<\/h2>\n

When you hire a general contractor to pull permits for you, they typically charge you for their trouble. But if you\u2019re licensed yourself, there\u2019s no excuse not to pull your own permits. Granted, property owners can file their own permits without a license, but the work itself must be performed by a licensed contractor.<\/p>\n

As a licensed contractor yourself, you can hire employees for far lower hourly wages than you could pay a licensed contractor. It\u2019s yet another way you can reduce how much it costs to flip a home.<\/p>\n

Better renovation cost forecasting<\/h2>\n

When you do renovation work yourself, you have a far better grip on what renovations actually cost.<\/p>\n

You can walk into a home and quickly estimate the scope of work, based on direct experience rather than guesswork. It makes your cost forecasting both faster and more accurate\u2014an excellent advantage over your peers.<\/p>\n

Lower risk of contractor default, theft, or poor workmanship<\/h2>\n

When you hire a contractor, you entrust them with an asset worth tens or hundreds of thousands of dollars. It requires enormous trust.<\/p>\n

But if you know how to complete renovation work yourself? You don\u2019t need to hand over the keys to a stranger and hope they don\u2019t butcher your property. Sometimes being able to sleep soundly at night is the greatest advantage of them all.<\/p>\n

More stable income<\/h2>\n

Just as licensed real estate agents can supplement their house flipping income with real estate commissions, contractors can do work for other investors and homeowners.<\/p>\n

It\u2019s also a great way to network and get to know the other investors in your area!<\/p>\n

So, should I get a contractor\u2019s license to flip houses?<\/h2>\n

Unlike getting a real estate license, which takes weeks or months, it can take years to develop the skills needed to become a licensed contractor. If you love renovating properties and would be happy doing it as a career, then by all means, get your contractor\u2019s license. But if you\u2019re only looking to save a few bucks on your flips, there are easier ways to do it.<\/p>\n

Learning how to work with contractors plays a crucial role in your real estate investing education and success. Even if you get your contractor\u2019s license, you\u2019ll still need to work with other specialists, such as HVAC experts when the furnace needs servicing. And unfortunately, part of your education in working with contractors is learning how to deal with bad contractors.<\/p>\n

Final word<\/h2>\n

Do you need a real estate license to flip houses? A contractor\u2019s license? No. Most investors don\u2019t get them.<\/p>\n

But if you decide you\u2019re committed to a career in real estate, choosing either a real estate license or contracting license can open more doors and create competitive advantages for you. Before making such a decision, spend some time shadowing a licensed real estate agent or contractor to get a rounded sense for their average workday. While you\u2019re at it, spend some time shadowing flippers to learn the industry. You\u2019ll learn shorthand rules of thumb like the 70% Rule, and tips for selling homes for maximum price in minimum time.<\/p>\n

Most of all, don\u2019t be intimidated by a lack of cash. You can start flipping houses with as little as 10% down, as lenders like LendingHome offer bridge loans for up to 90% of the purchase price and 100% of the renovation costs.<\/p>\n

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