"No, you don't need a real estate license to flip houses."
The answer is often followed by its close cousin: "Do I need a contractor's license?" The short answer here too is no. Most investors in this industry do not hold either of these licenses and as such cannot become certified through them anyway. This isn’t surprising considering the test only covers laws and regulations related to private residential property ownership, rather than fundamentals on how to invest/form your house-flipping plan!
What is a real estate agent?
A real estate agent is a professional who helps people buy, sell, or rent a property. In order to become a real estate agent, you must pass a state-licensed exam.
A real estate agent typically works with a broker, who is required to have more experience and knowledge than an agent. In some states, agents can work independently without a broker.
The role of a real estate agent is to provide information about properties to potential buyers or sellers, help negotiate prices, and guide buyers or sellers through the process of buying, selling, or renting a property.
In order to become a real estate agent, you must be at least 18 years old and have a high school diploma or equivalent. You must also pass a state-licensed exam.
Why You Don't Need a Real Estate License
In most cases, you don’t need a real estate license to buy or sell investment properties. If you’re not working with clients, you don’t need a license. You can find deals, put them under contract, and then wholesale them to another investor who will close in their name.
You can also buy properties directly from motivated sellers without ever getting your license. There are no rules that say you can’t market for deals or even door-knock until you get your license. You just can’t work with clients or list properties for sale until you pass the exam.
The main reason why you don’t need a license is that you’re not working as an agent of the seller or buyer. You’re not representing anyone when you find deals and put them under contract. You’re simply acting as the middleman between the seller and the buyer. Because you’re not representing either party, you don’t need a license.
While you don’t need a real estate license to buy investment properties, there are some advantages to getting one. First, having your license gives you access to the MLS, which is the multiple listing service that realtors use to list properties for sale. This is valuable because it allows you to see all properties that are for sale in your market, not just those that are being marketed by investors.
Second, having your real estate license makes it easier to get funding from hard money lenders. Many hard money lenders require that borrowers have their real estate licenses because it makes them feel more comfortable lending money for investment purposes. While there are plenty of private money lenders who will lend to investors without licenses, having your license definitely gives you more options when it comes to financing your deals.
And finally, having your real estate license gives you more credibility with sellers. If you’re working with motivated sellers who are trying to sell their homes fast, they may be more likely to work with you if they know that you have your real estate license. While this shouldn’t be the determining factor in whether or not they work with you—after all, what really matters is whether or not you can make them an offer that meets their needs—it can be helpful in building rapport and trust with potential sellers.
So, do you need a real estate license to flip houses? No, but there are some advantages to getting one if you're serious about making a career out of investing in real estate. Decide what's right for you and take action accordingly!
Benefits of a Real Estate License
Even though you don't need a license, it does have benefits. Here are just a few of these benefits:
MLS = Finding Real Estate Deals
When you have a real estate license, it is easier to find deals and get houses under contract. The best thing about being in this field? You can be one of the first people aware when new listings come up! By having this type of advantage, you will be light years ahead of the rest of the market.
When you have a real estate license, you have access to the MLS (Multiple Listing Service). The MLS is a database that realtors use to list properties for sale. By having access to this, you will be able to see all properties that are for sale in your market. This is valuable because it allows you to find deals that other investors may not be aware of.
Hard money lenders
It is also easier to get money from hard money lenders when you have a real estate license. Many hard money lenders want to work with people who have their real estate license because it makes them feel more comfortable lending money for investment purposes. Without a license, you will still be able to find private money lenders; however, having your real estate license gives you more options.
Credibility with sellers
If you are working with motivated sellers who want to sell their homes fast, they might be more likely to work with you if they know that you have your real estate license. Even though this should not be the only factor in whether or not they work with you—what really matters is whether or not you can make them an offer that meets their needs—it can help build rapport and trust with potential sellers.
Lower Closing Costs
When you have a real estate license, you are able to get what is called a realtor's discount. This can save you up to 50% on commissions and other fees related to the sale of a property. The bottom line: more money in your pocket!
House flippers should get a real estate license because they can market their own properties and save on listing fees, but house buyers need an agent. The average cost is 2-3% of the sales price for agents which could add up if you're selling multiple homes at once or taking over someone else's listings in different areas where there may be competition from other brokers who work with competing companies.
Some people are born with the natural gift of gab and can haggle like there's no tomorrow. If that's not you, working with an experienced agent could save you money in the long run by getting you a lower purchase price, helping you avoid properties with too many repairs needed or even steer you away from problem neighborhoods.
Benefits of a Contractor’s License
For those who love working with their hands, renovating your own flips can be both fun and rewarding. You avoid paying contractor markups on materials that are only used for part of the project, which can save you some money. And, if you're handy with tools, you can do much of the work yourself.
You'll need a contractor's license in order to pull permits for most major renovations. In some areas, handymen or licensed electricians and plumbers can do this for you, but in others, only a general contractor can apply for permits.
The requirements for a contractor's license vary by state, but in general, you'll need to have a certain amount of experience working in the construction field and pass an exam. Some states also require bonding and insurance.
Once you have your license, you can list your business on websites like Angie's List or Craigslist to find potential customers. You can also work with real estate investors who are looking for someone to do the rehab work on their properties.