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If you are currently investing in real estate or would like to do so in the near future, you might wonder if it’s necessary to obtain a real estate license to assist with your investments. A real estate license can help you save more on commissions while also increasing your income. But do you require a real estate license in order to make investments in real estate? The answer to this question is no, but this does not infer that it would be a bad idea to obtain a real estate license.

Even though it’s not required that you obtain a real estate license before making investments in real estate, doing so can provide you with a range of notable benefits. This article focuses on the many advantages that come with a real estate license, which should help you determine if getting a license is right for you.

Benefits of Obtaining a Real Estate License

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There are multiple benefits that you can obtain by applying for a real estate license. Some of these benefits include:

  • You’ll gain access to many more deals
  • Your contact network will grow and expand
  • You can earn additional income via commissions
  • You will be able to have more control when investing in real estate

Multiple Listing Services

The most notable benefit of obtaining a real estate license is that you will have access to multiple listing services (MLS), which is a comprehensive database created by various real estate brokers to provide each other with extensive data about properties that are listed on the market. The goal of this service is to make sure that brokers can easily connect buyers with sellers. The MLS also helps to facilitate broader networking among real estate brokers in the industry.

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The real estate brokers and agents who pay membership fees are able to access an MLS. In return for the fee, real estate agents can obtain information on the properties that can be found in a specific area. This information includes complete listings, numerous photos, and details like property amenities and square footage. Keep in mind that only licensed brokers and agents are able to access an MLS, which is why it’s recommended that you obtain a real estate license before investing in real estate. While each specific MLS has its own procedures, they usually follow the rules and guidelines that have been set by the National Association of Realtors.

The rules that have been created by this association dictate that each listing will need to display the amount of commission that was earned for the seller. This commission is shared with the other broker or realtor who set up the introduction with the buyer. Multiple listing services are beneficial to both the buyer and seller. For the seller, the MLS provides them with more exposure for the property they are attempting to sell. On the other hand, buyers have many more options at their disposal and should be able to more readily find the right home. These services also help to even out the playing field by making sure that smaller brokerages are able to compete with larger ones.

You Earn Commission

The commission that a real estate agent gets refers to the fees that the agent is owed when the property is sold. The agent earns a commission when a buyer purchases the property as long as they represent the buyer. The agent for the buyer can submit offers for the property and negotiate with the listing agent. They also deal directly with the home appraisers, inspectors, closing attorneys, lenders, and any other party that takes part in the closing of the transaction. You will also be in charge of marketing, sales, and showing properties to prospective buyers.

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If you decide to obtain a real estate license, you will be able to forego using a real estate agent when investing in a property, which means that the standard commission fees they receive won’t come out of your pocket. Instead, you will act as the agent, which means that you can make money by facilitating the transaction. The commission fees that you should expect to receive typically amount to 2-3 percent of the property value. However, you’ll likely need to negotiate the commission split when you sign on with your brokerage.

The majority of brokerages have a base commission split that’s offered to newer agents. Eventually, you will have a significant amount of experience as a real estate agent, which may come with an increase in the commission split that you receive. High amounts of production may also lead to an increase in your commission split. In any regard, having a real estate license allows you to make a commission that would otherwise be unavailable to you when investing in a property.

You Are in Control of Your Real Estate Investments

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Likely the best aspect of getting your real estate license is that you will be in control of your real estate investments. When you invest as a real estate agent, all aspects of the transaction go directly through you. Without this license, you would likely need to work with a real estate agent to negotiate and submit offers, which also means that you wouldn’t obtain a commission from the property being sold. When a deal has been reached and the property is being closed on, you can also be directly involved with every element of this process, which means that you would speak directly with home inspectors, closing attorneys, appraisers, and lenders. Before you obtain a real estate license, it’s important that you understand what the process involves when working with a buyer or seller.

When you work with sellers, you will be tasked with meeting with the seller and understanding their needs. Throughout the transaction, it’s up to you to display your knowledge of the market, your negotiation skills, and your marketing abilities. Among the most important tasks for a real estate agent is to set the right listing price, which will involve studying the local real estate market and comparing the main property with other properties in the area. Once the right price has been reached, it’s time to list the property with any relevant listing service. In order to provide a comprehensive listing, numerous photos will need to be taken of the exterior and interior of the property. Finally, it’s important to stage the home correctly so that prospective buyers find it appealing.

Working with a buyer is an entirely different process and typically involves meeting with and understanding the needs that the buyer has when searching for a home. The information that you obtain from the buyer can then be used on the MLS to identify properties that match these specifications. Once the right property has been identified, you will need to plan a showing of the property while working around the buyer’s schedule. When showing a property to the buyer, make sure that you communicate every feature that they might be interested in. While touring the property, you will also have an opportunity to talk with other agents, which might allow you to obtain useful information. If the buyer is interested in the property, all that’s left to do is to make a purchase offer, which will likely lead to negotiations with the seller’s agent. During these negotiations, you will need to negotiate on behalf of the buyer’s interests.

Want to Diversify Your Real Estate Investment Portfolio?

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Obtaining a real estate license can be highly beneficial when you want to build a strong and steady investment portfolio. With this license in hand, you should have a much easier time identifying properties that would make a good investment since you will have access to multiple listing services. You will also have direct control over the entire selling or buying process, which should make it easier for you to negotiate the kind of deals that you want. By acting as the real estate agent, you should make a sizable commission by connecting a buyer to the seller, which would otherwise be impossible. Even though it’s not exactly necessary to have a real estate license before you invest in real estate, it can potentially be more rewarding for you and your investment portfolio.

*Disclaimer: The statements and opinions expressed in this article are solely those of AB Capital. AB Capital makes no representations, warranties or guaranties as to the accuracy or completeness of any information contained in this article. AB Capital is licensed by the Financial Division of the California Department of Business Oversight as a California finance lender and broker (DBO Lic. No. 60DBO-69427). AB Capital makes money from providing bridge loans. Nothing stated in this article should be interpreted, construed or used as legal, financial, investment or tax planning advice, or a substitute for thorough due diligence and the exercise of sound independent judgment. If you are considering obtaining a bridge loan, it is recommended that you consult with persons that you trust including but not limited to real estate brokers, attorneys, accountants or financial advisors.