There are six pros and four cons for having a real estate salesperson’s license while being a real estate investor, even being a part-time investor like me. This month we just added a full lecture to the Smarter Investing home study course that describes all of these pros and cons.
In this article, I will share the most valuable benefit I enjoy as an investor by having a real estate salesperson’s license. Spoiler alert: the #1 benefit is not simply having access to MLS since an administrative assistant can have that.
The most valuable benefit to me for having a real estate license is being able to visit any house listed on MLS any time I want and as few or as many at a time as I want, without bothering anyone else and without the abusing others to show me houses that I have no intention to buy.
Why is this such an important benefit? There are several reasons.
There are many cases in which the immediacy to visit a property and make an offer in an urgent and timely manner can be the difference between getting a good deal and missing that opportunity. This often happens when a property is first listed and sometimes it happens when I discover an opportunity “late” that was listed on MLS and just fell through the cracks, maybe two or three weeks after I should have seen it and other investors should have seen it.
The moment I discover the opportunity, I can immediately schedule a visit for myself. If the house is vacant, I can usually see it within an hour and make an offer within two hours. I have won HUD home bids that way since a winning bid on a HUD home takes it off the market the very next day.
If I didn’t have a license and had to contact an agent to see the house at that moment, the agent may not be available to show me the house at the drop of a hat.
There is also a limit to how many times you can snap your fingers and have agents drop everything they are doing to show you one house that you may or may not buy then do that over and over again.
2. Ability to Refine ARV to Within $5,000 Accuracy that Enables Optimizing the Maximum Allowable Offer
The maximum allowable offer (MAO) is a crucial number to calculate since in real estate you “make money when you buy.” If I visit every single house for sale or for rent in the neighborhood, none of which I have any intention to buy (i.e., wasting the time of an agent), I can calibrate the after repair value (“ARV”) of the house I intend to buy against the condition and price of every other house for sale. That enables me to refine my uncertain speculated ARV with greater accuracy for the MAO calculation and make a better offer than other investors who lack the information I am able to obtain by visiting the other houses without bothering an agent.
If my ARV estimate is $5,000 closer to reality than the ARV estimated by other investors, I am more likely get the deal. Alternatively, if I make an extra $5,000 on non-competitive deals due to the better resolution of ARV before making my offer, the extra 2-3 hours of work is very much worth it to me. Imagine making an extra $5,000 or $10,000 for an extra few hours of data collection. Lazy investors don’t know what I know, so I make more money based on the competitive advantage of knowledge and information resulting from the combination of having a license and investing the effort.
3. Study the Competition for Overcoming Buyer/Renter Objections During Negotiation
When the time comes to list my property for sale or for rent, I already know the condition and prices of the houses that are no longer on the market because I toured them before they were sold or rented.
Moreover, I am aware of the condition and price of every single house on the market at that very moment that may be considered by prospective buyers or renters. So, I know the competitive advantages of my property over all other properties seen by the prospects and I know how firm or flexible I must be to close the deal during the negotiation. The information on the competition is often worth thousands of dollars during the negotiation.
Again, it is not ethical to ask an agent to show me every house that comes up for sale or for rent in the neighborhood that I have no intention to buy. When I am my own agent, of course I am willing to show myself every house, one at a time, as each one hits the market.
4. Learn a New Neighborhood
I specialize in certain subdivisions and neighborhoods and I am an expert in their prices, layouts, finishes, amenities, etc. for evety house style in those neighborhoods. What happens when I come across a deal or get pitched a deal by a wholesaler in a new neighborhood with which I am not familiar? Since I have a license, I can show myself as many houses as I need, at my convenience, until I feel confident that I learned that neighborhood sufficiently to make solid profitable offers.
5. Know the Standard Finishes for the Specific Neighborhood and Price Point
An important factor in achieving highly profitable flips and rentals is knowing what to renovate and how to avoid over-renovation. In some areas, a $150,000 house requires granite countertops to be competitive while other neighborhoods at the same price point are OK with laminate countertop. The difference may be $1,000 for that countertop. Is it worth it for me to visit the competitive homes before renovation to save $1,000? Yup. There are many such costly renovation decisions in every house such as the ability to save or requirement to invest an extra $3,000 in a bathroom, an extra $2,000 in hardwood floors, an extra $1,000 in lighting, etc.
Having the ability to show myself as many homes as I want, when I want, puts at least an extra $10,000 in my pocket on every 1-3 projects due to avoiding over-renovation and I am just a part-time investor who averages buying only a couple of houses per year. The cost and hassle of the license pays for itself in avoiding over-renovation.
When you add up the impact on profit of all these benefits that result just from my ability to see as many or few houses as I want, when I want, the incremental profit adds up to a significant amount of money that is 10-100 times what I pay for the license, fees, continuing education, etc. depending on the deals I do in a given year. So much so that I make the same amount or more than other investors but with less houses to buy and manage.
This doesn’t even take into account the other benefits of having a license such as the thousands of dollars commissions that I apply to profit when I buy and sell, that definitely affect the bottom line.
If you want to get the full picture of the pros and cons of having a real estate salesperson’s license as a real estate investor, including as a part-time real estate investor, now watch the lecture in the Smarter Investing home study course entitled “Should a Real Estate Investor Get a Real Estate License?” This is just one lecture in the 22-hour series that teaches you the pros, cons and decision making for the multiple real estate investment strategies and tactics that you must execute to maximize your profit. Calculate the return on your investment on this training and you will realize that you will make your money back many times over on your first deal.