{"id":10531,"date":"2019-04-30T14:09:55","date_gmt":"2019-04-30T21:09:55","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=10531"},"modified":"2019-05-10T12:29:08","modified_gmt":"2019-05-10T19:29:08","slug":"do-you-need-a-realtor-license-to-flip-houses","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/do-you-need-a-realtor-license-to-flip-houses\/","title":{"rendered":"Do You Need a Real Estate License to Flip Houses?"},"content":{"rendered":"

There\u2019s no law<\/a> that says you need a real estate license to flip houses professionally. So technically you can skip the state exam<\/a> that aspiring agents have to take on your way to becoming Chip and Joanna Gaines<\/a> (though they are both Realtors<\/a>, by the way!)<\/p>\n

But we’ve spoken to investor specialists, flippers, and top agents on the subject and the bottom line is you probably want to get a real estate license if you plan to do this flipping business full-time. Alternatively, you can partner up with an agent who has flipping experience.<\/p>\n

The right choice varies case by case, but to succeed at a notoriously tough trade with razor thin margins and regulations you need to follow, the more knowledge and help you have going into it, the better.<\/p>\n

\"\"<\/a>
Source: (Charles\/ Unsplash)<\/figcaption><\/figure>\n

Don\u2019t be fooled: It\u2019s hard to make money flipping houses<\/h2>\n

House flipping<\/a> is not a guaranteed get-rich-quick scheme. In fact, home flippers generally consider a flip to be a success if they get a 10-15% gross profit margin<\/a>. That doesn\u2019t leave much room for error\u2014one major unanticipated repair could easily wipe out any profits you expect to make.<\/p>\n

What\u2019s more, 2018 data from ATTOM Data Solutions<\/a> shows that gross return on investment, or ROI, from home flipping has decreased to a seven-year low. In 2018, completed home flips yielded an average return of $65,000, down from $66,900 in 2017. (Remember that that number is simply the price the flipper sold the home for, minus the price the flipper purchased it for. The cost of repairs and renovations is not factored in.)<\/p>\n

That said, people can and do still make money flipping homes. But if you want to be among the numbers of successful, profitable home flippers, you have to know how to do it right\u2014and having a real estate license can help.<\/p>\n

\"A<\/a>
Source: (Jason Coudriet\/ Unsplash)<\/figcaption><\/figure>\n

Why should you consider getting your real estate license to become a home flipper?<\/h2>\n

Since you don\u2019t actually need<\/i> a real estate license to become a home flipper, should you put in the time and effort to get one? It depends on whether you want to pursue house flipping as an ongoing side hustle, or as an occasional hobby.<\/p>\n

If you plan on flipping a single house, pocketing the profits, and moving on, it doesn\u2019t make sense to get your license. <\/b>Instead, you should search for a real estate agent<\/a> with experience in home flips who can help you navigate the process of buying, renovating, and selling.<\/p>\n

However, if home flipping is something you enjoy and want to continue, getting your real estate license can give you some major benefits. Let\u2019s review some of the biggest.<\/p>\n

1. Bypass agent commissions<\/h3>\n

Unless you’re a licensed real estate agent, you’ll have to pay real estate agent commissions<\/a> when you set out to sell your flipped home, which will typically amount to 5%-6% of the sale price. On a $250,000 home, you’d have to deduct another $15,000 from your projected profits on the sale.<\/p>\n

2. Get an understanding of real estate rules and regulations<\/h3>\n

Knowing the ins and outs of real estate law can be a boon to house flippers, especially in regards to issues like permitting, disclosures<\/a>, and housing discrimination.<\/p>\n

For example not getting the required permits for a project can open a house flipper to liability months or even years down the road.<\/p>\n

\u201cThis happens to a lot of people,\u201d says Andr\u00e9 Kocher<\/a>, a top-selling real estate agent in Carrollton, Texas<\/a> who has spent over 15 years assisting clients to invest in and transform homes and personally fixes up houses and turns them into rentals. \u201cSay there\u2019s a pool in the yard, and when you buy the house you demolish the pool. Well, you\u2019re supposed to get a permit to do that. <\/span><\/p>\n

“If you don\u2019t disclose that there was a pool that you demolished, and you didn\u2019t get a permit because you\u2019re trying to save as much money as possible, that may not interfere with closing but it can easily become an issue later.\u201d<\/span><\/p>\n

2. Gain access to the multiple listing service (MLS)<\/h3>\n

The multiple listing service (MLS)<\/a> is a series of private regional property databases. To have direct access, you must be a licensed real estate agent in your state.<\/p>\n

One reason the MLS is so helpful for home flippers is that in hot real estate markets, there\u2019s a great deal of competition for homes that are suitable for a flip.<\/p>\n

\u201cThe most difficult part is finding houses to flip,\u201d Kocher says. \u201cIf I\u2019ve got a house that I think might be a candidate for a flip, there are going to be buyers who want to fix it up and live in it, investors wanting it, big companies wanting to buy it for rental housing\u2014it doesn\u2019t matter how bad the house is, there are going to be multiple offers on it.\u201d<\/p>\n

If you put the MLS to work for you by setting up notifications, you\u2019ll know about available properties as soon as they hit the market, giving you an advantage.<\/p>\n

3. Make connections with high-quality contractors<\/h3>\n

When you become a licensed real estate agent in your state, you\u2019ll naturally begin to meet other members of your local real estate community. As you build that network, you\u2019ll have greater access to word-of-mouth recommendations for the contractors and other building professionals<\/a> who are critical to any home flip.<\/p>\n

\u201cWord of mouth is one of the best ways to find out if a contractor is good or not,\u201d says Charles Tassell<\/a>, COO of the National Real Estate Investors Association<\/a>. \u201cYou\u2019ll be able to get that from other people who have more experience in that market than you do.\u201d<\/p>\n

5. Increased trust from potential buyers<\/h3>\n

According to data from the National Association of Realtors<\/a>, 87% homebuyers in 2018 purchased their home through a real estate agent.<\/p>\n

Selling a home through an agent makes a difference in price<\/a>, too: NAR also reports that the average For Sale By Owner (FSBO) home sold for $200,000 in 2018<\/a>, compared to $265,500 for agent-assisted home sales.<\/p>\n

In addition, data from a study by Owners.com found that millennials and boomers who are searching for homes to buy rely on their real estate agents more<\/i><\/b> than online data sources<\/a>.<\/p>\n

That information alone should tell you that having a real estate agent involved in your home flip\u2014whether that\u2019s you or a local agent you hire\u2014puts you in a strong position. \u201cThe majority of homes flipped here [in the Dallas area] that sell are listed by a Realtor,\u201d says Kocher. \u201cThat\u2019s the case eight, nine times out of 10.\u201d<\/p>\n

How do you obtain your real estate license?<\/h3>\n

Real estate licenses are given out by each state, so requirements vary somewhat depending on where you\u2019re located. However, every state has the same basic process:<\/p>\n

    \n
  1. Ensure you\u2019re eligible for a state real estate license.<\/b>
    \nYou can do this by checking the requirements for your state\u2019s real estate commission. In general, there\u2019s a certain age requirement as well as the requirement that you are a U.S. citizen.<\/li>\n
  2. Take a real estate pre-licensing course offered by an accredited institution.<\/b>
    \nPre-licensing courses will prepare you for your licensing exam, and a certain number of hours of education are required     by every state<\/a>. These can range from as few as 60, to as many as 160.Both online and in-person courses are offered throughout the country; however, certain states do not allow for online courses (including Arizona, Connecticut, Delaware, Idaho, New Jersey, North Carolina, Rhode Island, South Carolina, and Washington, D.C.). If your state does allow online coursework to count toward your real estate license, Real Estate Express<\/a> and Kaplan<\/a> are both top schools to consider<\/a>.<\/li>\n
  3. Pass your state\u2019s licensing exam.<\/b>
    \nOnce you\u2019ve completed the coursework, it\u2019s time to sign up to take your state\u2019s licensing exam, which is usually completed at a third-party testing site. The exams are typically divided into two sections: one on your state\u2019s real estate laws and principles, and one on national and general real estate laws and principles.<\/li>\n
  4. Activate your license. <\/b>
    \nOnce you pass the test, you\u2019ll need to activate your license through your state\u2019s real estate commission, which generally costs between $200 and $400.<\/li>\n
  5. Pay for MLS membership.<\/b>
    \nIn order to access the MLS, you\u2019ll have to pay annual dues, which vary by county. These can be as low as $220, in certain counties in California, or as high as $1,160 in more urban areas like Washington, D.C.<\/li>\n<\/ol>\n
    \"A<\/a>
    Source: (Charles\/ Unsplash)<\/figcaption><\/figure>\n

    What if I don\u2019t want to get my real estate license, but I still want to flip houses?<\/h3>\n

    Getting a real estate license isn\u2019t for every home flipper\u2014and the good news is, you can get many of the benefits that a license offers you simply by finding a top local real estate agent <\/a>who has experience flipping homes.<\/p>\n

    In fact, sometimes you can actually benefit more from working with an experienced agent than getting your own license.<\/p>\n

    Agents will have a wealth of knowledge that you don\u2019t get in real estate school, like which renovations are earning home flippers the greatest ROI, whether or not the neighborhood will realistically support the price you\u2019re asking, and how strong the market for flips is.<\/p>\n

    \u201cI think you should get a real estate license to get into real estate\u2014not to flip houses,\u201d Kocher says. \u201cIf you\u2019re just flipping houses on the side, use a Realtor.\u201d<\/p>\n

    Getting your real estate license can be a great investment if you plan to get serious about flipping houses\u2014and who knows, there\u2019s a chance you\u2019ll end up making real estate your full-time career.<\/p>\n

    If flipping is more of a hobby, however, you\u2019re likely better off simply using an agent<\/a>. You\u2019ll get many of the benefits of a license, without spending the time, money, and effort that it takes to get your license and maintain it year after year<\/a>.<\/p>\n

    Header Image Source: (Laurie Shaw\/ Pexels)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

    There\u2019s no law that says you need a real estate license to flip houses\u2014but here\u2019s how obtaining it can benefit you in this tough business.<\/p>\n","protected":false},"author":112,"featured_media":10540,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[329],"tags":[],"class_list":["post-10531","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-flipping"],"acf":[],"yoast_head":"\nDo You Need a Real Estate License to Flip Houses?<\/title>\n<meta name=\"description\" content=\"There\u2019s no law that says you need a real estate license to flip houses\u2014but here\u2019s how obtaining it can benefit you in this tough business.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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