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Should House Flippers Consider Becoming Licensed Real Estate Agents

Apr 23, 2020 by Matt Frankel, CFP

You don't need any sort of professional certification to flip houses. All you need is the capital required to buy and repair a home and the knowledge to get the job done.

Having said that, there are some compelling benefits to becoming a licensed real estate agent if you plan to flip houses regularly. Here's a rundown of the advantages and potential drawbacks of becoming a licensed real estate agent as a house flipper. With this information in mind, you can determine if it's the right move for you.

Why house flippers should become licensed real estate agents

The primary reason to become a licensed real estate agent as a house flipper is to make more money. Profit margins in house flipping aren't typically huge -- making 10% or so of the invested (purchase plus repairs) amount is typically considered a success. Real estate commissions, if you hire an agent, are typically about 6% of the sale price, with this amount split between your agent and the buyer's agent (if applicable). By becoming a licensed real estate agent yourself, you can avoid at least half of the commission cost, which could dramatically increase your profits, especially if you plan on flipping several homes per year.

There are a few other benefits to becoming a licensed real estate agent. You'll be able to directly access the Multiple Listing Service (more commonly called MLS), and although there's typically a setup fee, this can be a big help both from a buying and selling standpoint. You'll know about new listings the minute they hit the market, and you'll be able to get your finished product out in front of other agents and their clients in an efficient manner.

And finally, because every state has an education and examination requirement to get a real estate license, you'll build a much better knowledge of the legal process of buying and selling a home in your state, which can help your flips move along more quickly. As any experienced house flipper can tell you, the shorter the time period between buying and selling the home, the higher your profits will be.

Drawbacks to consider

No business or personal finance choice is right for everyone, and becoming a licensed real estate agent is no exception. While there are some clear benefits to getting a license, there are some drawbacks as well, mainly due to the time and expense involved with becoming a licensed agent.

Cost: The requirements to become a licensed real estate agent and the costs of the process vary significantly from state to state, but it's fair to expect a significant out-of-pocket cost. Between education requirements, licensing exams, background checks, professional memberships, and other necessary (or beneficial) expenses, it's not uncommon for startup expenses to reach $1,000 or more to obtain a real estate license.

Time commitment: All states have educational requirements to become a licensed real estate agent. Some allow for online courses, while others don't. And the education time requirements range from just over to 60 hours to as many as 180, depending on which state you live in. So in addition to the obvious financial burden, also consider the opportunity cost associated with the time you'll spend to get a real estate license.

The Millionacres bottom line

In a nutshell, becoming a licensed real estate agent certainly has its advantages for house flippers, but it isn't for everyone. For most people who want to make flipping houses their primary job, the benefits clearly outweigh the drawbacks. On the other hand, if you're planning on flipping houses as a hobby, using a real estate agent who focuses on the business full-time could be well worth the added expense.

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