Do You Need A Real Estate License To Flip Houses?

If you're venturing into the world of real estate investments, whether your goal is to own properties, become a seasoned house flipper, or invest in rental properties, you've likely pondered a crucial question: "Do you need a real estate license to flip houses?"

In real estate investing, different activities demand different licenses. For instance, selling investments in real estate or operating a real estate rental brokerage requires a license, as does acting as a lender in real estate transactions.

But when it comes to house flipping, the rules may not be as clear-cut. That's where Real Estate Skills comes in!

If you're aspiring to become a successful real estate flipper, whether it's a part-time gig or a full-fledged career, it's essential to navigate the nuances of this business effectively. One of the first steps in your journey is understanding the licensing requirements necessary to thrive in the house-flipping industry.

Let's unravel the details surrounding flipping houses and what you need to start your real estate career!

• Do You Need A Real Estate License To Flip Houses?

• Do You Need A Real Estate License To Sell Houses?

• Should You Get A Real Estate License To Flip Houses?

• What Can You Achieve With A Real Estate License?

• 7 Benefits Of Having Your Real Estate License

• 5 Drawbacks Of Acquiring Your Real Estate License

• How To Obtain A Real Estate License For House Flipping

• Flipping Real Estate Licensing Requirements: FAQs

• Final Thoughts

*Before we begin our guide, we invite you to view our video on DO YOU NEED A Real Estate License To FLIP HOUSES? Host and CEO of Real Estate Skills, Alex Martinez, & Stan Gendlin get right to answering one of the real estate industry's top questions!

Do You Need A Real Estate License To Flip Houses?

No, you do not need a real estate license to flip houses. However, it can be extremely beneficial to have one as a house flipper.

When you purchase a house to fix and flip, you become the legal owner of the property. Real estate owners receive a bundle of rights or legal privileges to their property.

According to Rocket Mortgage, a bundle of rights is “the set of legal rights associated with ownership of real property.” These include:

• The Right of Enjoyment

• The Right of Disposition

• The Right of Possession

• The Right of Control

• The Right of Exclusion

Among these property rights, the right of disposition preserves property owners' right to sell the property and transfer ownership permanently to another party, with respect to any outstanding liens such as mortgages. 

A real estate license is a document issued at the state level by each state’s Department of Real Estate. The license allows an individual to mediate a real estate transaction between two parties in exchange for a sales agent commission.

Typically, a license is used to gain access to the Multiple Listing Service (MLS) marketplace and have the lawful ability to help homeowners and buyers negotiate a price for a sale.

Any individual acting in the capacity of a real estate broker, real estate agent, or property manager on behalf of other individuals generally requires a real estate license.

In house flipping, the only barriers to becoming successful are education, grit, determination, and access to money - not licensing.

Do You Need A Real Estate License To Sell Houses?

Now, you may be wondering “Can you sell houses without a real estate license?”

If you are selling real estate for another party, then yes, you’ll need a real estate license to sell houses.

When you are the owner of the property that is being sold, a license is usually not required.

In some real estate markets like Michigan, if you sell more than a certain number of houses in a year, then you'll need a license.

Check with your state regulations and always do your own due diligence because being a part-time agent and flipper can be very lucrative - assuming you are doing everything by the book and inside the law.

Should You Get A Real Estate License To Flip Houses?

The path to obtaining a real estate license can vary significantly from one state to another. Generally, the qualifications and commitment required aren't overly daunting. Typically, it involves a period of studying the necessary material, usually spanning from 3 to 6 weeks, followed by a licensing exam. Success in this exam grants you a coveted real estate license.

Now, you might wonder how this license relates to flipping houses. In reality, having a real estate license isn't a prerequisite for conducting house flips. Nevertheless, it's worth considering acquiring one, and here's why.

With or without a real estate license, you'll have the ability to oversee construction projects, procure materials, hire your crew, and sell the finished product.

However, having a real estate license unlocks a host of additional advantages.

One of the standout benefits of holding a real estate license is gaining access to the MLS. This access can significantly enhance your house-flipping game as the MLS provides a treasure trove of property listings, valuable market insights, and a broad network of real estate professionals. Utilizing the MLS can lead to substantial savings, reduced acquisition costs, and the potential to spot hidden gems in the market.

A real estate license also offers the opportunity to expand your network within the industry. Networking is a critical aspect of real estate investing, and having a license can open doors to valuable connections, from experienced agents to potential partners and investors.

Finally, obtaining a real estate license can help you save on listing commissions. When you decide to sell one of your property flips, having a real estate license enables you to list your property without incurring a listing agent's commission. This can translate into substantial savings, especially on higher-value properties.

While there are clear benefits to obtaining a real estate license for house flipping, it's essential to weigh these advantages against your specific circumstances and business model. Licensing does come with certain obligations, codes of ethics, and potential liabilities that might not align with everyone's goals.

Ultimately, the decision to get a real estate license should be based on a careful evaluation of the benefits and your long-term real estate investment strategy.

What Can You Achieve With A Real Estate License?

It's worth noting that having a real estate license opens doors to various other career options within the real estate industry, including becoming a real estate broker or property manager.

The possibilities are diverse, and your license equips you with the knowledge and authority to excel in various real estate-related roles, depending on your interests and career goals.

Let's explore the two primary categories where a real estate license can be put to use:

Investment Sales

Investment sales involve the buying and selling of real estate properties on behalf of clients. Real estate agents typically secure clients through methods like cold calling, networking, and canvassing properties.

They earn a commission by facilitating property transactions, representing sellers in negotiations, and connecting buyers with suitable properties.

In investment sales, real estate agents often receive a commission that can amount to as much as 6% of the total transaction value. For instance, if you successfully sell a $1,000,000 property, you could earn a substantial $60,000 commission.

Investment sales can be a lucrative field within real estate, offering significant earning potential.

Rental Properties

Rentals provide an alternative avenue for individuals with a real estate license to generate income. This includes activities like leasing multifamily investment properties and assisting single-family homeowners in finding tenants for their properties.

Real estate agents involved in rentals can represent property owners or offer their services on platforms such as Zillow, Naked Apartments, and Street Easy. Their compensation typically comes in the form of a percentage commission or a one-time fee if they successfully secure a tenant for the property owner.

While the payouts in the rentals sector may be smaller compared to investment sales, they offer a higher level of consistency and predictability. Rental transactions tend to be quicker to close, reducing the uncertainty often associated with property sales.

Additionally, real estate brokers can take on the responsibility of managing rental properties, ensuring tenant satisfaction and efficient property maintenance. Engaging in rental activities can provide a steady stream of income for licensed real estate professionals.

7 Benefits Of Having Your Real Estate License For Flipping Houses

As stated above, flipping houses while holding a real estate license can offer you a multitude of benefits that can significantly enhance your house-flipping business.

Here are some of the key advantages of having a real estate license for flipping houses:

1. Real Estate Knowledge & Expertise: Acquiring a real estate license as a house flipper provides you with a wealth of knowledge and expertise in the real estate industry. Real estate is a multifaceted market with intricate terms, regulations, and processes. By becoming a licensed real estate agent, you equip yourself with a profound understanding of the real estate landscape. This knowledge empowers you to navigate the complexities of buying and selling properties confidently, reducing the risk of unexpected challenges.

2. Access to the MLS: Access to the Multiple Listing Service (MLS) is a game-changer for house flippers. The MLS is an exclusive database accessible only to licensed real estate professionals, offering comprehensive information about homes available for sale in a specific area. It not only expands your reach as a seller but also provides valuable insights when searching for investment opportunities. Access to the MLS enables you to stay ahead of competitors and identify lucrative prospects that may not be publicly listed.

3. Diversified Income Source: Flipping houses can be an unpredictable source of income, making financial stability a priority. Obtaining a real estate license opens doors to unlimited income potential. Unlike many other careers, the real estate profession does not impose income caps. As a passionate and dedicated house flipper, your entrepreneurial mindset and determination can drive your success as a real estate agent. Selling properties not only supplements your flipping profits but also ensures a consistent income stream.

4. Elimination of Agent Commissions: One of the most evident advantages of holding a real estate license is the substantial savings on agent commissions. When you engage a real estate agent to buy or sell a property, you typically incur fees, often in the form of a commission based on the property's sale price. By becoming your own real estate agent, you circumvent these commission fees, allowing you to retain a more significant portion of your profits from house flipping.

5. Expanded Professional Network: Flourishing house flippers rely on an extensive network of contacts, including contractors, inspectors, fellow investors, and real estate professionals. Attaining a real estate license broadens your network and provides opportunities to forge relationships with other industry experts. These connections can prove invaluable when seeking recommendations, collaborating on projects, or accessing resources that streamline your house-flipping endeavors.

6. Enhanced Credibility: Credibility plays a pivotal role when selling a flipped property. Your profound knowledge of the legal and financial aspects of real estate transactions, gained through your real estate license, positions you as a knowledgeable and trustworthy seller in the eyes of potential buyers. Moreover, your associations with other real estate agents may lead to referrals and connections with buyers actively searching for homes that align with your property's specifications.

7. Continuous Learning: Acquiring a real estate license requires meeting specific educational criteria, but it also offers an ongoing learning experience. The real estate industry is dynamic, and each day can bring new lessons and insights. This continuous learning curve can be invaluable throughout your investing career, helping you adapt to evolving market conditions and investment strategies.

*View our video on How To FLIP A HOUSE For Beginners (Step-by-Step). Host and CEO of Real Estate Skills, Alex Martinez, & Stan Gendlin share how to flip a house from start to finish as a beginner! 

Together, Alex & Stan have completed over 1,000+ house flips. What you learn in this video will give you the confidence and guidance to successfully complete your fix-and-flip project!

5 Drawbacks Of Acquiring Your Real Estate License

Flipping houses with a real estate license offers numerous advantages, but it's essential to weigh these benefits against potential drawbacks.

Here are five drawbacks to getting your real estate license:

1. Costs of Education & Certification: Acquiring a real estate license involves certain expenses that vary from state to state; to obtain precise information on fees, it's essential to check your specific state's requirements for becoming a licensed real estate agent. In total, budgeting approximately $800 to $1,000 is advisable to account for class fees and application costs. Typically, you can expect the following costs for obtaining a real estate license for house flipping:

   • Real estate license fee: ~$150

   • Pre-licensing courses & education: ~$300.00+

   • Real estate license application fee: ~$30.00

   • Fingerprinting & background check: ~$120.00

   • State licensing exam: ~$50.00 to $100.00/attempt

2. Time Commitment: The process of acquiring a real estate license can be time-consuming. Depending on the chosen path, it may take anywhere from 2 to 6 months to complete. Factors influencing the duration include the format of your courses (online or in-person) and the varying education requirements across states. Most states mandate a minimum number of pre-licensing instruction hours, ranging from 40 to 300 hours. Whether it takes 2 or 6 months, dedication and time investment are necessary to achieve your real estate license.

3. Opportunity Costs: While pursuing your real estate license, you'll need to allocate time and effort to your education and certification. This investment might divert your focus and resources from your active house-flipping projects. Consider whether the time and energy spent on obtaining a license could be more profitably directed toward identifying, renovating, and selling properties.

4. Ongoing Responsibilities: Maintaining a real estate license involves fulfilling continuing education requirements, adhering to professional standards, and complying with ethical obligations. These responsibilities may entail additional time and expenses, which could affect your capacity to focus exclusively on house flipping.

5. Limited Flexibility: Once you possess a real estate license, you may be subject to specific regulations and ethical guidelines. These constraints could limit your flexibility in certain house-flipping strategies or require additional disclosures when working on your own properties.

Weighing these pros and cons will help you make an informed decision about the path you choose in your real estate investing journey.

How To Get A Real Estate License For House Flipping

If you've decided that obtaining a real estate license is the right path for your house-flipping endeavors, here's a general outline of the steps to follow:

1. Determine Eligibility: Confirm your eligibility by checking your state's specific requirements. Typically, you'll need to be at least 18 years old, have a high school diploma or equivalent, and be a U.S. citizen or legal resident. State eligibility criteria can vary, so it's essential to verify your qualifications.

2. Enroll in a Pre-License Course: Enroll in a pre-license real estate course provided by an accredited school or program. These courses are designed to meet the training hours required by your state. Depending on your location, these courses can take anywhere from two to six months to complete.

3. Pass the Licensing Exam: Upon successful completion of your state's required pre-license coursework, you'll be eligible to register for the real estate licensing exam. This exam typically covers both state-specific and national real estate practices. Be prepared to pay an examination fee, which varies by state.

4. Obtain Your License: After passing the licensing exam, you'll need to apply for and receive your real estate license. This license grants you the legal authority to engage in real estate transactions. Keep in mind that obtaining your license is just the beginning of your journey.

5. Activate Your License: Once you've obtained your real estate license, you'll likely need to activate it through your state's licensing authority. Activation may involve additional fees, which can range from $200 to $500, depending on your state's requirements. This is also a suitable time to consider becoming certified with the National Association of Realtors (NAR), which can enhance your credibility and networking opportunities.

Flipping Real Estate Licensing Requirements: FAQs

Are you curious about the other licensing requirements for flipping real estate?

In this FAQ section, we'll address frequently asked questions to help you navigate the world of real estate licensing and make informed decisions for your potential house flipping business:

Do You Need A General Contractor’s License To Flip Houses?

House flipping does not require obtaining a general contractor's license. However, the decision to flip houses and manage the renovation process yourself can lead to significant cost savings.

General contractors play a crucial role in the house flipping process. They handle various aspects of the renovation, such as hiring construction staff, sourcing necessary materials, and overseeing the entire renovation project. If you have a reliable and trustworthy general contractor on your team, that's excellent! However, if you find it challenging to identify a dependable contractor, you might consider taking on the role of managing the renovation project yourself.

By learning how to manage the renovation process independently, you can potentially save a substantial amount of money on renovation costs. This approach allows you to have more control over the renovation timeline, budget, and quality of work.

It's essential to be cautious when dealing with contractors who display red flags, as they can lead to expensive and problematic situations. By taking a hands-on approach to renovation management, you can mitigate risks and ensure that your house-flipping venture remains profitable.

Do You Need A Business License To Flip Houses?

You do not need a business license for real estate businesses. The playing field is wide open for the taking.

If you’ve got the money, dive right in. No business license is required.

That said, a best practice in flipping houses is to use a business entity, such as a Limited Liability Company, also referred to as an LLC. 

Using an LLC to flip houses has a range of benefits, from protecting an individual's assets by keeping them separate from the real estate business to allowing tax-deductible expenses not available to individuals. 

Do You Need Any Permits To Flip A House?

You don’t always need a permit to flip a house. Permits may be required depending on local building costs and the extent of the renovations being done. Work such as adding square footage or additional structures, adding bathrooms, and bedrooms, or making significant changes to plumbing and electrical typically require permits. Check your county zoning laws to ensure you aren’t building an illegal structure - i.e. a multi-family or office in a single-family home area. But, other than that it’s unlikely you’ll need any permits to conduct a typical flip.

Do I Need A Real Estate License To Be A Landlord?

No, a real estate license is not necessary to be a landlord! Being a landlord is a great way to make monthly residual income by renting out properties to tenants. Flipping houses often requires managing major renovations on multiple properties over the course of several months to result in a large payday. Being a landlord can be a great alternative if you are looking for more consistent cash flow generation without doing a ton of work.

Final Thoughts

Now that you have the answer to the question, “Do you need a real estate license to flip houses?” we hope that you feel confident in tackling your house-flipping endeavors.

We explored the advantages and drawbacks of becoming a licensed real estate agent, discussed how to secure a real estate license, and delved into what you can do with it in the context of real estate investment. If you're serious about excelling in the world of house flipping, gaining access to valuable real estate knowledge, and expanding your network, obtaining a real estate license can be a game-changer.

At Real Estate Skills, we value knowledge and education above all! To further enhance your real estate education, consider our brand new FREE training on house flipping and wholesaling real estate.

Take the first step towards becoming a successful real estate investor by seizing this opportunity today!