You will hear several people asking this question. There is money in real estate and everyone is interested to set their foot in the business. The first thing to ponder on – ‘Do you need a real estate license to flip houses?’
Theoretically – No. But Practically – Yes!
It is not mandatory to have a real estate license to flip houses. However, not having one can expose you to several risks in the highly competitive market. Real estate is a very uncertain field, to begin with. The profits and ROI are always fluctuating and hardly anyone can predict the change.
In 2020, a data solutions company analyzed the trends in the Real Estate business and concluded that only a gross 15% profit can be considered a ‘House flip success’. Also, the average ROI of $67,000 was drastically reduced to $65000 from 2020 to 2021.
The stakes are high and so the approach must be professional. If you want to do real estate as a full-time affair, having a license will be of great advantage.
To become a house flipper, the rules and regulations of each state will be different. The approach will depend upon the laws there. But to simplify things, here are 6 important steps to being a house flipper.
Note: The question do you need a real estate license to flip houses comes with two answers – Yes and No. If you do not want a license, then you can ignore the first three steps mentioned below.
You must prepare for the exam, ace it and then apply for your real estate license. Though this is not mandatory for being a house flipper, you will save on taxes and expenses.
Use State Portals or Listing services to search for the appropriate properties. Licensed house flippers do not have to invest money to view these portals. But those without a license may pay up to $1500.
These people are commonly called Brokers. You can network with them, ask for their help, learn about the market and use them to get potential buyers.
While buying the house, understand the real estate value of the area, and the worth of the property. Find out if you can get fix and flip loan in Los Angeles to buy it. Also, is it profitable to pay money upfront? The sale price and your investment into renovating the house.
Start with your renovations and be smart while doing it. Estimate the expenses, and look for the right contractor’s quote. Choose contemporary designs that will attract buyers or the preferences of people in that area.
Pitch your house to the buyers and highlight the attractive factors of the house. If you don’t have footage yet, use the help of brokers and brokerage websites. Ultimately, you will get up to 20% of the sale price as gross profit. You can also avoid 1-3% brokerage charges if you represent your house
There are several advantages to having a Real Estate License. Here are a few –
Exposure to State Laws and Regulations: It is good to know the state laws to understand how to renovate the house. You will know who you can sell it to and property discrimination. In case there are fees to pay, permissions to take, or to avoid future feuds with buyers.
More Gross Profits without Fees: You can avoid paying the real estate agents or brokerage costs if you know how to pitch your house well. Licenses will help buyers establish a trust bond with you. Your transactions will be much easier from there on.
Access The Property Portals and Multiple Listing Services: You can sign up with Multiple Listing Services with a one-time payment. This amount is less compared to what a non-licensed person would pay.
More Potential Buyers: Think like a buyer. If a person knows you have a license, they’d assume you know more than a non-licensed person. They will listen to what you have to say and trust your judgment. That is how you can flip more houses.
Networking within the Business: You will meet more qualified real estate agents, learn from their experience, and know more about available houses. You will make a group of your own, and you can ask them to spread the word about your property.
Diverse Options to Choose a Career Path: With a state License in your possession, you can choose to be a property seller, a licensing agent, or a broker. You can be a Property marketing agent or a Property Manager.
To get a real estate license, you need to go by these steps –
Do you need a real estate license to flip houses? We are not going to lie to you, it definitely helps. Is it required? Technically, no. It might be possible to do a house flipping without a license, but why would you want to? A real estate license shows that you have the knowledge and expertise needed to successfully navigate the world of real estate investing. Without a license, you’re essentially flying blind. So while a real estate license is not required, it’s definitely in your best interest to get one. It is always good to be a step ahead in a competitive business with marginal profit numbers. The real estate license will give you a good head start.