Flipping properties may be quite profitable if you have the right information and skill set. That’s why do you need a real estate license to flip houses is on many people’s minds. Flipping typically means paying a lower price for a property than its real or potential value. The house flipper is able to sell the property after making renovations to increase its value and appearance to generate profits.
The most popular question for those interested in house flipping in California is “do you need a real estate license to flip houses?” The most straightforward answer is “no.” There is no requirement in California to obtain a real estate license in order to flip houses. This is not to say that obtaining a real estate license to assist you in flipping houses is a terrible idea. Below is some information to assist you to understand how a real estate license might aid house flippers, so you can make the best decision for your future in real estate investment.
What Is a Real Estate License?
A real estate license is a state-issued permit that allows you to conduct real estate transactions on behalf of another party. A real estate licensee usually represents a person or organization that wants to buy, sell, or lease real estate. State law requires anybody who wants to serve in this capacity to have a real estate license because acting as someone else’s agent in a real estate transaction needs specialized knowledge and abilities.
A real estate license is one of the requirements to be a real estate agent. In exchange for a commission, real estate agents spend their time serving as buyer’s or seller’s agents. They could also be involved in property management.
How Do You Get a Real Estate License?
Several conditions must be met in order to receive a real estate license in the state of California. You must be at least 18 years old and have completed at least 135 hours of authorized pre-licensing coursework. You must also find a registered California real estate broker ready to act as your employer and pass a state-mandated exam. Fingerprinting and completing a background check are the last prerequisites for applying for a real estate license in California.
The Advantages of Real Estate Licensing for House Flippers
Although a real estate license is not essential to becoming a house flipper, it can be useful if you want to make money in real estate. Some of the special advantages offered to house flippers with a real estate license are as follows:
1. As an Alternative Source of Income
Flipping houses can actually be a full-time job that generates a generous amount of income. But it may take some time to achieve success in this field. While your house flipping business just getting started, you may require an additional source of income. When you obtain your real estate license, you will have simple access to various sources of revenue that are closely tied to the industry in which you are attempting to succeed.
House flippers who have a real estate license might boost their income by working as real estate agents and collecting commissions. They can also make an additional income by working in property management.
2. Networking Benefits
You will encounter other real estate agents, house inspectors, wholesalers, contractors, appraisers, hard money lenders, and investors when you obtain and use your real estate license. This will assist you in growing your business. The more connections you have in the local real estate market, the more effective your house flipping business will be.
3. Access to The Multiple Listing Service
The Multiple Listing Service, or MLS, is only accessible to licensed real estate agents. MLS is the internet marketplace where real estate is posted for sale. The public can view properties listed on the MLS. Only a licensed real estate agent, however, can add a property to MLS’s database. Even websites that use MLS public data such as Broker.com and Zillow do not have access to as much information as a licensed realtor. Also, licensed real estate agents can access the freshly listed properties earlier than the public.
If you obtain a real estate license, you will have complete access to information about other properties listed on the MLS. This makes it easier for you to identify prospective purchases that are most likely to work for you. Also, you will have immediate access to all newly listed properties, providing you an advantage over any house flipper who does not have a real estate license. Because many of these properties are under contract within a few hours of being listed, this is a fantastic resource for anyone looking to flip houses. Furthermore, you will be able to offer properties for sale without the assistance of a real estate agent.
4. Reduced Closing Costs
If you do not have a real estate license, you will almost certainly require the assistance of a real estate agent when you try to sell one of your properties. You will be obliged to pay a substantial commission when the property is sold by the real estate agent.
Even if you have a real estate license, you must still pay the buyer’s agent a commission. However, your total closing costs will be significantly cheaper.
Making a Decision
Obtaining a real estate license can help someone who wishes to work as a house flipper. However, this does not imply that licensure is the best option for everyone. After all, getting your real estate license is both time-consuming and expensive, so you need to make sure you’re making the right decision.
Before deciding whether you should get your real estate license, you should examine the requirements thoroughly. Also, you need to evaluate your own particular situation and objectives.
What about a contractor’s license?
A real estate license is not the only professional credential that can be useful for someone looking to flip houses. Many people consider obtaining a contractor’s license, too. A contractor’s license is not required for everybody who wants to flip houses. But like a real estate license, having a contractor’s license can make you more competitive in the industry.
The Advantages of Having a Contractor’s License for House Flippers
Some of the advantages of a contractor’s license for house flippers are as follows:
1. More Predictable Expenses
When you renovate your house, a contractor usually gives you a cost estimation for the project. But sometimes the actual expenses will change during the project. Having a contractor’s license will allow acting as your own contractor on your house renovation. As a contractor, you will be able to make your own cost estimation. Acting as your own contractor decreases the amount of guessing involved in this procedure. Furthermore, as you get more experience with house renovations, you will be able to more precisely forecast the cost of future projects. This can provide you with a significant competitive advantage.
2. Reduced Risks
You don’t need to hire a third-party contractor if you have your own contractor’s license. That means you will be less vulnerable to poor workmanship, theft, and default. Although many contractors are respected specialists who provide high-quality service, some are not. There is always a risk of a scam that might cost you thousands of dollars. Working as your own contractor will not only shield you against these scams, but will also provide you with better peace of mind.
3. Lower Permit Expenses
Before you can begin renovating a home that you intend to flip, you must obtain the necessary permits. Most contractors will charge you an additional price for this service. However, if you have your own contractor’s license, you can get these permits without paying the extra fees, lowering your overall costs and making it simpler to qualify for loans from hard money lenders.
Obtaining your contractor’s license might provide you with invaluable knowledge that will help you succeed as a house flipper. You will have a major advantage over other people who flip houses for a living if you have this knowledge.
5. Possibilities of Earning Extra Income
A contractor’s license, like a real estate license, provides opportunities to earn extra income. This is especially useful in the early phases of your house flipping business when you are still a beginner in this field. With a contractor’s license, you will be able to complete other projects on the side to earn more money. If you have a day job, you may be able to quit and devote your entire time and efforts to contracting and house flipping.
6. Reduced Renovation Costs
A licensed contractor should complete renovation work on a residence you intend to flip. You can conduct the renovation work yourself if you have your own contractor’s license. So you won’t have to spend nearly as much money on renovations as you would if you had to hire someone to do it for you.
While completing the work yourself can save money, however, keep in mind that you will need to commit a significant amount of time and effort in the process. Furthermore, completing the work on your own may take longer, especially if you have a full-time job. If you want to speed up the process, you can hire hourly labor to complete some of the work which allows you to pay less than hiring a third-party contractor.
Do I Need a Contractor’s License?
Having a contractor’s license, like getting a real estate license, is not for everyone. Before you can get the license, you must first commit time and money. For some, the rewards may not be worth the investment. To determine whether obtaining a contractor’s license is the appropriate path for you, consider how it will affect your own situation.
You may benefit from having a real estate license and a contractor’s license as a house flipper. But you may be able to work well in this industry without either. Many house flippers begin working in this industry without either license and later decide to obtain one or both licenses.
If you plan to start a business as a house flipper, there is no need to have either of these licensure programs immediately. Take the time to learn about the requirements and compare your possibilities in order to make the best decisions for your business.