Why You Should Become a Real Estate Agent if You Want to Invest in Rental Properties
Real estate has provided me with a great income and opportunity to own a business. When I became a real estate agent in 2001 I did not invest in rental properties, I sold houses to people. I have made a lot of money selling houses and when I started investing in rental properties my real estate license saved me thousands of dollars and made me more money.
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One of the great things about making a career of real estate is the multiple options to make money. I did not start well in real estate, because I tried to fit the typical real estate agent mold. Once I learned to diversify myself into different areas of real estate that fit me like REOs and BPOs, my career took off. When I started investing in real estate, being a real estate agent helped me immensely! Becoming a real estate agent was one of the best decisions I ever made.
Being a real estate agent saves me a lot of money on my investments
Being a real estate agent has helped me tremendously in my own investing strategy. I have purchased 11 long-term rental properties and I am making at least 20% cash on cash returns on all of them. One of the reasons I am earning such high returns is because I save thousands of dollars on each transaction by being a real estate agent. I also do 10-15 fix and flips a year and save thousands of dollars on each of those transactions as well. I estimate being a real estate agent saved me over $70,000 in 2013 alone in commissions. That does not count the profit I made on deals that I would not have gotten if I was not an agent.
Investors save money on commissions when they become a real estate agent
If you plan on buying more than one or two rental properties a year, get your real estate license! If you do nothing else with your license except buy your own rental properties, it will save you thousands in commissions a year. On every rental property I buy I save a ton of money, because I get paid a commission as the buyer’s agent. The commission may be 2%, 2.5% or 3% per deal, but in the end that adds up to a lot of money. If you buy three houses a year, being a real estate agent can save $7,500 to $9,000 a year if your average price is $100,000.
If you fix and flip those houses and sell them, you will more than double your savings because you will save a commission when you sell the house as well. On a recent fix and flip, I bought the home for $105,000 and earned a 3% commissions as the buyer’s agent. I am going to fix and flip this property and most likely sell it for $160,000. When I list the home I will save another 3% commissions I would have had to pay another agent. On this one deal I will save $7,950, because I am a real estate agent.
What are the advantages of being an investor with a real estate license?
There are many other advantages to being an investor with a real estate license. Being an agent saves me commissions and it allows me to get more deals as well. Here are some other ways having a license is a huge advantage.
1. As a real estate agent, you get access to MLS and can do your own searches for properties without relying on an agent to find you the right deal. Having access to MLS gives investors a huge advantage, because they don’t have to wait for an agent to send them listings. I search for listings at least five times a day and I routinely make offers the same day a house is listed. An agent can also easily pull sold comparable information from MLS to calculate values on properties. Calculating accurate values is one of the most important things an investor needs to do to be successful.
2. As a real estate agent you can fraternize with other agents and people in the real estate world. The more people you know in the business, the more people you can tell you are looking for property. Sometimes the best deals are those that are brought to you, not the deals you find yourself. Let everyone you know you are looking for investment properties and you never know what will come up. I have bought a couple of properties that were never listed on the MLS, because of my contacts in the business.
3. The IRS has limits on how much money you can deduct on rental properties if real estate is not your primary job. If real estate is your primary job, then you may be able to deduct many more expenses. For more details please see the IRS tax code.
4. If you are a real estate agent that does a lot of deals, most agents will know who you are. If you bring a good reputation for getting deals done, sticking to your word and being dependable then other agents will want to work with on tough deals. Many properties we buy have major issues and are tough to sell and other agents know me and know I will do my best to get the deal done.
5. I already mentioned the commission savings on investment properties, but there is another advantage besides just the money savings. If I save $8,000 on a fix and flip deal in commissions, then I can buy that property for $8,000 more than an investor who does not have their real estate license. That savings allows me to pay more money and get more deals than other investors while still making a profit.
How can you make money as a real estate agent?
I am biased, but I think being a real estate agent is one of the best opportunities out there. There are many, many forms of income in the real estate business. If you are motivated and dedicated to making it in the business, then you can make serious money. I won’t go into details in this article, but here are some of the different areas that can generate income. Here is a more detailed article on how real estate agents can make money.
- Property management: If you want to be a serious investor you will want a property manager to handle your rental properties at some point. If you start your own property management business, you can manage your properties and other properties as well. Not only are you saving 10% per month on your rent coming in by doing your own management you can make extra cash, by managing other investors properties.
- Retail Sales: This the most common way to earn money as an agent. Retail sales involve listing houses for private sellers and selling homes to buyers. If you are dedicated and treat this as a real job, you can make a lot of money. Many agents make over $100,000 a year and the very best make much more than that.
- Commercial Sales: Commercial real estate takes a lot more experience and knowledge than residential. It is difficult to break into commercial, unless you start with a commercial firm who can mentor you. Experienced and successful commercial agents can easily make hundreds of thousands of dollars a year.
- REO sales: REO properties are homes that have been foreclosed on and gone back to the bank. REO agents list and manage these homes for the banks. Agents can make a very lucrative living if they work with the right banks. It can take years to build up your business and the supply is determined by how many homes are foreclosed on. REO agents are not allowed to buy their own listings as it is a conflict of interest. Here is a great article on how to list REO properties.
- Short Sales: Short sales are homes that are listed for sale by private sellers, but the sellers are selling the home for less than they owe the bank. There is a huge market for short sales and many agents make a great living specializing in this field. It takes a lot of patience and diligence to close a short sale since the banks have many requirements and can take months to approve a short sale.
- Broker Price Opinions (BPOs): BPO stands for broker price opinion. A BPO is a one to three page report, used to determine value on properties, but is not an appraisal. Licensed agents can complete BPOs for various clients including banks and usually get paid between $30 and $80 per order. Some agents make a living only completing BPOs and it is a great way for agents to supplement their income while learning the business. I discuss how to get BPO business in my REO starter kit.
How can you become a real estate agent?
I discuss how hard it is to become a real estate agent in this article. You must take pre-licensing classes and then pass a test in most states to get your real estate license. My assistant got his license through Real Estate Express, which also has a great licensing program in all 50 states. Real Estate Express also has some of the cheapest prices I have seen, although I have not researched every real estate school.
There are many ways to make money as a real estate agent. Even if you just want to buy or sell a few of your own listings each year I believe becoming a real estate agent it is well worth it. I have a number of articles listed below that detail how to become an agent and what is involved with being an agent.