Why You Should Become a Real Estate Agent if You Want to Invest in Rental Properties

05 Mar
Why You Should Become a Real Estate Agent if You Want to Invest in Rental Properties

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become a real estate agentReal 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.

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.

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.

For more information on how to become a great real estate agent, check out my book: How to Make it Big in Real Estate available at Amazon or in PDF for only $6.49.

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.

Conclusion

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.

Do you have to work under a broker once you are a real estate agent?

The top 9 ways to make money as a real estate agent

How much money can you make as a real estate agent?


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32 Comments
  • Marta
    Posted at 15:07h, 20 June Reply

    You forgot to mention that you need to give some money to your broker or you need to be a broker to get all 3% of the commission.

    • investfourmore
      Posted at 15:12h, 20 June Reply

      True, there are many different ways agents and brokers get paid and state laws are all different on what it takes to be a broker or agent or combination. Many companies let agents hang their license for very minimal fees and many investors are their own broker

  • Junior S
    Posted at 17:11h, 09 August Reply

    Hey Mark, why did you choose doing REOs and HUD homes as a real estate agent?

    • investfourmore
      Posted at 17:27h, 09 August Reply

      For a number of reasons.
      1. I like email and I can deal with almost everything through email with HUD and REO
      2. It is relatively steady income compared to retail sales.
      3. There is less emotion involved with the seller.
      4. There is a great supply of work coming in(usually) and I don’t have to call people or go out looking for business, do open houses, etc. I can farm for wok online through email, or registration sites, conferences

  • Why You Should Become a Real Estate Agent if You Want to Invest … | Real Estate Investing
    Posted at 15:40h, 01 September Reply

    […] See the rest here: Why You Should Become a Real Estate Agent if You Want to Invest … […]

  • mom
    Posted at 16:52h, 13 February Reply

    You also need to remember the rules for Agents being property managers. It has to b ok with the Broker and they get a little piece of that pie too

  • mom
    Posted at 00:03h, 20 February Reply

    I think you are right. There are a lot more positive than negative to having your license. Thanks for the article

    • investfourmore
      Posted at 16:18h, 21 February Reply

      Thank you!

      • James Johnson
        Posted at 17:44h, 25 April Reply

        Hi Mark
        I have 2 rental homes now and may pick up a 3rd but I also work F/T with my office job. Will getting a realestate Lic help me if I don’t buy and sell homes to others? I have been told no in CA but I can’t seem to find the facts even from the IRS. I don’t put all my time into just 2 rentals and I do keep a F/T job
        I know the$25K help when with a realestate Lic but have been told I have to be trding and selling homes active to make it work

        • Mark Ferguson
          Posted at 19:26h, 25 April Reply

          Hi James,
          It really depends on how many deals you want to do. The biggest benefit to me is getting a great deal because I am an agent. That may save me $20,000 on one deal or make me $30,000 on a flip. I am also able to look at properties at any time and make offers right away. It would be tougher if I had a full time job. You would also save money on commissions, but again it will take time to find the deals and write the contracts.

  • Helga
    Posted at 20:40h, 20 March Reply

    I just got my license mainly for investment purposes but I want to go all in.
    My question is: how do I get leads if I want to sell or rent properties?
    I’m with a broker that charges me a tiny flat fee every month but the down side to that is that I don’t get any leads, support, training, etc…
    How should I go about that? Should I switched brokers?

    • investfourmore
      Posted at 03:03h, 21 March Reply

      Hi Helga. You can get leads on your own, but it is easier with a full service broker. A few suggestions are open houses, advertising in local house magazines or the newspaper, build a website for yourself, Facebook advertising and I have a lot more info in my E Book.

  • Harvey Jackson
    Posted at 06:38h, 23 May Reply

    Thanks for your post. I really like the information which you have shared in your post about the real estate agent

  • urvella
    Posted at 22:03h, 14 June Reply

    I just got my real estate license. I was interested in bpo side business, since I’m pregnant. How can i can I find leads to do banks bpo?

  • SAMPSON LEEVON
    Posted at 05:48h, 30 July Reply

    Thanks for this because I moved from ca to va to get mentored by a agent to be a investor…but he wanted me to be just a agent and I just want to be a investor, because I’m weird around people, I think I don’t smile enough and give good vibes…plus I don’t want to be tied to a desk for hours on hand and shelling out money for everything. I wanted him to be a investor, since I see he is not at the level that he should be in life as a long time agent.

    • Mark Ferguson
      Posted at 05:01h, 02 August Reply

      Glad this helped I think there are benefits to being an agent and investor and it is possible to excel at both.

  • Tina
    Posted at 04:31h, 07 October Reply

    Hi Mark, I’ve been whole selling property for the last 3 years and am currently studying for my real estate license. How did you find reliable contractors for your fix and flip deals? That is the next thing I’d like to jump into. I’m pretty good at estimating repairs but am very nervous about finding good help that would finish the job on time at the right price and well. Any advice would be very helpful. Thanks, Tina.

  • paul
    Posted at 05:10h, 16 January Reply

    Hi mark, if I get get my real estate license, do i have to sell houses outside of purchasing my own rental properties?

    • Mark Ferguson
      Posted at 16:51h, 16 January Reply

      You don’t. you don’t have to sell any houses at all. Different brokers will want different things from their agents.

  • Harcourts Grenadier Accommodation Centre
    Posted at 09:38h, 21 January Reply

    It takes a lot of skills and experience to be both agent and investor. It can work for some but as for me, I’d like to focus more on what I do best and provide my service with undivided attention.

    • Mark Ferguson
      Posted at 18:44h, 23 January Reply

      True, sometimes it is best to start out with one aspect and then include another once you are successful. In the case of investing in real estate I think they go hand in hand.

  • ribhisaleh
    Posted at 03:47h, 22 March Reply

    hello good sir,

    thank you for sharing your knowledge and wisdom, i think your website and info are ammmmmaazing !!

    i have a question, when you mentioned becoming a (licensed real estate agent ), what did you mean? i live in the philippines and im still new in this field and planning to start investing but im choosing to follow your advice also,
    but when i started researching about getting the license i found out that there are alot of terms that (real estate agent) might mean! for example i found that a real estate agent includes : 1- Real estate consultant 2-Real estate appraiser 3- Real estate assessor 4- Real estate broker 5- Real estate salesperson . (being a licensed broker would require more pre licensing class hours than real estate sales person) so which category should i apply to be licensed to so i can follow your footsteps sir???

    thanking you in advance and waiting your reply.

    • Mark Ferguson
      Posted at 18:21h, 23 March Reply

      Hi, I am talking about being a real estate salesperson who sells houses.

  • ribhisaleh
    Posted at 11:32h, 24 March Reply

    thank you man

  • Denae
    Posted at 16:48h, 31 March Reply

    Thank you for the information! Answered a lot of questions for me! I am interested in becoming a real estate agent to have access to MLS to find my own deals and to learn more about the business. I have a FT job, but really can’t work for a broker selling homes due to my schedule. When you pass the test, Do you have to work with a broker to get access to the MLS? Should I tell them my true goals? I don’t have time to sell or show homes, I truly only want to invest in rental properties and fix and flip.

    • Mark Ferguson
      Posted at 17:27h, 01 April Reply

      Yes you have to work for a broker. i would be completely honest so you find the right broker.

  • Victor Martinez
    Posted at 07:12h, 20 April Reply

    Man! This is an awesome site. I’m getting pretty hyped for school to start. I cant wait til im in this buisness.

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