I am a real estate agent and a real estate investor. Many people feel that being a real estate agent will limit your ability to be a successful real estate investor. While it is true that there are some limitations that being a real estate agent brings to investing. I feel being an agent makes me a better investor and makes me a lot more money than if I was not an agent. For some investors, being an agent may not be worth it or may actually hurt or limit their marketing. You have to decide what level and what type of investing you want to do and then figure out if being an agent is the right mow.
How does being a real estate agent help me be a better real estate investor?
I run a real estate team of ten people including six licensed agents. I own 16 rental properties and I fix and flip 10 to 15 houses every year. I first starting making a lot of money in real estate by selling REO properties for banks. I was able to use that money to buy rental properties and build my fix and flip business. When I buy rental properties and fix and lips I almost always buy them from the MLS. When I buy from the MLS I get paid a commission as the buyer’s agent and I save a commission when I sell houses because I am the listing agent as well. I can save $10,000 in commissions alone on one flip and that is on a low-end property (in my area) bought for $100,000 and sold for $180,000.
In one year I saved over $70,000 in commissions on houses I bought and sold. Not only does being an agent save me money on houses that I buy from the MLS, but I get more deals being an agent as well. Below are some advatnages that allow me to get more deals as an agent.
- I can act fast because I can set up showings, write my own offers and negotiate quickly.
- I can pay more for properties because I am saving money on commissions.
- I have access to MLS and can see new listings come on the market faster.
- I have built up a good reputation as an agent in the area and other agents trust me.
Is it worth it to become a real estate agent if you want to be an investor?
Just because I save and make a lot of extra money being a real estate agent and an investor, does not mean it is the right move for everyone. I do a lot of deals every year and to me it would be silly not to be an agent. If you are a beginning investor or you are only buying one house a year or fewer, being an agent may not be the right move for you. At least being an agent solely for the purpose of your real estate investing may not be worth it. I think being a real estate agent is a fantastic career and you can make a lot of money whether you are an investor or not.
Getting a real estate license takes time and money. It also take time and money to keep your license active each year and you must work under a broker as a new agent. It will most likely cost you at least one thousand dollars to get your license and at least a couple hundred dollars each year to keep your license and access to the MLS. If you are not doing at least one deal a year I don’t think it is worth being an agent. Even if you are doing one deal a year it may not be worth it to become a real estate agent depending on your situation.
Another thing to consider is how much time you have available. If you are working full-time and want to add real estate investing as a side business. You may not have time to also become a real estate agent. It takes time to take classes, pass the test and find a broker. If you are just thinking about investing in real estate, but have not started yet. I would not rush out to get your license, unless you want to make a career of being an agent as well.
When should you get your real estate license if you are a real estate investor?
If you are ready to get your license or feel it will greatly help your business, when is the best time to get it? I see a lot of investors or soon to be investors rush out to get their license right away. Many people rush out to get their license before they have even bought one investment property or done one deal. If the only reason you are getting your real estate license is to be a better investor, make sure you like real estate investing! Many people who want to be real estate investors never end up doing any deals. It is hard, it takes patience and time to be a successful investor.
Once you know you want to be a real estate investor it is a personal decision when to get your license. Some people will want to get their license right away, others will want to wait a couple of years and some never will. You don’t have to be a real estate agent to be a successful real estate investor, but I think it sure helps. On the other hand, If you are looking to be a real estate investor just to make money or to start a new career. Being an agent may be a great way to make money as well. If you want to help buyers and sellers as an agent then you could start right away. Many agents make well over $100,000 a year and I think it is an awesome career.
What are the drawbacks to having a real estate license and being an investor?
Many people say you should never get your real estate license if you want to be a serious real estate investor. Here is the reasoning.
- As an agent you have to disclose you are an agent and abide by ethical standards when buying homes.
- As an agent you have to disclose on advertising or letters that you are an agent.
- As an agent you may have a conflict of interest with investors you work with if you are trying to buy the same houses.
- As an agent I have to disclose that I am may be buying houses below market value and that I may make a profit on them when I buy off market properties.
These are not concerns of mine for the following reasons.
- I have no problem disclosing that I am an agent and abiding by ethical standards. I think being an agent actually gives me some credibility if I want to buy off market houses. I market directly to sellers who do not have their houses listed and when I talk to them I am very honest about whether they will make more money selling to me or on the MLS. Because I am an agent I can offer them both options and make money either way.
- Again, I do not see any drawback to this as I think it gives me credibility to show I am an agent and I have been in business for many years.
- This does not concern me because I do not work with investors. If we have investors who are looking for homes I will refer them to someone on my team. If you are an investor/agent you could also refer buyers to another agent and still get paid. Or you could disclose to them that you are an investor and may be looking at the same deals in some cases.
- I have not had any problems with this disclose once I explain there are no commissions or closing costs. The sellers have understood they are selling for less than they would get on the MLS. I personally would not feel good about buying houses off market if the seller’s did not know this.
Just because these are not drawbacks to me, does not mean they will not be drawbacks to others. There are some people who wholesale and rely only on direct marketing to find deals. For a wholesaler who uses this strategy, they would not save much if any money, because they are not buying from the MLS and they are not selling on the MLS either. They also may find it easier to market to sellers without having to disclose they are an agent.
There are many things to consider when getting your real estate license simply to improve your real estate investing. I do not think being an agent hurts my real estate investing, in fact I think it greatly improves it. I am also buying a lot of houses every year and I buy mostly from the MLS. If you are a wholesaler who doesn’t use the MLS, I do not think you have to be an agent. If you are just starting out as an investor you may not want to rush into becoming an agent. If you know you love investing and you like buying from the MLS (probably the easiest way to buy houses), being an agent can be a huge advantage. Don’t let people convince you there are no deals on the MLS. I am in one of the hottest markets in the country in Colorado and I have 8 flips in progress all from the MLS.