Why Every Realtor Should be Investing in Real Estate
by Boston Dave Knight
Licensed Real Estate Professional/Real Estate Investor/Owner of Orlando Property Management
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 who 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 you on tough deals. Many properties we buy have major issues and are tough to sell, but 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.
6. As a Realtor, you are, once again, way ahead of the game. You already have existing relationships: your home inspector, lawyer, mortgage broker and so on. And there is a very good chance you have a handyman and some skilled tradespeople that you can refer your homeowner and investor clients to.
Well, guess what? This team that you’ve assembled is invaluable to you as an investor as well. Instead of having to go out and build a team like most people have to do when they purchase an investment property, you can plug into what you have already built. And the great part is, if your team is not the strongest right now, it is just going to get better as you refine it as an investor, adding even more value to your existing homeowner and investor clients.
In short, as a Realtor, you have all the advantages in the world to a successful investor. Nothing beats real estate as a wealth-building vehicle, not to mention all the tax advantages. All you need to do is get educated by joining a local real estate investors club and by attending real estate boot camps and other events. There are deals out there—you just need to put an action plan in motion.
For more information about real estate investing and property management please feel free to email me at Dave@WeRentOrlando.com.
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