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A savvy real estate investor has insider knowledge of the trends and practices of a dynamic market. Much of an investor's education comes from the experience of the deals themselves -- but a real estate license could really take that buying and selling know-how to the next level.
Should real estate investors also become real estate agents?
It is not necessary for you to earn your real estate license as a real estate investor, whether you're in the residential or the commercial space. However, in an industry like real estate, knowledge is power, and there's no denying that the knowledge that comes with earning your real estate license is going to be an asset.
Should you take the plunge and become a real estate agent to boost your investing prowess? Let's take a look at some of the pros and cons:
- You'll have first-hand knowledge of the real estate market. It bears noting that being a real estate agent is not the same as being a real estate attorney; however, a real estate agent will know the ins and outs of what happens in a real estate transaction.
- You'll have access to the MLS. The multiple listing service is an asset to real estate investors, but it's only fully available to licensed RE agents. Yes, there are plenty of property listings online that you can browse, but as a licensed real estate agent, you'll have access to the whole shebang. Are you willing to devote dozens of study hours in exchange for access to the MLS? It's a good question to ponder.
- Be your own agent and save (most) of the commission. When you act as your own real estate agent for your fix-and-flip sales, you'll get to pocket most of the commission yourself -- part will have to go to the brokerage you're affiliated with unless you decide to become a broker yourself. That percentage of the final sale price could wind up saving you when your flip doesn't recoup as much of your investment as you had hoped -- and if it does, it's just more money in your pocket.
- It can add an additional stream of income. If you're going full-time with your real estate career, then you can always take on more listings between fix-and-flips or when things are a bit slow on the investing side to make more money. You'll keep your head in the real estate game when you're working with your clients, but the investment risk will be on them, not you.
- You can learn more about other market niches. If you're thinking of broadening your horizons with property investments, you can learn from your clients and fellow agents. Let's say your real estate investing portfolio has a focus on multifamily rentals, but you are considering a crossover into commercial real estate. As a licensed agent, you can get your feet wet with someone else's deal before you dive into your own. Experience is the best education, so this is where you'll really come to appreciate the opportunities you'll get as a real estate agent.
- You'll spot the good deals -- and the bad deals. It's easy to overlook the red flags when you're excited about a real estate investment deal of your own. And while you have a vested interest in your clients' properties, you're taking an outsider view of the transaction. Over time, you'll get to see firsthand the real estate trends in your area, particularly when it comes to pricing. Take notes so that you can incorporate those best practices into your own real estate business -- as well as steer clear of tactics that didn't work.
- You'll have additional stress. Even experienced investors find it stressful to deal with their own real estate deals. Now add in the stress of your clients as they navigate their way -- often for the very first time -- through a tricky real estate market. Finding a work/life balance may be tough for you as a real estate investor, and it could be doubly so when you're an agent.
- Client properties will take precedence over yours. Ask any real estate agent -- when the phone rings and it's a client, you answer it. This could prove problematic if your clients' needs pull the focus from your own real estate transactions. If you're a seasoned investor with a real estate team to assist you with the properties in your portfolio, great. But if you're just getting started with your real estate business and need to focus on selling for your clients, your own projects could get sidelined until their purchases are squared away first.
- A slow market will be doubly slow. It can feel like feast or famine sometimes in the real estate world. Now double it if you're working as both an investor and a real estate agent. If you chose real estate as your main focus while investing is your side hustle, you may wonder if getting fully involved in real estate was the best move. It's certainly something that many an agent thought during the worst of COVID-19, but as we move on from the pandemic, hopefully, real estate agents' phones will start ringing again.
- "Unlimited" income can be misleading. Many have been lured to sales in any industry because of the promise of unlimited income. While this is true to a certain extent in that there is no employer putting a salary cap on your work, you might not have the opportunity or bandwidth to take on as many listings as you need in order to keep that income on the rise.
- You must disclose that you are a real estate agent. Honesty is always the best policy in real estate, but when wheeling and dealing for your own investment properties, there are some sellers who will be reluctant to work with agents for any number of reasons. However, this could be a red flag that you should heed, turning this con into a pro after all.
Should you become a real estate agent as an investor?: A recap
|Advanced industry/market knowledge||Additional stress|
|Access to the MLS||Client deals will take precedence over yours|
|Save on commission||Slow market will affect you even more|
|Additional stream of income||"Unlimited" income is misleading|
|Learn firsthand about other niches||You must disclose you are an agent in investing deals|
|You'll spot the good deals -- and bad ones|
The bottom line
If you're ready to invest in yourself as a real estate investor, then yes, a real estate license could be very helpful. However, if you're not sure if you're in the real estate business for the long term, then there are other ways of building your skills and knowledge in the business.
11% of the mega-wealthy swear by this investment…
The richest in the world have made their fortunes in many ways, but there is one common thread for many of them: They made real estate a core part of their investment strategy. Of all the ways the ultra-rich made their fortunes, real estate outpaced every other method 3 to 1.
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