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Thursday, December 14, 2006

Trading One Job For Another

I've been thinking about this for a while, but when I read the latest post on one of the real estate investing blogs I follow regularly, I had to write about this.

I follow several blogs of people who got started in real estate investing. Over the past several months, three of them have decided to get their real estate license and become Realtors. It seems to me that this is just trading one job for another. I will admit there are some advantages to being a Realtor, but I don't think they are advantages that couldn't be gotten other ways - such as having a working relationship with a good Realtor.

I remember an article I read in the Arizona Republic earlier this year about the glut of real estate agents. Referring to the real estate boom, the article stated:

Suddenly, helping other people buy and sell houses looked like an easy way to make money, maybe a lot of money. How hard could it be? With investors amplifying demand, houses practically sold themselves, often for thousands of dollars more than the asking price.

People poured into the real estate business: The number of licensed agents in the state increased from 53,478 in July 2002 to 80,210 at the end of March [2006], according to the state Department of Real Estate. But now that the market has cooled and the prospect of quick money is gone, the newbies are starting to pour out, brokers and agents say.

It goes on to say that 80% of new agents quit within a year and 90% quit within 3 years. From my point of view, being a Realtor is even worse than having a 9 to 5 job because agents tend to work a lot of weekends and are on call basically all the time.

I really do hope that all my blogger friends enjoy success as Realtors. Perhaps their REI-based viewpoint will help them succeed where others so often fail. For me, however, I'll stick with being an investor.

6 comments:

Michael E said...

Shaun,

Becoming a Realtor is a great way to gain experience in the world of real estate and real estate investing especially for someone who doesn't have the funds to start investing right away. I've always had a passion for real estate investing, however, being a college student with student loans tends to get in the way of investing! Instead, I've plunged myself into real estate, obtaining my real estate license and interestingly enough, my real estate career has never been better than right now. I'm gaining valuable knowledge helping other people and investors find properties and I'm learning about the business from the inside, while being my own boss. While doing this, I'm obtaining an income doing what I love. So, if you're someone who enjoys learning about real estate investing and at the same time wants to have a steady income to fund your lifestyle and investments while getting a quality hands-on education in the world of real estate, I would STRONGLY recommend becoming a Realtor.

Michael
MichaelEmilio.com

Anonymous said...

And, there's absolutely nothing wrong with that. My #1 reason for finally getting my license was that I thought it would open doors for me as an investor. And, it already has allowed me unfettered access to the MLS, which has already given me much more insight into properties of interest. I've been looking for commercial deals, as you probably know. And, the MLS has allowed me to see what others have sold for in the area, what rents per sq ft are, etc, etc. Just try to get that info out of a commercial realtor! Good luck with that! I struggle just to get them to call me back. And, I'm not the only one who's noticed that problem.

But, as an aside, I believe 2007 will be as big for me as 2005 was as far as purchases go. I wanted to be the one to collect on those commissions, since I did all the "realtor-type" work before anyway, even though I had a realtor! I've always been involved with my purchases and sales. I don't just hand over the earnest check and hope for the best.

So, that explains why I got my license--mostly for my own stuff. But, when I get some investor clients, it'll be icing on the cake. I'll be doing something I enjoy--talking to investors. :-)

Anonymous said...

Not sure if I was one of the people you were referring to, Shaun. My reasoning for getting a license is 3-fold:

1. MLS Access - As Trisha mentioned, complete access to the MLS. This not only provides me with instant comps, but lets me see properties before the general public can, in most instances. Keep in mind that Texas is a non-disclosure state, so the MLS is about the ONLY place to get sales comps. Asking an agent, title company, or appraisar is an alternative, but imagine pestering them for each property I'm interested in. :-)

2. Supplemental Income - Being an agent can provide supplemental income. I plan to keep my full time job for as long as it is financially feasible to me. I'll do the agent thing part time. I realize being a part time agent may be an oxymoron as agents require a lot of "off hours" to close deals, meet with byers/sellers, etc. Again, though, my initial concentration will be to increase my investment portfolio. If I manage to make money as a buyer's or seller's agent, then all the merrier!

3. Path to Other Things - This coincides with my next reason (Networking), but basically being an agent can open other opportunities. For instance, when I was talking with a broker last week, she mentioned that her office no longer handles property management. I'm thinking this could be a wonderful opportunity for someone who wants to open a property management company as they can partner with this office (or, at the very least, get leads from them). Other avenues could open up, such as working the mandatory 2 years as an agent and then opening up my own office as a broker.

4. Networking - Being an agent will allow me to not only network with other professionals in the business, like other agents, broker, loan officers, lenders, appraisars, title companies, but also meet up with other investors.

5. Reducing Costs? - I put a question mark on this one, because all the fees associated with becoming and staying an agent may be a wash, but imagine buying a property on the MLS and not having to fork over the usual 6% in commissions? If I buy one listed through my broker, I could conceivably save 4.5%. If I buy one through another broker, I still save 1.5% (or more).

Of course there are some negatives, but I don't think they are too bad. The one thing I'm researching now is being an agent and buying HUD foreclosures. I've been told you can't do it, but the HUD processor's web site for my area says ONLY the HUD *Listing* Broker and their agent's cannot buy it.

Shaun said...

There's nothing wrong with being a real estate agent and I'm sure each person who went down that path gave it lots of thought. I just thought it was strange that a bunch of people who started out as REIs morphed into agents. The reason most people get into REI is to be able to quit their day job and live off the passive income, so becoming an agent is pretty much doing the opposite. However, I do agree an REI can get some added benefits from being an agent as well. (Of course, there is also the drawback of having to disclose your agent status whenever you make an offer.)

Bginvestor said...

Shaun,

If I was a realtor, I could have made approx 10k in commisions from buying my new house through a builder.

Thats a good reason to have a license!

Bginvestor

Anonymous said...

I agree with Shaun on this. Becoming an agent is basically going from a E to an S. When a client wants to view a house on your childs birthday what are you going to do say no? I have access to MLS(both commercial & residential) & Im not an agent. So thats not a selling point to me, saving on comissions? Well if you network with Professionals who do their job right, I dont have problem paying them what they deserve. Agents are a dime a dozen, & im sure everyone who's signed up had stars in their eyes & were promised the moon by their brokerage, until reality hits.

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