Moving from real estate agent to real estate investor is a matter of mindset.
I recently spoke at the Think Realty Conference & Expo in Atlanta and moderated a panel of real estate agents who have “flipped the switch” from real estate agent to real estate investor.
What I found out was that all of the people in the room came from corporate America and I thought that was interesting. Why? Could it be that the corporate mindset is what got us all to look at real estate sales differently?
Now, I don’t have to be a math whiz, but it’s pretty clear that with 75 percent of all agents making less than $72,000 a year, most agents aren’t rainmakers for their offices — or for themselves.
As the real estate landscape changes with technology and iBuyer platforms, real estate agents need to have a plan B.
One thing that is rarely discussed or taught within our industry is how we, as real estate professionals can take advantage of what we already know! I have seen a few courses that teach agents how to work with investors but not one teaching agents how to be investors. One of my very good friends and a fellow Realtor® was complaining to me a few months back that her back hurt from driving buyers around all day and how she was turning 60 and would have to sell real estate for several years to come. Why? Because she was never taught how to build wealth, create passive income, and invest in herself. She never thought of flipping the switch until we had a conversation.
What do agents already know that gives them a leg up in the real estate investing space? They know:
- How to run a CMA;
- What buyers are looking for;
- How to price and market a property;
- How to identify up and coming areas;
- How to set up specific searches in the MLS; and
- What items are concerning in an inspection.
Most real estate agents do not think the same way investors generally think. It’s not a negative, it’s simply the way in which most agents were trained. We were taught how to show a home, point out features, or tell sellers to de-clutter and de-personalize their home. This is not the mindset of an investor.
So, what is needed to move toward the “flip the switch” mindset as I call it? You need to change your focus and consider points beyond a home’s features. Examples include:
- The lower level of a certain property could make a great AirBnB rental unit.
- Properties in this area have appreciated 15 percent over the last 12 months and are still increasing.
- If I open-up the floorplan or add square footage, can I make a profit?
- There’s a lot of new development in the area and new businesses. What’s happening? Is the area changing and is there opportunity?
See the difference? Investors don’t care if there are piles of clothes everywhere or what pictures hang on the walls.
If you have a 4-unit home, and after all expenses are paid you are left with $200 per door? You would have $800/month in passive income. Plus, you should have appreciation in value. You would have a tenant paying down the mortgage and building equity for you. And you would reap tax benefits.
What if you have a 50-unit apartment building? At $200 net per door, that would be $10,000 per month!
Or what if you have a short-term rental with a $1000/month mortgage, but you can get $100/night — that’s $2000 per month in your bank account.
There are several ways to invest in real estate depending on your investment personality and risk tolerance. You can fix and flip, buy and hold, wholesale, become a private lender, buy tax liens and invest in notes. It just depends on your own objectives and goals.
The real estate industry is constantly evolving, and more people want a slice of our commission pie. For real estate agents, it’s important to think how to leverage our knowledge to BE the investor and create generational wealth for ourselves and our families. When you flip the switch, you illuminate many more possibilities!
Agents vs. Investors: A Numbers Game
According to US News and World Report, in 2017 real estate agents earned a median salary of $45,990.
And 25 percent of agents earned less than $32,000 per year while 25 percent made over $70,000 per year. As of January 2019, the average annual earnings for real estate agents was $41,289. (salary.com)
The Bureau of Labor Statistics states that only 10 percent of agents earn more than $110,000.
So, what about earnings for real estate investors?
According to Zip Recruiter, as of September 2019, the national average investor salary is $123,937. In my home base of Atlanta, it is $124,566. Those numbers are a far cry from agents’ earnings!