Why aren't realtors investing?

Realtor · Northern Virginia · Member since 2018 · 17 posts · 31 votes

Hey BP,

I'm relatively new as a real estate agent, but one of my main goals are to become a successful investor, focusing on building a portfolio of rental properties (hard to find cash-flowing properties in the Northern Virginia area btw, from what I've seen)

As I haven't "made it" yet as an agent, it's crazy to see that the agents who are making good money, aren't investing themselves, with all the resources and tools they have at their disposal.

Why is that? I feel like it's especially needed when you have a commission-based job

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Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

Like any industry, the Pareto Principle applies. 80% are average, 20% rockstars. I'd venture its even closer to 90/10. The agents that are here contributing to BP are def the top 10%.

I ask the same of contractors. Why don't you invest? You get calls from people with house problems all the time. They look at me like I have a 3rd eye even though this is the 8th different job I'm hiring them for.

Investing to hold a cash-flowing asset does not cross most sheeple's, I mean people's, minds. Baa-ah, gotta get to work. Baa-aah, it's almost Friday. Be grateful there aren't more of us :)

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Brian Egr
Flipper/Rehabber · Lincoln, NE · Member since 2016 · 144 posts · 71 votes
7y
I am an agent and an investor, actually you could probably say I'm an investor first. To answer your question, even though investing in real estate is appealing to some, it's not appealing to everyone. Even agents who work in the industry helping other people buy and sell just don't always get the urge to buy for themselves. It's a mixture of risk tolerance and human nature.
3 Reply
Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
To make a living as a real estate broker - it can be more than a full time job, so rentals can be distracting. It also includes an expanded skill set - mostly renovating, repairing, maintaining buildings. I found about 10 to 20 percent of realtors also invest in real estate. Most have smaller holdings.
4 Reply
Karl B.
Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
7y
90% of realtors aren't awfully successful. I believe 10% of realtors sell 90% of properties.
The realtors I've worked with whom I were impressed by (to varying degrees) do a lot of sales - one had a team - an assistant who is also a realtor and would show properties as well as her own secretary which made getting in contact with her easier as I could simply check in, ask for updates and info and the secretary would make certain no ball was dropped. And since then (I still get her newsletter) she's grown her team three-fold the past six or so years.
Every realtor I speak with in the L.A. market is familiar with her because she hustles an amazing amount and is great at what she does. But I'm getting off subject!
But as you mentioned, 'agents who are making good money'... some probably figure they'd rather spend their time showing and marketing properties - especially now with hot markets and larger commissions.
I assume more realtors get into rentals when the market is tanked and deals are too good to pass up. 2008 would be a prime example - I'm sure some realtors can confirm or deny my thought.
Plus perhaps realtors see trashed homes and figure a renter could have done it could scare a realtor from investing. Who knows. Total assumption here.
But I know a few realtors who invest - one guy (he was a dual agent in a duplex I bought) told me he was getting out of landlording; perhaps Brandon Turner has it right - most people aren't cut out for being a landlord and that includes a large amount of realtors.
As David Green said recently - realtors must like people. Perhaps that's why they're realtors - they enjoy the social aspect of it and the open houses, meeting new people, etc. and perhaps a lot of them don't like the idea of having to deal with the bad side of landlording: chasing rent, evicting, etc.
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Frank Geiger
Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
7y
The ones who truly understand the power of real estate are! Not all agents want to invest. They have different things that inspire them like luxury/ high end homes. Not all people choose the career for the money. Some genuinely enjoy the job and networking with clients.
4 Reply
Michael T.
Los Angeles, CA · Member since 2018 · 326 posts · 279 votes
7y
@DuBeaux Dingle approximately 25% of the agents in my office invest. Most treat being an investor as a second job so it's not worth their time or effort to have a second job.
Yes, it's extra effort to invest but for the agents who are willing able to do it they are setting themselves up for long term success. You can do both but unless you make money through sales/commission you can't necessarily acquire multiple cash flowing assets.
5 Reply
William C.
Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes
7y
Originally posted by @Dennis M.:
Most agents in my area are not really what I’d call successful . Many rent and drive older cars . I’m not sure they could invest even if they wanted to because in rural areas and small cities RE agents are not paid very well from what I can tell .
RE agents are not paid employees, they need to earn a commission to be paid. There is the 1% of agents doing all the business in your town and they are not driving around your neighborhood, and they are being paid very well.
2 Reply
Patricia Steiner
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
7y
The question concerns me...how would you know whether realtors have investment portfolios or not? Those who work with investors generally have an investment portfolio but are not active to avoid a conflict of interest. Others own an interest in design, development, and construction companies. Others own their own firms and have investment interests that are diversified. The most successful people I know are the ones who live "under the radar" and have no interest in others knowing their business. About the reference to the "old car," Warren Buffet drives one. Guess he's not too worry about what folks think of his investing success.
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Llewelyn A.
Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes
7y
In my mind, Real Estate Agents are like the people trying to be Sports stars.
In a VERY crowded field, only about 1% will be extremely successful.
50% will not be in the business in a few years and 49% will wind up making a living but not being that "Superstar".
One BIG obstacle is that Agents/Brokers work on commission. That's really detrimental to getting loans since it's much harder to qualify as a self-employed commission based worker.
It was so much better for me as a previous w2 employee making 6 figures to qualify when I started my RE Portfolio 21 years ago.
Today, prices are MUCH higher and the bifurcation between those who are successful as an Agent is much bigger.
Part of the problem is the higher standard for qualification for Loans after the Financial Crisis of 2008.
Since I am in NYC, I cannot imagine a mediocre Agent being able to invest and the Superstars are way to busy to be Landlords.
If you contrast what prices were 21 years ago to today, the entry to Real Estate investing is WAY different.
For instance, I bought a 2 family property for $140k but it is worth $1.1 million in today's Market.
How can the average RE Agent afford to buy in NYC?!
Even the Superstars will have difficulty here! You will have to be in the top 1% of RE Agents here despite the increase in commissions on a sale due to higher Prices.
Just curious if this is true in other markets?
6 Reply
Adam Blachnio
Rental Property Investor · North East US · Member since 2019 · 114 posts · 31 votes
7y
one of shark said:
B/c they are in a commission based business while Investors are in cashflow business💥
Remeber KNOWLEDGE IS POWERFUL 🚀
4 Reply
Nick Rutkowski
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
7y
@DuBeaux Dingle A lot of agents I know own a rental property or two. I know very few agents who own more than 20 units. They rather focus on listing and selling properties or making their team better. They might find it easier to scale their sales business rather than their investments. As you know, you run a business when you're an agent - this takes time, energy, and money.
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Stephanie Zader
Rental Property Investor · Mansfield, OH · Member since 2015 · 10 posts · 8 votes
7y
Hello @DuBeaux Dingle
I am a Realtor and investor. I've owned properties for 10+ years and I've been an agent for about 3 years. Initially, I took the classes because I felt that it made me a better educated investor, but I later became licensed because I wanted to help other investors build their portfolio, as well. I think everyone has their own style and investing just isn't for everyone.
As for the market, the market is still fairly hot for seller's right now, but I see it shifting in the near future. Obviously, a seller's market isn't an investors market, but deals can still be found with a little work put in.
Beat of luck to you, my friend!
Stephanie
4 Reply
Matthew DrouinPro Member
Developer · Rochester, NY · Member since 2016 · 403 posts · 338 votes
7y
@DuBeaux Dingle I used to be an active agent (now I only do it for friends and family). Then I started investing and I said F this and I fired myself. Funny thing is, when I stopped worrying about commissions, I started getting more business that I wanted or could handle properly.
Maybe that’s what happens? Haha
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6 Reply
Ade Amoo
Real Estate Broker · Houston, TX · Member since 2017 · 32 posts · 15 votes
7y
@Michael Van
To support your position; reading The Millionaire Next Door sums it up. As humans we just don’t value the same thing across the board. Some folks have massive net worths but you can’t really tell from the outlook of things like what car they drive e.t.c
3 Reply
Gus Kazek
Real Estate Agent · Cleveland, OH · Member since 2018 · 90 posts · 55 votes
7y
@DuBeaux Dingle those agents who dont invest themselves tend to not understand the big picture when it comes to creating long term wealth. Many of us were raised to work hard and buy a single family home without ever realizing the potential that a rental property could provide adequate income for us to live the lives we want. Everyone is different and most agents just want to sell instead of taking risks of owning!
1 Reply
Tim Houzenga
Morrison, IL · Member since 2016 · 48 posts · 68 votes
7y
I would have to assume the successful agents spend a lot of time developing their own systems and building out their own business to worry about buying properties. Investing in real estate is an entirely different skill set.
1 Reply
Account Closed
Morristown, NJ. · Member since 2019 · 9 posts · 2 votes
7y
Good post... I believe they are... and I know a few that do... maybe its just personal preference.
0 Reply
Staneley Cesaire
Investor · Utica, NY · Member since 2016 · 24 posts · 26 votes
7y
Because they are very focus on finding clients! It take a lot of time to try to sale a house, find client, drive them around, etc...
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Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
7y
Some do but most don't know or want to.
0 Reply
Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
7y
@DuBeaux Dingle real estate agent school teaches you nothing about investing.
Many agents just don’t know. They may also rack up lots of expenses with the luxury lifestyles that many think they deserve.
I drive a 2005 Mazda and was 3rd in my office last year. I also own 20 units because I’ve been able to live frugally and save money.
I know so many agents that think they need a nice car or to live in a hot area to get business. That’s nonsense, serve your clients well and you’ll be in great shape.
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Aaron Gordy
Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
7y
I buy as much as I can. Real wealth isn't created with taxable income from commissions (job). Real estate investing is a great way and proven to build real wealth especially if its passive income where someone else is doing all the dirty work.
3 Reply
William C.
Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes
7y
I think a better title might have read “Why aren’t the few agents I know, investing”. Your title implies implies more than 1 don’t invest, and some would even read think and think all agents don’t invest.
Anyway the answer to your question is pretty simple, just ask them. I personally don’t know any agents that don’t invest, and according to study done last year 85% of agents own property, so those few that are not investing are in the small minority.
I’d look around for some new agents in your market to network with. The old cliche about the 5 people you spend the most time with etc etc....
I’m enjoying the thread though. Anecdotal evidence always finds a way to prove the fax.
2 Reply
Michael Warinner
Real Estate Broker · Pensacola, FL · Member since 2018 · 42 posts · 68 votes
7y
@Karl B. I agree with that- plus most people assume that if you own investment properties, then you must have to fix toilets at 2am.
Most are just not informed or haven’t taken the time to research properly
2 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Dennis M.:

Originally posted by @Michael Van:
@Dennis M. You bring up a good point about their cars but be careful about using that to disqualify people to invest. Investors especially people like us know where our money and value goes and something like a new or really nice car just doesn't go as far as putting that money into an investment. I know a handful of guys in my area that live like they're broke and drive beater cars but they have a solid portfolio of investment properties.
I understand that and you do to . The realtors I know aren’t driving beaters around so they can stack money for their investments , that’s for sure
keep in mind agents are 1099 and they have a much tougher time qualify for loans.. I know its a major issue for me with normal banks.. if I did not have my commercial banker in my corner the time effort and frustration of being self employed and qualify for a govmit backed loan is just a Pain in the @@@@ so i dont do it. Plus rental income in areas that dont appreciate is not a good use of our credit or capital.. too much work for way too little money. And as stated above top agents dont need rentals they knock down big money rentals to them with drip income probably are not worth their time .. A lot of agents i know skip that part and go right into lending and developing and major fix flip or new construction.. so instead of tying up 500k to make 1k a month they make 50 to 100k in less than a year for the same use of capital.. ???
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Mica Moore
San Antonio. Tx · Member since 2018 · 75 posts · 47 votes
7y
Property management is the armpit of real estate. The tenants drama, maintaince & vacancy. It looks like easy money on paper -- but the reality is a lot of hard work. A PM helps but it doesn't solve all the problems. Tenants are ruthless -- you would not beliive it unless you experience it.
The fix & flip side? Have you dealt regularly with contactors? Very big headache --- getting them to perform ontime & within budget or even to have the crew show up at all & do quality work --- takes a lot of patience & oversight. Think you can DIY? Not as easy as it looks either, you could run into an array of issues. Then when time to sell -- it could not be as quick & easy a sell as you think. You're on the clock to make a profit and 99% of the time there is more work & energy involved that estimated.
There are a lot of big dreams & big talkers in this game -- but few consider the realities.
6 Reply
Julie Noone
Member since 2019 · 17 posts · 3 votes
7y
I got my license for a number of reasons, but a big one was for the tools and commissions saved on buying/selling personal investments.
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