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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Suly B.
Rental Property Investor · Denver, CO · Member since 2018 · 81 posts · 62 votes
7y
@Llewelyn A. In my opinion it's true in the Denver market.
0 Reply
Judy Murphy
Investor · Copper Center, Alaska/Indiana · Member since 2018 · 44 posts · 33 votes
7y
I can’t speak for other RE agents, but I only got my license to learn more about the RE game...and let me tell you, as a new REagent, I was very busy just learning the day to day stuff. Since I owned one rental prior, I thought I had a good grasp... I also live in remote Alaska which adds a few challenges to being a RE agent. Many inquiries from the lower 48 should have been saved for the next reality show! Now I am transitioning out of the agent status to full time investor in my home town in the lower 48. I am very thankful for learning the agent duties, but the time I wasted w “tire kickers” (plus a 4 hour time difference for a lot of calls) kept me busy from early morning to late evening w minimal results/remote properties. Now when I get up at 4 am I work on MY out of state rental properties and feel more productive! Hmm, maybe I should get a RE license in the state I am investing in???
1 Reply
Judy Parker
Rental Property Investor · Closter, NJ · Member since 2015 · 884 posts · 722 votes
7y
I am a NJ licensed Realtor and investor - currently own 5 houses and 4 commercial buildings.
0 Reply
Greg Dawson
Member since 2019 · 7 posts · 5 votes
7y
In my experience a lot of them just don't have a business/investor mindset. They have a sales mindset.
Any time you see a person driving a luxury car (Mercedes, BMW, etc.) with no assets or investments they fundamentally have a consumers' mindset.
4 Reply
Joshua DawsonPro Member
Real Estate Broker · Dublin, OH · Member since 2013 · 111 posts · 36 votes
7y
I would add that - a lot of our markets are simply too expensive based on return objectives. I know Columbus, Ohio is in many instances. The great numbers are found in areas with too much risk in my opinion. That's why I am not putting any money to work right now.
2 Reply
Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
7y
@DuBeaux Dingle
In my area they are, and I’ve noticed a lot of contractors/investors/flippers becoming realtors
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Joshua Lidberg
Rental Property Investor · Philadelphia, PA · Member since 2016 · 41 posts · 14 votes
7y
Some people on this thread claim that agents perhaps earn a higher ROI by investing in themselves, which could be the case. However, those are 2 completely separate activities, and both should be implemented for diversification. Their income from day jobs could be considered operating activities, and investments would of course be considered investing activities.
None of us won't be able to, nor have the desire to work forever. (Good) Real estate investments will allow you not to rely on your job for income.
Also, some people only consider their cashflow as income from their RE investments. When you account for everything, the cashflow, loan pay down, appreciation, tax benefits, leverage, and that once the note matures and is fully payed off, your cashflow will triple - the overall returns are astonishing.
1 Reply
Julie N.
Real Estate Investor · Unionville, CT · Member since 2016 · 260 posts · 167 votes
7y
@DuBeaux Dingle I am! If I look at my office of 70 agents- there are a handful of us who invest. I see lots of Agents who rely on it as their sole job to pay bills and thats it. Of course Agent/investors are a different breed.
1 Reply
Brad Clarizio
Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
7y
@Joshua Dawson , man, respectfully, I couldn't disagree more about Columbus. As a long time investor and someone who is recently licensed, I am dumping money into Columbus every chance I get. Every area has risks, but there is still a TON of money to be made here. I'm riding this investment wave until the cows come home.
2 Reply
Scott Schultz
Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
7y
@DuBeaux Dingle as a Broker of 13 years the vast majority of agents anew not that bright, most are nice folks, just not so smart, and really not good with money, so big picture they are like most people, and they treat being an agent like a job to pay the bills instead of a means to freedom
1 Reply
Scott Schultz
Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
7y
@Phil G. I dont “deal” with my rental properties, I hire a property manager for that, I just manage my managers.
1 Reply
Scott Schultz
Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
7y
@Russell Brazil If investing in their own business means their agent business, that’s active income, so they may get a better ROI, but they have to work for it, as you know, for an agent “no working” “no pay”
0 Reply
Scott Schultz
Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
7y
@DuBeaux Dingle Also like most people, agents think they have to manage, and they can’t stomach that part, and even if the hire management, and live near what they own they feel compelled to micromanage their managers, most people don’t look at rental property like other investments, for some reason they are compelled to be involved.
0 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
Originally posted by @Scott Schultz:
@Russell Brazil If investing in their own business means their agent business, that’s active income, so they may get a better ROI, but they have to work for it, as you know, for an agent “no working” “no pay”
For some agents, like myself, we are self employed and that is true. However some agents own businesses, that are more passive than real estate. Its still active income in the way that its taxed, but there are many agenta who havnt set foot in their business in years.
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1 Reply
Rob Mcclellan
Realtor · Rootstown, OH · Member since 2018 · 98 posts · 39 votes
7y
Some do, I am a full time agent. I closed on investment home #8 yesterday. I agree with the comment above most agents are sales people not investors. It is a totally different mindset.
1 Reply
Trent Ecklar
Real Estate Agent · Columbus, OH · Member since 2017 · 203 posts · 170 votes
7y
We should close on our 17th unit for the past year in Columbus Ohio, mostly in Linden.
3 Reply
Bleu T.
Bend, OR · Member since 2018 · 19 posts · 15 votes
7y
I really like your question! ...because it begs larger questions...
Why do most not save?
Why do most people carry so much debt?
Why do people not understand the fundamental difference between consuming and investing?
Why do people waste their hard earned money on expensive gas-powered carriages?
Agents are salespeople...strapped to a cyclical gig.
The majority of Americans could benefit from a thorough reality check, and a tough regiment of self-education in the ways of personal finance.
To be honest, buying a rental using leverage is the last thing most people should do.
1 Reply
Haydn Zeis
Rental Property Investor · Columbus, OH · Member since 2016 · 60 posts · 100 votes
7y
I'm an agent and just wrapped up a rehab buy and hold, in Westerville, Ohio last month. Closing in two more deals on the 28th and working on an LOI for an investment we're analyzing and hopefully closing on, in the spring. I think there are lots of real estate agents who just focus on sales, and simply don't like investing.
0 Reply
Della R. Williams
Rental Property Investor · Member since 2018 · 5 posts · 4 votes
7y
I'm relatively new to real estate, but I became an agent to make my investments easier. I have four single family homes and two lots that I intend build on. Being an agent supports my investing. I can't imagine that an agent wouldn't invest either, given the commission status.
1 Reply
Joe Bertolino
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
7y
@Michael Van
Read the Millionaire Real Estate Agent. There are dozens of 7th level teams where the rainmaker works on the business but not in it day to day.
2 Reply
David Hooper
Lender · Fort Collins, CO · Member since 2017 · 67 posts · 19 votes
7y
@Casey Powers I’ve run across several agents who wouldn’t qualify for a mortgage. Of course I haven’t “made it” yet as a lender and I don’t have top producers calling me for a loan, but I’ve seen some with significant credit and debt challenges. Then you think of tax reporting and accounting,... as an agent you deduct EVERYTHING to pay less taxes,... means you can’t get a loan.
2 Reply
Asif Aman
Specialist · Durham, NC · Member since 2017 · 22 posts · 6 votes
7y
@DuBeaux Dingle it's worth mentioning that most people at BP think of REI as BRRR or something creative, which is high risk and high reward. But regular REI ROI is pretty close to the stock market, based on a study done looking at the data from many countries going back decades. Someone had written an article on BP citing that study.
0 Reply
Jon Lanclos
Real Estate Broker · Houston, TX · Member since 2017 · 64 posts · 27 votes
7y
@DuBeaux Dingle it’s because they are busy trying to earn an living - we are taught to go get a job, earn a living - we are not taught to create passive income - I’m glad your looking into it now - keep going
2 Reply
Jarrin Benson
Real Estate Broker · Portland, OR · Member since 2018 · 31 posts · 22 votes
7y
It really comes down to earned income vs passive income and what peoples' tastes are. Some don't look forward far enough to see a day when they'd appreciate having a high rate of passive cash flow, and are only focused on earning enough in their productive years to approach a savings that provides the magic '4%' retirement rate. Above, Kiyosaki's Cashflow Quadrant is mentioned. This had a profound affect on me, and provided guidance to a lot of questions that I had at the time. When the student is ready, the teacher will present itself. Now, I'm focused on re-investing my earnings. High earned income into high passive income. I don't even know 100% what that looks like yet. I don't know if I'll want to manage 100+ SFR, or have a combination of MF complexes that total 100+ doors, or invest in private funds or notes or what. The one thing I know is that I'll be investing. A high earning real estate agent has to work with a lot of people's indecision, various personal and emotional issues with buyers and sellers, dishonesty, and the list goes on. At the end of the day the last thing some of them probably want to deal with is a bad tenant. It's really a matter of personal preference and taste. No matter what anyone else tells you: it's a long time before investing is not a job anymore. Anyone who tells you otherwise is worth 4mm plus and got there by 20 years of hard work, or high earning, or legacy wealth. Period. Anyone who thinks they can own 10 properties in 2 years and retire off that cash flow either has good capital going in or has a brutal truth coming to them the first time a property needs major repair or capx investment. While I plan to be diverse with my investing, the first and foremost goal is high earned income. A high income will put you ahead faster than investing will, but investing wins the wealth race in the long term. Do both, and you should be far ahead of your peers.
3 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
7y
I would say it's a low single digit percentage of agents who invest, and many of those have only one or two units. I believe the answer has something to do with the agent life cycle.
The drop out rates are extremely high, depending on who you ask 80% to 90% in year one and two. After 3 years, most new agents are gone. The ones left standing are trying to get to a higher level in production, do more than 10 deals a year, maybe then reach a 6 figure income. Only a few will succeed. And of those a only a few will go and build a team and aim to net a million (as outlined in Gary Keller's book Millionair Real Estate Agent). That carrot is in front of them has so much draw that they don't look left and right.
What also contributes is that many "investors" are a pain to work with. They are looking for an investor friendly agent, but are not "agent friendly investors". It's a lot of work for very little money. And it requires a lot more specific knowledge than working with a family. I went to a seminar once hosted by an agent about how to work with investors. I was intruiqued. He was throwing a few buzz words around like cap rates and leverage and some of the things he explained were not quite right. Most of the audience glazed over and went back to working with families.
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