Most people who are starting out are looking at becoming a real estate agent as a job instead of as a way to get an edge as a real estate investor.
On the other side, I often hear investors talking about whether or not it makes sense to be a licensed real estate agent, especially if they plan to invest in real estate long-term or even in notes.
From an investor standpoint, I’ve experienced many positive game-changers over the years, largely due to the fact that I held onto my real estate license.
So, here’s my take on some of the advantages.
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4 Advantages of Keeping a Real Estate License as an Investor
1. Save Commissions
Saving commissions is one of the first advantages that comes to mind. I saved thousands of dollars in commissions over my 30 year career as a licensed real estate agent, and this includes referrals and property management fees too. When I first started out, I lived off of my day job’s income, and I was able to bank all my real estate commissions to invest in real estate.
Sometimes I hear folks say that being an agent can be detrimental to getting a good real estate deal since they have to disclose that fact to all the parties involved.
I’ve found the opposite to be true. Even on private deals, by disclosing that I was an agent, it had the opposite effect. It actually gave me credibility and a sense of trustworthiness, and when I knew what else was needed to complete their transaction, it demonstrated a certain level of expertise. There were even times when being an agent helped me get the deal. For example, I was able to get an REO deal when there were other competitive bids involved by forgoing my commission.
2. Deal Access
For me, access to deals may have been just as valuable, if not more valuable, than the commission fees that I saved. After all, it’s all about finding and having enough deals.
To be quite honest, I never had a problem finding enough deals at any time throughout my career. As a real estate agent, not only can you look for properties online 24/7, but you can also be alerted when something you’re looking for hits the MLS.
You can find estates, administrators (nursing home situations), and handyman specials. Also, you have access to public records, expired listings, and lease-option candidates. Days on the market (DOM) are critical as well. I can track deals that have been with multiple real estate agents without selling and have reduced their price on numerous occasions. These are all great areas to mine for excellent deals, and by being an agent, I could easily submit multiple offers, as well as letters of intent.
Another advantage of being the agent with MLS access is having the availability to review comparable properties near my subject property. This is extremely important not only when buying properties, but also when buying notes. Real estate values are so subjective, so you really need to do your homework in advance, whether that’s trying to determine the ARV (After Repaired Value) on a rehab project, or if it’s trying to figure out how much equity is backing the first mortgage you’re trying to buy.
3. Industry and Market Knowledge
Although this advantage may be overlooked sometimes, by being an agent, not only are you familiar with all the paperwork and the buying and selling processes, but you also have the inside scoop on the local market and the overall industry.
You’re able to have a pulse on things like mortgage financing, which can be huge, especially since real estate is finance driven business. But you’ll also learn about other things, such as title and homeowner’s insurance. This has been another added bonus that’s saved me a fortune over the years.
4. Tax Savings
Now, being able to save on taxes is a big advantage. Today, it’s one of the primary drivers for me continuing as a real estate agent.
Sure, you can write off your office expenses, membership fees, meals, and mileage, but the biggest advantage for me is the depreciation deduction on my rental properties that can offset my earned income, and I’m not capped at $25,000 of passive losses like most individuals since I am a full-time real estate professional. This alone has been a tremendous tax savings strategy for me over the years.
Clearly, there are many advantages to keeping a real estate license—besides buying all the listings that aren’t selling (my favorites) or that others aren’t buying.
As my buddy always says, there are no bad houses, just bad prices.
So, if you want to get more deals, you just have to make more offers, and doing that has been much easier for me by being a licensed real estate agent.
To all the BiggerPockets folks out there, what are your thoughts on this strategy?
Let me know with a comment!