Is Becoming a Real Estate Agent a Good Path to Investing — Or a Pricey Distraction?

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Should more aspiring real estate agents just start investing in real estate instead?

Becoming a real estate agent is a path to real estate investing that at least hundreds of individuals choose each year. Some are unsure of themselves and see this as a way to learn the ropes before investing for themselves. Or they perceive being an agent as a way to earn a paycheck and return from real estate quickly. Yet ultimately, many find out that while there can be advantages to getting a real estate license, it can be a long and expensive detour as well.

Becoming a Real Estate Agent is Not Cheap

Most don’t realize just how expensive becoming a real estate agent can be. This is certainly one of the top reasons that the majority of agents don’t make it long enough to renew their licenses after just 12 months.

Related: The 3 Biggest Drawbacks of Being a Real Estate Agent in This Day and Age

There are pre-licensing course fees, association dues, lockbox fees, continuing education costs, and more. Then there are all the setup expenses including real estate websites, purchasing technology, business cards, new devices, signs, and so on.

This can easily total thousands of dollars.

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No Guarantee of a Paycheck

All of this training and cost to become a real estate agent doesn’t even come with the guarantee of a paycheck. In fact, you could easily go 3 to 6 months before seeing a penny from a closing. Then consider that the average real estate agent only barely makes minimum wage. To make any money, you are going to have to be out there hustling every day and investing even more in a variety of marketing efforts.

Should I Just Invest Instead?

Now compare the average real estate agent wage with that of investors. According to RealtyTrac, the average gross profit from a house flip in 2016 rose to over $60,000. That’s just one deal. There are many other ways to get involved in real estate investing without having to flip houses yourself. You could put $5,000 into becoming a real estate agent, just to buy the chance to work as a real estate salesperson for another investor. Or you could just put that money directly into real estate investments and begin earning income right away. That could be through mortgage note investing, private lending, real estate crowdfunding, or wholesaling properties.

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Related: The Epic Guide to Finding an Investor-Friendly Real Estate Agent

Summary

We do need real estate agents. There may be upcoming technology aimed at making them redundant, but it hasn’t yet. For some people, becoming an agent may be the best fit for them. But for those who really want to invest for themselves, there are other ways to get perks of an agent. You can just hire one if you like. The bottom line is that every aspiring agent and investor should carefully do the math for themselves up front and determine which path is really going to take them to their goals the fastes and with the best return.

What do you think — is becoming licensed as a real estate agent a good way to get your foot in the real estate door?

Let me know your thoughts with a comment!

About Author

Sterling White

Sterling White started in the real estate industry at a early age back in 2009. The company he co-founded Holdfolio is a real estate crowdfunding platform based in the Indianapolis market. Before founding Holdfolio Sterling and partner Jacob Blackett were involved in the purchasing and selling of 100+ single family homes nationwide. In his free-time he trains for a World Record

21 Comments

  1. Christopher Smith

    Good Article

    I struggled with this decision myself. I knew I never really wanted to be an agent, but I have enough of my own properties now that I wondered if it would be worthwhile to become an agent just so I could buy and sell them myself. I ultimately concluded that it would likely not be efficient for me. Sure if I were already an agent take full advantage of it, but I think there are possible work arounds if you own your own properties. A better answer than devoting a lot of time to something that in effect becomes primarily a one off benefit.

    If I ultimately do decide to start unloading properties in the future (no intent to do so now), I am thinking I can probably negotiate a better agent selling commission than the typical home owner needs to pay. Plus with the new tools available for marketing properties, I can likely assume some of those functions myself which would also enhance for my benefit the agent selling commission. If not I just keep rolling along with a nice portfolio of rental properties.

    • Sterling White

      Thank you for the comment. Sounds like you are leaning more towards not becoming an agent which makes sense with what you’re looking to accomplish.

      If you did at some point decide to get a license would you jump into selling properties full-time, Chris?

  2. Samantha Belinkie

    Very relevant issue for me. I just recently passed the real estate exam and got licensed. I don’t intend to become a full time real estate agent because of the start up costs mentioned in this article and unpredictably around income. People I have spoken with have said if you want to be successful at it you can’t do it part time, and right now I can’t afford to give up my salaried full time job. I had hoped having a real estate license would help me with real estate investing but now I am struggling with what to do next and figuring out how to use my license without signing on with a brokerage full time.

    • Sterling White

      Congrats on getting your license! It sounds like you’ve got some decisions to make. I wouldn’t let the start-up costs discourage you. There are more cost effective ways out there to go about marketing to find people looking to sell their homes.

      I wish you the best of luck.

  3. Edward Briley

    It is this easy. Do you want to be a real estate investor of have an occupation is a real estate agent? Investing is about making money, and being a real estate agent is an occupation. Plus and minuses to both of them. I would side with investing.

  4. Ryan Sanders

    There is nothing saying you cannot get your license solely to save on commissions. If you plan to be a flipper, then saving that percentage on every sale can be a HUGE benefit long term. In Colorado Springs, the average ARV of a house is $289k and the ‘typical’ sales commission is 6% (3% for buyer’s agent and 3% for seller’s agent). This means someone with their license can add 3% (just over $7k) to their profit on EVERY deal. If you do 1 deal a month, thats $86k more income per year. I would say this is a large factor when deciding if a real estate license is a good idea.

    Also, to head off this argument at the pass, there are brokerages out there who will let you hang your license with them without requiring ‘full time’ employment. In fact, when working on a commission-only basis, they cannot require you to work any number of hours because you are treated as an independent contractor. That means you can hang your license with a brokerage and give them whatever commission split you’ve negotiated with them on each deal and never have to be an agent for anyone other than yourself. In Colorado, once you’ve been licensed for 2 years, you can operate your own brokerage which would then allow you to keep that entire $86k per year instead of splitting it with a firm.

    Just food for thought.

  5. David Roberts

    At least in Michigan, the author is overstating the costs depending how you go about it. Also if you are using the license as a tool to save on commissions and have access to better data, the cost is almost negligible.

    There are brokers who take no commission and extremely low carry fees. They are usually investors you just have to find them.

  6. Link Moser

    I have held a real estate license in New Hampshire for nearly 20 years and am embarrassed to say I’m only not serious about buying real estate for myself. I know tons of real estate agents who never invest in their own product, short of maybe their primary residence. I have used my license for my own personal transactions and no doubt it has been well worth having. However, the unpredictable nature of the income and having to ‘hunt’ for your next meal ticket can be very hard. I hope to leverage what I have learned in the real estate industry to invest in real estate for myself and be a better agent to help clients and customers.

  7. Joshua Martin

    Sterling, decent article, but I like the overall topic and your input. With respect to this decision, I’m smack in the middle of it.
    I was licensed a few months ago, and signed on with a broker about 6 weeks ago. One listing so far (w/ accepted offer), and written several offers. Once I close a few I will have paid for the initial investment, so the start up costs I don’t consider to be that huge. In fact, compared to other businesses, or even buying a property (depending on your market and price point), the cost of entry is remarkably low, and the income potential is massive. But yes, as another commenter posted, it is a job and not the least bit passive. I accept this, but given my current employment as a bartender in a fine dining restaurant, what I can make in this industry hustling every day for the next year could potentially double my current income.
    What do I plan to do with any money I make? Buy real estate. Putting together the details on my first purchase right now. And goal for 2017 is to have 3-4 units. (The first will be the O/O duplex).
    In the 3-5 year plan I’ll be working as an agent and buying property, but once I can see that property generating enough income to buy more properties and work full time, I’ll be doing that.
    For me it was a question of which job do I want for the next few years: 35-40k consistent, or wild potential as long as I’m willing to out-hustle and outwork most of the agents out there. Well, I’ve already knocked several hundred doors, so I know I can do that out-hustling part.
    Given my situation, the alternative would’ve been working a lot more restaurant shifts and keep going at my savings rate, which is impressive given my income, but doesn’t add up all that quickly.
    So, in short, like anything else, it depends. Did I choose the best route? Who the hell knows. But I chose it, and now I’m sticking with it till I get a better plan 😉
    And in response to one of your questions, will the experience working as an agent help? Yes and no. Yes because you can see deals start to finish and learn the ins and outs, but no because there’s something entirely different about running numbers and doing deals when you’re calculating your own COCR!
    So, in summary, should someone pursue working as an agent if you want to be an investor? Well, no. But if you’re willing to work hard as an agent to stash cash to invest, then it might be a sound move. Big poster on here, Jay Hinrichs, said he started with no money working as an agent, so the truth is, there’s no clear and easy path to REI, but if that’s where you’re going, and you’re certain of it, you’ll get there.
    Thanks for the post!
    Best,
    JTM

  8. Jason Sampson

    I’ve been an investor for many years and I debated getting my license for a long time. I read many articles of the pros and cons and seemingly didn’t get much further than the internal debate I was already having. Finally, 4 years ago I became very irritated in dealing with so many incompetent and lazy agents that I had to work my schedule around to help them make money. Now, first off, as an investor we all know that we can write 10-20 offers and maybe end up with maybe a few in the long run. Because of this, I understand that any agent dealing with an investor is going to be “worked” more than a regular Joe buying his next home. It can get exhausting for an agent; though investors are numbers and home buyers are feeling buyers it all roughly the same amount of work. A few years ago, I rehabbed a house in an area that I usually wouldn’t. The spread was predicted to be awesome so I jumped in head first. Here’s the dilemma. As an agent who really only worked for myself, I realized once the house was on the MLS that there was much more to being an agent and that marketing was everything. At that point, I pushed a lot of focus on agent marketing and marketing my properties as an agent. Fast forward 4 years, I’m not flipping as many houses as I was 2 years ago because competition has picked up and my spread isn’t worth my time on most of these deals. I am still a buy and hold investor and maintain the original course I was on there, but now the scales have tipped. I’m busy as an agent and not as consumed with time on the investor side…it was like an accidental Plan B.
    I can tell you, wearing both hats, as an investor and as an agent, is difficult. If anyone contemplating this thinks they will go get their real estate license and the world will start flooding their phone with listings and buyers, they’re a fool and have a rude awakening coming. Being an agent cannot be done part time. To be successful with it will take time, lots of money, and dedication. If you want my opinion, don’t get a license, but do some serious research for an agent who understands investors. The right one will be a rock star accompaniment to your strategy. Remember, work smarter not harder. Think about it in this perspective: just because you know how to install windows, doesn’t mean you should be doing it when you have a guy willing to do it for $25/window. It doesn’t mean you shouldn’t be doing it, but your time is much more valuable elsewhere. Surround yourself with the right people and consider that your team; FLOURISH!

      • Jason Sampson

        I feel like it’s too many hats to try an wear at the same time for the normal person. Life gets in the way more often than you would like. I can handle all of those hats, but I also brought in help quickly. I do have a decent passive income stream that afforded me the ability to bring in help before I actually was drowning. Each person and scenario is different. I know it’s tempting to see how much an agent makes on the front and back end and say, “I should get that”. In our area the average commission is 6% total. Great, you’re the “Buyers Agent” and made a gross of $3000 on your $100K purchase. If you’re buy and hold, that’s good for the bottom line, but how many more of those will you do in a year? If only one, that $3000 is eaten up in all your fees you pay for being an agent. If you’re flipping, yes you save it on the front and back end, but now you need to have time, money and resources to market and sell that $155K rehabbed house. That’s a total of $7500ish in gross commissions and a big amount in your bottom line, but remember your Broker will get a cut of that, it’s pre-tax money, and doesn’t account for the cost of time, gas, and resources needed to be an successful agent. Your Broker isn’t going to let you list your flips for free and not be productive as an actual agent. Oh also, don’t forget you should be looking for your next deal, marketing this one, fielding all the calls, learning new programs, continuing education, managing or doing work on the flip, etc; technically running 2 businesses. Oh yeah, the spread on this deal is thinner than you think because you’re not the only flipper with a license counting on that $7500. Sorry for the ramble.
        Now, the actual response… If I was just starting out and had a regular 9-5, I would not get my license. If what I said isn’t freaking you out or changing your mind, let me know as I would love to refer you to a great Exit Realty Brokerage in your area. #sevencityhomes

        • Lisa Filiatrault

          I guess I am very fortunate to find the broker I am with. The fees he will take on my investment properties and 1 or 2 sales for family per year is so minimal (not your average Counselor, REMax, Edina, CBB splits) that I find it is totally worth the knowledge and experience he has and to constantly be learning from him. I think if you find the right broker (and I am not talking the big guys here) it can be worth your while. AND, after 2 years, at least in Minnesota, you can get your own brokers license and do it all for yourself… if you want 😉

  9. Lisa Filiatrault

    Great food for thought article. Being that my husband is the bread-winner in the family, and real estate has always been an interest for both of us, it made sense to get my license since I am home full-time. I have the time to search the MLS, send emails to friends and family interested in properties and go on my own to look at properties (as soon as they hit the market and bring my analyzers!) that I think my husband and I would be interested in for investment purposes. I have a GREAT broker/friend that understands what my goals are (as his father is an agent/investor as well) and supports what I want to do, and is a great mentor. I don’t plan on being a FT agent per say, unless our investment deals really ramp up lol.

      • Lisa Filiatrault

        To be completely transparent, I just got my license. The plan is to start doing flips again in 2017 and adding multi-unit rentals into the mix. We did our first flip back in 2006 thru an agent who was a relative along with hard money. I realized as time went by how much more control you have over your flips as an agent which is what motivated me to pull the trigger….finally. 2016 was way to busy with our sons wedding, rehabbing our own house and my husband traveling, parent illnesses, etc. (poor excuses, but its how it rolled). In the meantime, I am learning a lot from my broker, watching properties I have been thru being turned and what they finally sell for, walking properties, and learning how to analyze the deals. And, I cannot tell you how valuable the posts, blogs & connections on Bigger Pockets has been to us. THANK YOU!

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