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.
How to Invest in Real Estate While Working a Full-Time Job
Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.
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.
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.
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.
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 fastest and with the best return.
[Editor’s Note: We are republishing this article to help out our newer readers.]
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!