Thinking of Becoming a Real Estate Agent Because Wholesaling is Too Hard? Read THIS First.

by | BiggerPockets.com

Real estate markets are hot, and the U.S. economy has improved. A lot of people have gone back to wanting instant riches so they can party on yachts and take exotic trips. After all, that is what I see on the Internet. And if it’s on the Internet, it’s true.

In the past five years of me being a full-time investor, I’ve noticed a trend. People want to be investors, so they try it out for a few months. Then they realize the work it takes. At that point, they enroll in a real estate school. I have managed to work full-time as an investor for five years without a real estate license. And I know investors here locally who have been doing business for over 20 years without a real estate license. However, this novice investor always seems to think getting licensed will be a breeze. And if they do get licensed, they then find out about the reality of being a real estate agent.

Regardless of Your Niche, Real Estate Requires Hard Work

Real estate is one of those things where money is not always an advantage. My mentor taught me that. People who enter into real estate with money often choose not to think things through. People with no money are forced to think and get creative. And that often leads to good deals. Also, having money in real estate does not guarantee success. Oftentimes, regardless of money, you will need to work harder than you ever have to be successful.

Related: Newbies, Want to Succeed at Wholesaling? Focus on Finding Deals! Here’s How.

For example, as a wholesaler, you have to put in relentless work. Maybe you’ve noticed that a lot of wholesalers make the jump to rehabbing to get bigger and better checks. One of the main reasons is that to be a consistent wholesaler is hard. I have been able to do it due to my systems and relentless marketing. Marketing is the biggest cost in my business. But, of course, when I first started out, I did not have money or connections. It took me eight months to get my first deal. After paying my mentor, I took home $1,300. After I cashed that check, I went right back to work.

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The Costs Associated With Being a Real Estate Agent

If the previous paragraph discouraged you, please keep in mind that if you become a real estate agent, you will have costs associated with your license. So, let’s say you hang your license with a broker, like in my state of NC. You are responsible for paying your MLS fee, office fee monthly, quarterly dues, and your national Realtor fee. At the end of the day, as a real estate agent, you are in business for yourself as well. There cost associated with that. I have been told by people that they will get a license to help with their investment business. That sounds good in theory, but I find it pretty hard to justify for those who have never done an investment deal. So, it probably won’t make sense to add on more overhead to your business when you are just getting started, struggling to keep marketing consistently.

Related: 3 Ways to Find Comps When Determining ARV for Your Wholesaling Deal

Now, let’s say you have the money to become a real estate agent and you go for it. Then, at that point, you need the same things to stay in business that you will need as an investor. Most brokerages charge you for marketing. Therefore, you will still need a marketing budget. Let’s say, for instance, you decide to skip out on your brokerage’s suggestions on marketing and come up with the bright idea to market on Zillow. Well, those Zillow ads are going to cost you a pretty penny if you want to make some serious cash. And now as a real estate agent, the majority of your closings are 45-60 days out. In contrast, a wholesaler we can pick up checks in as little as 10 business day.

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Conclusion

So, can you make a lot of money as a real estate agent? Absolutely you can. But the guys who do well as real estate agents work hard. And the investors who do well work hard, too. You can close deals without paid marketing, but the people who do network relentlessly, built networks over several years, or just get up and bust their tails every day to find new leads. No matter what you do, there is no elevator to success; it’s only the stairs. My advice is to focus on one thing and make it work, then move on to the next. The people who jump from one thing to the next normally stay at a job or find their way back to a job after real estate did not give them their big payday.

What’s your take? Is getting a real estate license a good option for those struggling to start out investing?

Leave your thoughts below!

About Author

Nasar Elarabi

Nasar is a corporate failure who was saved by Real Estate. Nasar is now a Wholesaler, Rehabber and Landlord in the Charlotte area. Nasar may have just barely graduated college but can flip a house like an acrobat. Nasar's work can also be found at RealEstateDoru.com.

10 Comments

  1. Once again, Bigger Pockets is creating a false narrative that says being a licensed agent means you have to work for Coldwell Banker or Remax and drive people around all day. Will someone with a brain please review and revise these silly articles that mislead people?

    WRONG, WRONG, WRONG. I am a licensed managing broker in the state of Illinois. I work for myself out of my home office. No advertising, no agency fees, I pay an quarterly fee for the MLS, which provides me with up to the minute market information. Basically a $1000 commission side from buying one HUD junker pays for all my fees and education for two years. People this is just not that hard. Nasar, if you are not smart enough to want up to the minute information on what just closed down the block, I cannot help you. County records are not always accurate and there is always a lag of several weeks if not more. Zillow, Trulia, etc. are getting better, but I would not want to invest money based on Zillow.

    I have a good friend ( also a managing broker, working for himself) that has a very nice business working with estates. He does a lot of marketing to estates and probate attorneys to find good deals. He sells most of them on the MLS because he is a licensed real estate broker. He pays no fees, only the normal split to the other side. Some he sells privately, which is perfectly legal.

    I don’t know the laws in all 50 states. In my state it is legal to work for yourself. There are a bunch of non managing brokers ( but still realtors) in Illinois that “hang their license” with a company for 200 bucks a year and pay a very nominal transaction fee when they buy or sell something. I am sure most other states these days have arrangements similar to this just about everywhere.

    Nasar, getting your license means you have real time access to the MLS. Sorry to burst your bubble, but that is it. What you do with your license is your business. I use my license to find solid cash flowing rentals. I use my license to find out what rented and sold down the street last week. I use my license to find fix and flips. I don’t do wholesaling because there is very little money in it and almost no wealth building in it, unless you keep some as flips or better yet long term rentals. Yes, it is getting harder than it used to be. I would not buy a stock or mutual fund without knowing what it sold for 2 seconds ago. That information is everywhere. Why would one invest in real estate without timely accurate information, which is what the MLS provides?

    I don’t know how you can be a wholesaler unless you have an accurate picture of what ARV is? Do you just guess? Use Zillow? Use tax records that are 2 months old? How do you sell deals to your buyers if you don’t know the true market?

    I completely agree that being a standard realtor can be a huge time and money commitment. There are also many people that make a real nice living doing just that. Oh, and BTW, there is nothing stopping a traditional realtor from finding a few rentals each year to develop a real nice cash flow portfolio in addition to the commissions. Ditto for doing one or two fix and flips per year. Please stop presenting this decision as a choice between two discrete career paths. Nothing could be further from the truth.

    Please stop misleading people. Please understand what you are talking about before writing a silly, misleading post.

    • Nasar Elarabi

      Thanks for your passionate response. Like Donald said I was actually stating being a real estate agent takes work. You said you use your license to buy rentals. Thats great well most newbies barely have money for marketing as an investor. So buying rentals on the MLS might be far fetched with no money or connections. Also I never said that some must work for X broker. If some one is new & looking for a check I don’t think its a good idea to not sit in a established brokerage to learn more about their market. Thats just my 2 cent. Have a good day

  2. Christopher Giannino

    I recently became licensed because I thought it would help out my REI career. I have realized that at this point, I’m to too small of an investor to really see big paydays, although I will admit that having a license is very convenient.
    Like you said, I think many people who are looking to become a real estate agents don’t realize the costs associated with becoming licensed. For someone who is looking to become a career full-time agent, the start up costs, as well as, the yearly costs are relatively low compared to the earning potential. But on the other hand, for someone who is only doing this to save some money to buy/sell 1 or 2 deals a year, my personal opinion is it might not be worth it.
    Overall, this is a great blog post for anyone thinking of potentially getting their license and I’m hoping that people read this post to help better educate themselves!

  3. Bill Schrimpf

    As a licensed Realtor and investor, I think this is a helpful post. It’s true that a job in real estate takes time and money, both as an investor and agent. Yes, I used the word “job”.

    The first comment, quite rudely (are you getting trolled?), does have a point in that costs, administrative hurdles and regulatory limitations associated with being an agent vary by jurisdiction. The same is true for investing. As they say, real estate is local…

    Thanks for the article!

    • Heather Rhoden

      Wow. That escalated quickly… I’m a new-ish licensed Realtor (going on 11 months) and I agree with everything Nasar said. In my state, you can’t start out as a broker. You have to have two years as an agent and it’s not very clear which are the investor-friendly brokerages when you’re first starting out.

      Nasar, I think you raised some excellent points. When I got into real estate as an agent, I knew it would be hard work but I really didn’t understand how tough it would be to make a living. (And I’m consistently top 20 in production in my office). The office, MLS, NAR, and supra fees are super tough when you’re first starting out (Thousands of dollars each year) and you can kiss your weekend plans goodbye!

      I do think having a license is a benefit (MLS access is great) but if someone’s goal is really to be a full-time investor, there might be better ways. At the very least, they should spend some time finding investor-friendly brokerages that allow some flexibility.

  4. Nasar, Heather and others, I apologize for the tone of the first post, which was mine. As a marketing ploy, Bigger Pockets sometimes writes inflammatory headlines and encourages writers to stake out extreme positions, which is what I was reacting to.

    A license is merely a tool. Just like a car, a computer, or a smart phone. It takes some time and money to obtain the the license and to maintain the license.

    I started out non licensed and got tired of paying commissions to realtors for bank owned and HUD houses when I was doing all the work.

    Being a Realtor does not mean you have to work in a brokerage on nights and weekends and drive people around and pray for a sale. You may choose this path as you are getting going. You will have first access to listings coming into your office.

    Being a Realtor does not preclude you from owner financing, hard money or private money or investing with your IRA ( this one can get a little tricky, be careful) or any other type of creative financing that investors use. You can still do lease options and sell on contract and everything other investors do. You just have to disclose that you are licensed.

    Do your research in your own locality. Pick what is best for you and your situation. Your situation may be different in 3 years. There is no single answer for everybody.

    Thanks for all the perspectives and thanks for indulging me.

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