Why Real Estate Investors Should be Their Own Agents
Nick AtwoodBusiness Member
Realtor · Forest Grove, OR · Member since 2017 · 35 posts · 15 votesWhy Real Estate Investors Should be Their Own Agents
Most Popular Reply
Real Estate Broker · Huntsville, AL · Member since 2019 · 1k+ posts · 872 votes
5yThanks for posting this brother. I'm just about to get my license here. You've helped me erase my doubts on why I'm spending so much money!
23 Replies
- Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes5y
Not everyone has the time or desire. In AZ, it takes 90 hours of class time not counting the school and state exams. Not sure how you completed everything in a week or how many hours OR requires (I thought it was like 150), but I got mine in 2 weeks and it was a full-time job at that time.
Secondly, a lot of people don't care for school. Learning doesn't come easy to a lot of people and the thought of extra work and money makes people stay away. For buy and holds, being an agent isn't as much of a necessity in comparison to fix and flips where the commissions earned or waived or impact the bottom line more than rental properties.
I don't pay all that much to maintain my license (about 1k a year) so it's definitely worth having in my opinion.
- Member since 2019 · 448 posts · 306 votes5y
Originally posted by @Nick Atwood:
As an investor, it didn't make any sense why I was letter a buyer's agent collect 2.5% of the purchase price, for the minimal return I was getting. After many sales, I knew the real estate forms well and had the buying/selling process down. I decided it was time to get a real estate license. It took me about a week to get my license, start to finish- education, testing, forms, etc. I did the research and found one of the cheapest, low overhead, transaction fee based brokerages in the state of OR, and then over 3 years later, started my own brokerage! You end up saving thousands on each deal compared to your traditional brokerage commission split (20/30/40/50 etc.). It ends up costing a little over $2k a year to maintain a license at the minimum, but even doing just 1 sale a year more than pays for itself. A 300k property returns a $7.5k commission, or 3-4 years of the cost to maintain your license.
Being my own realtor provided so many more benefits! Being able to view properties anytime, anywhere. Negotiating on my own behalf. Not worrying about lowballing distressed properties, not worrying if I lose the deal if I'm negotiating too much - there are always more! Plus I can structure deals in a unique ways that provide a plethora of great benefits such as tax benefits, and less money needed to close deals!
Someone debate with me, as an investor, why would you not invest the little time and money to get a real estate license and save yourself thousands?Nick, I think you are overlooking a handful of things as to why NOT to get a license....
1. Time: Some people are busy with life and do not have time to get licensed. They dont invest full time.
2. Knowledge: While you took time to understand the forms and procedures, a lot of people dont want to be bothered with it.
3. Simplicity: It does not cost you any money to have an agent representing you as the buyer, so this task is easily leveraged.
With all of these things being said, I do agree with you that if you are investing as a full time job, you should at least think about getting licensed. I became licensed in June of last year because I wanted to get serious and learn every aspect of real estate. The commission I receive from my own deals is great, but I did it more for control.
-Matt
- Real Estate Broker · Huntsville, AL · Member since 2019 · 1k+ posts · 872 votes5y
Thanks for posting this brother. I'm just about to get my license here. You've helped me erase my doubts on why I'm spending so much money!
- Realtor · Forest Grove, OR · Member since 2017 · 35 posts · 15 votes5y
I should clarify, I did take vacation time to complete the education as fast as I could. If I didn't it definitely would have lingered. I work a full time job during the week as a Software Engineer, so I only invest part time. Even if I had slowed down and only done a transaction every year or every other year, I still think it's worth it. That's a good point, the buyer's agent is not getting paid from the buyer. But, saving is earning. And if you're able to find off market deals, at least in OR, you can be a dual agent, and collect both sides of the commission!
- Real Estate Agent · Willoughby, OH · Member since 2014 · 560 posts · 690 votes5y
I agree with you. I work full time as a quality engineer and went to night classes to get my license in 2016. Has definitely been worth it. I have helped friends and family sell/buy as well and the side income is nice to save for down payments to expand my personal portfolio. I would definitely do it again.
- Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes5y
This is an interesting perspective, which I had when I was starting and I think you do have a point.
Now, if you are an investor who focuses on buying rentals and want to scale their then this strategy might work. However, this would backfire if you are in the commercial space, say an apartment investor, because brokers might not even want to send deals to you if they think you are a realtor.
For wholesalers, this might have some legal quagmires too in certain states. So, I guess it really starts with what type of investor are you trying to become.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes5y
@Nick Atwood Depending on your state requirements, it may make sense. The financial break-even tends to be at the 3-5 deals per year avg, depending on values in your area. The effort and indigestion cost/benefit would put me at double that.
@Russell Brazil can better comment on how many deals per year on average make getting licensed worth it.
I was sponsored by a brokerage and tested with a high score, but decided not to go through with it. 'Corporate' (licensing dept / board / brokerage) governance is not attractive to some of us in any form.
My niche is 'not an agent'. My pivotal purchases and sales that made me job optional years ago wouldn't have happened if I was an agent. The old landlords I bought from and my apt building buyers were simply anti-agent and like to work belly to belly.
Some of us buy and sell solo for the savings. Last year I saved over $112k in commission costs operating solo. Even if I 'paid myself' 70% of the selling agent side of the net commissions, I'd just be creating $39,200 in taxable SE income.
My offers solo are often accepted because of the wiggle room. I just state I have the right to retain an agent if my offer is countered. The LA and seller work out the seller net. The 2.5-3% diff is often enough to not get countered.
Sellers and LAs also assume, right or wrong, that I'm just another push over. More attractive to a seller and LA than a high powered agent negotiating against them.
Granted, operating solo isn't for 90% of everyone, but you mentioned having a good grasp on the transaction process prior to getting licensed.
Again, life-changing buys and sells would not have happened for me if I was an agent but I operate off-market and may be an exception. We often don't know how impactful a transaction is until years later. I will remain unlicensed, but glad it is working for you.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes5y
Originally posted by @Steve Vaughan:
@Nick Atwood Depending on your state requirements, it may make sense. The financial break-even tends to be at the 3-5 deals per year avg, depending on values in your area. The effort and indigestion cost/benefit would put me at double that.
@Russell Brazil can better comment on how many deals per year on average make getting licensed worth it.
I was sponsored by a brokerage and tested with a high score, but decided not to go through with it. 'Corporate' (licensing dept / board / brokerage) governance is not attractive to some of us in any form.
My niche is 'not an agent'. My pivotal purchases and sales that made me job optional years ago wouldn't have happened if I was an agent. The old landlords I bought from and my apt building buyers were simply anti-agent and like to work belly to belly.
Some of us buy and sell solo for the savings. Last year I saved over $112k in commission costs operating solo. Even if I 'paid myself' 70% of the selling agent side of the net commissions, I'd just be creating $39,200 in taxable SE income.
My offers solo are often accepted because of the wiggle room. I just state I have the right to retain an agent if my offer is countered. The LA and seller work out the seller net. The 2.5-3% diff is often enough to not get countered.
Sellers and LAs also assume, right or wrong, that I'm just another push over. More attractive to a seller and LA than a high powered agent negotiating against them.
Granted, operating solo isn't for 90% of everyone, but you mentioned having a good grasp on the transaction process prior to getting licensed.
Again, life-changing buys and sells would not have happened for me if I was an agent but I operate off-market and may be an exception. We often don't know how impactful a transaction is until years later. I will remain unlicensed, but glad it is working for you.
87% of licensees dont even renew their license on first cycle. So everyone thinks its a good idea to get it it, but dont actually use it.
i reckon in most markets 4-5 deals per year make it worth it to get your license. 1 or 2 probably not. And Im a guy who was licensed for 10 years before becoming a full time agent. I think those 10 years with it were mostly just wasted money im hindsight.
Finding a Rockstar agent will easily save people more money, but obviously you have to find them. Every market has them, but you might not know how to find us. Ive got one client on BP Ron, I think I calculated the other day, Ive saved him almost $250k over the last 3 years....a lot more than I made in commission off him. And usually when youre doing repeat business with someone, I at least discount the listing side often to save them some money....making that commissiom difference even less.
I will say though I live in a market with fairly complicated laws as well as complicated paper work. Ive seen even inexperienced agents make mistakes that have cost their clients $25k a pop. In Massachusetts where Im originally from, agents use just a few page offer form, then lawyers handle the rest. In the DC area, we use contracts that can be as high as 75 pages or more, (and with 3 different states and a dozen different counties all with different laws) and what we do I think some agents in othet states might consider the practice of law what we do every day here. So some places can have a lower bar of knowledge than what I deal with here.
District Invest Group545 Reviews - Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes5y
Originally posted by @Russell Brazil:
Originally posted by @Steve Vaughan:
@Nick Atwood 87% of new agents don't even renew their license on first cycle. So everyone thinks its a good idea to get it it, but dont actually use it. i reckon in most markets 4-5 deals per year make it worth it to get your license. 1 or 2 probably not. Finding a Rockstar agent will easily save people more money, but obviously you have to find them. I will say though I live in a market with fairly complicated laws as well as complicated paper work. Ive seen even inexperienced agents make mistakes that have cost their clients $25k a pop.
Excellent points Russell. I didn't know 87% don't renew. Let that sink in.
As to navigating complicated and multiple rules, loopholes, customs, etc. Nobody can learn all those with standard licensing time and requirements. Experience teaches us to learn about what we don't know. While someone is trying to earn 70% of 2.5%, one could be missing that $25k gotcha.
Even though a lot of my sellers and some buyers are anti-agent/ anti-establishment, I am not. I am ok with a vanilla deal in my market, but just signed a listing agreement last night and have retained a buyers broker for assets or areas I'm not as familiar with.
Only a fool jumps over dollars to save pennies. Know when to retain a pro.
- Realtor · Forest Grove, OR · Member since 2017 · 35 posts · 15 votes5y
@Ola Dantis Good point, other office agents representing buyers don't forward me deals. I can see how this would be a negative thing, if I were a more passive investor not actively on the hunt.
@Steve Vaughan 3-5 deals seems steep as a break even point. My break even in OR is about 2k, so I only need like 1/4 of a deal. I get your point that some sellers don't want to deal with commissions. However, I use that as leverage to negotiate larger repairs credits, closing credits, IPCs, etc. If a deal is too good, I won't let a commission get in the way. It's all a negotiation game. :)
@Russell Brazil That's a great statistic! I can see how your average realtor would drop out fast. But your average realtor isn't an investor, and will most likely sign on with a big player, higher commission split brokerage. I only charge my brokers a flat $500 transaction fee, allowing them to grow their portfolio faster and profit more. It's not making me rich, but I'm hoping to just grow my business in volume. For me personally, I've also managed to negotiate significantly more for credits/price reductions for myself and my clients compared to the other agents I've worked with previously. I find the negotiation part of the deal the most exciting. I know it depends on the area, how complex the buying/selling process is, and how high the fees are, and am grateful I'm in the NW.
- Realtor · PA · Member since 2020 · 33 posts · 7 votes5y
Hello, so happy I came across this post. I have not sold or bought any real estate. Im just getting into it. Last year I spent all my time researching how to being investing in real estate. As it seemed like a lot of information for me, I felt like I would need a realtor on my team. I know I would need to be able to understand those forms and have access to MLS and be able to know and network with other agents, contractors, etc., easily. That convinced me to get my real estate license. Today I just received my license # from the commission and I'm so eager to get started.
It seems like you made the right decision. Your business seems like its doing great and you took the perfect steps to get you to where you are now. But how did you know what information to teach yourself first? I want to buy and hold, actually start my first investment property house hacking. The location is what I'm stuck on. Also figured the courses from the company would help me.
I think there's tons of benefits to being your own agent.
- Real Estate Agent · Jersey City, NJ · Member since 2017 · 69 posts · 56 votes5y
Pros and cons to both sides of the argument.
As an investor you have to ask yourself: Is your goal to save money, or make money?Is the 2.5%, 3% or even 6% worth it when there's skilled agents that might be able to save you 10-20% on your deal?
If you plan to do it for a living, then I'd say go for it, but if the goal is just to save money, I'd think about it before jumping in because a great agent will pay for him/herself.
I'm an agent not because I want to save money but because I have a passion for helping newer investors make successful deals. I also have access to the best lenders and attorneys in my areas. A great agent is a package deal, more to it than just a commission, they give you access to invaluable deals as well as connections.
- Member since 2020 · 339 posts · 356 votes5y
Never seen the wisdom in becoming an agent and still don’t after all these comments . I buy homes all the times and never used an agent . I never needed to , buying a house isn’t rocket science and most realtors are incompetent that wouldn’t know a great deal if it fell in their lap .
I don't plan to use one in the future either so becoming one makes no sense in my case . Frankly I See no value in joining the club ,the expense the training having to disclose I'm a realtor and forced to follow the restrictive guidelines standards set by a over reaching national liberal group ( NAR) controlling my moves . No thanks
- Real Estate Broker · Huntsville, AL · Member since 2019 · 1k+ posts · 872 votes5y
Originally posted by @Nai Chao:
@Stephen Brown I’m doing the same as we speak
I love you
- Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes5y
Someone debate with me, as an investor, why would you not invest the little time and money to get a real estate license and save yourself thousands?
I guess that's OK, but what do you do about the 100s of brokers that find stuff and expect a buy-side commission?
If you tell them all that you don't want to pay commission to them, then you reduce the number of opportunities (being extreme here) to how many you can call on your own.
- Realtor · Forest Grove, OR · Member since 2017 · 35 posts · 15 votes5y
@Moriah Giles When I first got my license, I met and contacted every real estate agency in my area. I learned as much as I could about the commission splits, caps, and fee structures and looked over all the contracts, to see what my least cost was. All the training/classes weren't of relevance in my decision as everything I ever needed was online. Learn as you go. You don't really know until you don't know. Minimize all my risk by talking to people more knowledgeable than myself as often as possible. Glean from experts their words of wisdom in the industry. I've personally had much success out in the secondary, and tertiary markets. If you're curious about location demand, you can look at your local listing market for rent on CL, FB, and see what's renting faster, and at higher prices, and then compare that to the list prices. Also, utilize rent tools online such as rentometer.com.
@David Da Silva I've worked with a lot of realtors before becoming licensed, and even after getting licensed, and have not met that rock star investment realtor. I've never been lucky enough to find agents to represent me that could negotiate better than me. That's another factor of what prompted me to become an agent. I also had trouble finding realtors who understood where I was coming from on the investment side of things, as if you're speaking another language. That doesn't mean those agents aren't out there; I just haven't had the luck to come across any.
@Dennis Wayne Are you talking specifically about off-market deals? Majority of the deals out there, the seller is willing to pay a commission. If not, then use you being a realtor as leverage to gain bigger IPCs.
@Steve Morris Having buyer's agents not refer me deals has never been an issue. Most of the time, the deals they send me I've already seen either online or offline. 100% of the deals I've invested in I've found on my own. As long as you're out there in the market, and actively looking then you won't be missing out.
- New to Real Estate · Houston, TX · Member since 2020 · 13 posts · 25 votes5y
As someone who hasn't ever purchased a property (primary residence or investment), do y'all think it would be a good idea to get the license prior to the first deal, or do you see benefit in having an experienced agent help you through the details the first time around? Looking for ways to decrease my margins but my inexperience could cost me more than what being my own agent would save me. Long term, I'll probably get my license or get a partner with one as I scale.
- Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes5y
"It took me about a week to get my license, start to finish- education, testing, forms, etc."
Umm, OK so you got your seat time and exam done in a week? You're rare.
Guess nothing would stop you from getting a RE license since doesn't sound like you want to work with a broker anyways.
- Realtor · Houston · Member since 2019 · 12 posts · 18 votes5y
Originally posted by @Nick Zahneis:
As someone who hasn't ever purchased a property (primary residence or investment), do y'all think it would be a good idea to get the license prior to the first deal, or do you see benefit in having an experienced agent help you through the details the first time around? Looking for ways to decrease my margins but my inexperience could cost me more than what being my own agent would save me. Long term, I'll probably get my license or get a partner with one as I scale.
Nick. I am a Realtor and Investor in the Houston area. When I bought my first property as a primary residence I had a Realtor represent me. I later on got my license and have since bought a couple more properties as investments using the BRRRR method and I have done some wholesaling. If I could go back, I wouldn't change the way I did things. The Realtor I used taught me alot, and I got to know what it was like to be the consumer relying on an agent. I think it made me a more understanding and knowledgeable agent today knowing what it was like from the other side.
All this being said, another great route you could take is getting your license prior to your first purchase.. but having one of the more experienced agents in your brokerage help you navigate your first purchase. They would probably still get half of your commission for doing so though. The courses you take for licensure don't necessarily prepare you to practice well, it just gives you the underlying information you need to know and be aware of.
Being an agent has costs associated with it, but if you really want to take an active role in investing I highly recommend it. For me the pro's far outweigh the cons! Good luck. Feel free to reach out if you have any questions.
- Huntsville, AL · Member since 2018 · 577 posts · 864 votes5y
@Nick Atwood - the time value of money is the very simple answer. If you have a strong W2 job, and you do REI as a part time venture, it absolutely makes sense to use an agent in that scenario.
- Insurance Agent · TX · Member since 2018 · 362 posts · 175 votes5y
@Nick Zahneis looks like @Zachary Khushf gave you great advice. I'm a realtor out in Katy. If you ever every want to talk dynamics of different areas or need help once becoming a realtor I am happy to help in anyway I can! Good luck man!
- New to Real Estate · Houston, TX · Member since 2020 · 13 posts · 25 votes5y
@Zachary Khushf Thank you for the great advice. It's similar to what I was thinking--I think I'm going to follow down the same path as you. The first deal I'm treating more as a learning experience rather than a home run deal, then focus on profits later.
@Matthew Rolf Appreciate it! Going to send both of you connection requests and plan to stay in touch!
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