Investment analysis and portfolio management
The potential of a hefty payday combined with a flexible schedule is certainly enticing -- and if you're a people person, you'll never feel more at home. But don't be fooled by glitzy reality shows about Realtors selling giant houses and making easy millions. Real estate agents are essentially self-employed, and often put in a ton of work and training not to mention their own money to succeed. Still, in an industry teeming with potential, those who enter it are excited to learn the tricks of the trade.
Kathryn Lionetti, a 23year-old recent addition to Weichert Realtors in New Jersey, compares being a new agent "to a freshman orientation, where training is supposed to be packed with information provided by the real estate company you chose.
How do you get started? First, consider the pros and cons of the process. Then research trends in the real estate market , like rising mortgage rates or how new U. There's a lot to know before getting started. Here are some of the basic steps that aspiring real estate agents will need to take:. Yet when you look closer, each aspiring agent's path is different -- not just because of people's personal paths, but because of where they chose to become an agent. After all, the specific details within the requirements for getting into real estate vary from state to state.
A real estate agent from New York can talk all about how they got to where they are, but an agent from Nebraska took a different path. So, the first step toward becoming a real estate agent is to determine the proper licensing method for your state. This kind of research can also prove helpful for prospective agents looking to practice real estate in a nearby state as well:. You'll often need to take several different courses before taking your licensing exam.
These courses bring many different facets of the real estate world together to create a full education. Depending on what state and whether you're seeking a salesperson's or broker's license, they can include:. You can take your classes at real estate institutes or certain colleges, and there are also plenty of online options that can fit into a busy schedule. Just remember to get your transcripts and a certificate that confirms completion of the courses after you're done.
You'll need these for your license application. In addition to your required coursework, many institutions also offer exam-prep courses. They're not mandatory, but many applicants enroll in one or more to feel comfortable when taking the licensing exam.
Once you've completed coursework, you're ready to apply for your real estate license and take the required test. The sooner you take the test after finishing your classes, the better. That's because if you fail the exam, many states let you retake it as often as you have to within two years of completing your coursework. After two years, you'll need to take the courses again. How likely is it that you'll pass on the first try? So, those who diligently do coursework and preparation have a good chance of passing on the first try.
Many people use "Realtor" and "real estate agent" interchangeably, but there's actually a world of difference between the two. In exchange, they receive a number of benefits, including access to exclusive marketing resources and discounted continuing education. So, while not required, becoming a Realtor is worth looking into.
Once you've passed the exam and have your real estate license, that's not all that's needed to practice real estate at least initially. In most states, new agents must work with a broker that chooses to sponsor or manage them, at least for the first two years. Some states even require aspiring agents to have a sponsoring brokerage before taking the exam, so it's wise to start looking as early as possible.
Real estate agents don't generally receive a salary from their brokerage, but instead make commissions on sales and listings. Typically, commissions are paid out to four parties: the listing agent, the buyer's agent and their respective brokers. It's important for new agents to start connecting with industry veterans. Make friends in the field, and find a mentor at the brokerage who can offer real estate insider tips and wants to help you succeed.
Kathryn Lionetti, the year-old who's just entering the field, says it's important to develop a reputation as someone who will learn quickly and use that information well. They're sharing with you their resources because they see your potential. It's a lot of work to get to that point, and more work after that to succeed at it. But for those who love doing it and truly want to thrive in real estate, it's worth it. Receive full access to our market insights, commentary, newsletters, breaking news alerts, and more.
I agree to TheMaven's Terms and Policy. Here are some of the basic steps that aspiring real estate agents will need to take: Step 1.
By Danny Peterson. By Tony Owusu. By Joseph Woelfel. By Dan Weil. By Annie Gaus. By Rob Lenihan.
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Location is the number one consideration when you are choosing an investment property. Allison focuses on college towns, preferable in the Midwest, where real estate prices are low.
College towns have a strong demand for rental property. There are also lots of ways to vet potential tenets to protect your real estate investment like credit checks, financial statements, guarantors, references, criminal background checks, and just a good old-fashioned Google search.
The vast majority own within a minute drive of their own homes. You can see the appeal, you know the area well, you can respond quickly to problems, and you can handle the property yourself rather than hire someone else to do it for you.
But there are disadvantages too. You also have all your eggs in one basket and if the area hits an economic slump or there is a natural disaster, your investment is vulnerable. If you want to buy outside your market, you can use a property management company which we will cover below. There are five criteria that Roofstock have developed to determine if an area is a good place to invest in rental property; median home value, median income, percent employed, percent of owner-occupied homes, and average school rating.
Those data points will give you an economic picture of an area. There are other things to consider too. Is the area considered hip? Younger people move around more and are more likely to rent than older people. They want to live in cities with a certain culture, lots of events, a good restaurant and bar scene, an arts community.
Fewer young people own cars so they want to live in cities that are walkable and bikeable and have a public transit system. You can see how walkable a particular address is at Walk Score.
No one wants to live in a crime-ridden neighborhood. Read local newspapers, the cities local sub-Reddit if there is one, and look at a crime map. There are pros and cons for both. Avoiding the whole mortgage process is a good reason to pay cash as is not paying interest. Offering a cash sale may also leap from you over other buyers because sellers like cash.
But paying cash ties up a lot of assets in one investment, the opposite of being diversified. If you have a limited amount of money to invest, paying cash is not ideal. Even if you buy more than one property this way, you can still be diversified in that your money is allocated across different properties and perhaps different markets when you own in more than one city. There are risks to leveraging too.
If the real estate market were to tank and property values can decline sharply in value, you could owe more than the house is worth. You must do your due diligence. Another way to measure if a property is a good deal is if the rental income is enough to cover all of your expenses and pay off the mortgage in years.
A good home inspector has more than 1, items on the list of things they look at. If you have a home inspection contingency in your offer you can negotiate with the seller to either fix the issues the inspector found or sell the property at a reduced price.
The inspection can also turn up so many problems that you decide to pass on that particular property. Some of the major things an inspector looks at is the age of the roof and HVAC system, listing of or cracks in the foundation, signs of water damage and the exterior condition of the home.
A good inspection can save you money and aggravation. Having a reserve account for your rental property is non-negotiable. Not only does it protect your investment, but it protects your peace of mind.
A reserve fund is like an emergency fund for your rental property. One rule of thumb is the amount a mortgage lender requires a buyer to have in reserve before approving a loan, which for most lenders is 6 months of mortgage payments. If your home is older and therefore may need more repairs than a newer property, you may want to increase that number. You should also increase the number if the property has a history of long vacancies between tenets.
Owning rental properties seems like it would be a lot of work. You have to advertise your place, find and screen tenets , respond to repair problems or at least hire someone to fix things for you, collect the rent, deal with what could be a protracted eviction process depending on the state, and then start all over again when one tenant moves out. Laws regarding tenets and landlords vary by state.
Even if you only own property in one place, there are lots of laws and rules to remember never mind if you have properties spread across more than one state. There are federal laws regarding habitability and discrimination you have to follow. Have you ever written a lease? Sure you can use a generic one found online but you would have to make sure it adheres to local laws and regulations particularly regarding evictions which can be especially complicated.
Who wants to do all of that? Hire a property management company. They do everything listed above and more. You can set the level of involvement you want. Do you want to know every time a light bulb needs to be replaced, only if a repair is over a certain dollar amount, never, aside from your yearly statement for your taxes? You might think you can save money by being a hands-on landlord but remember, your time is not free.
Every time you have to deal with something related to property is the time you could be do something else whether that is working and making money at your regular job or going on vacation without fear of interruption. You better sign up for a landlording class before jumping into it. Like finding a good doctor, hairdresser, mechanic or anything else, it can be hit or miss and you may have to kiss a few frogs before finding a prince.
The best way to find your team is word of mouth. Fortunately, we have the internet for that which is especially helpful when you are buying property outside your local area. This is at least a place to start. Once you have a few names that way, you can see if your choices have Yelp reviews.
If you are only buying locally, find out if there are any Meetups related to real estate and attend a few events. This way you can talk to people in person and get some recommendations. Now that you have a few final contenders, you can arrange a phone or in-person meetings and select your new team member.
There are three key positions you need to fill for your team, a property manager, home inspector, and real estate agent. Most of us are not going to get rich simply from our jobs and we only have so much time to dedicate to actively working. In order to achieve financial independence , we have to cultivate sources of passive income. Being a successful real estate investor is one of the best ways to increase your cash flow.
Now that you have our real estate investing guide for dummies you can start growing your real estate empire and start to build wealth. If you want to learn more about real estate investing in single family homes you can find all our resources here. Updated on March 15, Updated on March 15, Listen Money Matters is reader-supported. When you buy through links on our site, we may earn an affiliate commission. How we make money. Have a Team in Place Passive Income.
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