Creating wealth “passively” through Real Estate is absolutely possible. You simply need the right approach. I’ve already written three articles on great strategies you could use to increase your net worth with Real Estate.
The investing strategies covered focus on:
- Buying and Holding Rental Property.
- The “BRRRRR strategy” for Real Estate Investing.
- Investing in REITs.
These passive instruments will generate money while you sleep. But, I want to make an article about several other ways you can make money through Real Estate ACTIVELY! Not investing in Real Estate, but actually working in Real Estate. If you roll up your sleeves and put in the work, these Real Estate professions could make you a lot of money! Think of these ventures as potential new “Real Estate Careers” or a “Side Hustles” you could start today!
The main difference between a passive approach and an active approach comes down to the “asset” that is generating the money. With Real Estate investments, you’re purchasing an asset, and that asset is making money for you. With the following active ventures, the asset is actually YOU (your time and skills).
This is great if you don’t have the money to invest and buy property, or if you’re looking for a new fulfilling career.
These Real Estate Careers could have a lot of perks and advantages:
These careers can be highly rewarding from multiple perspectives. For starters, they offer you a lot of freedom. You could execute these professions anywhere you want in the country, and not be tied down to a specific city. Certain industries thrive in certain cities. For example, Banking in Manhattan or Technology in San Francisco. These four Real Estate careers are “universal” and you can thrive in any location through them!
Additionally, you will have great control over your time. A lot of these ventures have flexible schedules. You could be your own boss from the start, or become your own boss eventually. Furthermore, these Real Estate careers could scale and grow to fit your financial needs. They can start “part-time” or “full-time” and evolve into your own company. For example, you can get your real estate agent license and start selling homes on the weekends. After a year or so you could transition and embrace your new profession full time. Subsequently, you could create your own brokerage company.
If you are only interested in one of these four Real Estate Careers, simply read that specific section below. But, it could be in your best interest to execute multiple ventures simultaneously. That multi-disciplinary approach allows you to reap a lot of benefits and generate substantially more income.
For example, Real Estate Agents are sometimes Property Managers as well. These two ventures are “complementary” and could be “vertically integrated” in a very profitable way. House Flippers occasionally execute Wholesaling deals as well. They can do this with relative ease because the underlying nature of both business models is very similar.
Real Estate Careers Option #1 – House flipping
The main idea here is to buy “broken down” property and fix it up. The goal is to promptly resell the property after executing the repairs to an “end-buyer.”
Let’s illustrate the business model with an actual step-by-step House Flipping example:
1.) A house flipper searches for a good property to flip:
Ideally, the lower the price the better for the flipper. Houses that are in poor condition, are usually heavily discounted.
House Flippers tend to follow the 70% rule, which stipulates a “target” for the purchase price. The rule states that the purchase price should be 70% of the “After Repair Value” (ARV), minus the funds that will be invested in repairs.
The ARV can be estimated by evaluating the purchase price for similar properties that were recently sold in the area. Those comparable properties were sold in a condition similar to the condition the flipped property will be in after repairs.
So, let’s say the flipper finds a potential deal. After performing market analysis, the flipper finds that comparable houses are selling for $170,000 in the area. Let’s say the flipper believes he will have to invest $30,000 in repairs to adequately repair the property.
His target purchase price should then be:
$170,000 X 70% = $119,000 – $30,000 = $89,000.
So, the goal is for the flipper to buy the property for roughly $90,000. Please keep in mind this is a great “target price” to aim for.
The flipper’s scouting and negotiation skills are very important here. Good flippers locate good deals and negotiate aggressively. Nonetheless, if the flipper ends up paying a little more, he could still make good money. To illustrate this, let’s assume the flipper ends up paying $100,000 for the property.
2.) The house flipper rehabs the property:
Let’s say the flipper invests $30,000 worth of amendments or enhancements. This includes both material and labor required to execute the rehab project. In the United States, the typical timeframe for a rehab project tends to be between 2 to 3 months.
The timeframe varies depending on the extensiveness of the repairs that need to be executed. Another factor is the expertise of the team executing the repairs.
3.) The house flipper resells the property:
Let’s say the flipper ends up selling for $175,000, which equates to a $45,000 profit.
$175,000 – $100,000 (purchase price) – $30,000 (repairs) = $45,000
The higher the resell value, the better for the flipper. It is not unusual for flipped houses to sell at “premium prices” (over-market value). The reasoning behind the premium price is simple. The repairs leave many components of the property in “as new” condition, which is desired by many buyers.
In the United States, the typical timeframe to sell “flipped property” once it on the market (after the repairs are completed) tends to be 1 to 2 months.
House Flipping can be very lucrative. In the United States, the average gross profit for a “flip” was roughly $60,000 in 2019.
In essence, House Flippers “force appreciation” on the property by fixing it up. When they execute repairs or enhancements on the property, it inherently boosts the overall value. Typical repairs include fixing the flooring, roofing, siding, or remodeling kitchen and bathrooms. They could also be much simpler like replacing an old carpet, painting walls, or switching a damaged water heater.
Real Estate Careers Option #2 – Wholesaling:
These individuals are similar to house flippers, but they don’t flip the house, they simply flip the “purchase contract”.
Wholesalers start by finding motivated sellers (people in distressed financial situations). For example, individuals going through a divorce or bankruptcy. These motivated sellers need to sell their property fast (generally below market value).
This enables the Wholesaler to buy the property from them at a discount. After buying the property at a cheap price, wholesalers look for a third party to “resell” the property fast.The wholesaler’s goal is to find an “end-buyer” that will buy the property from them at a higher price than what the wholesaler paid. Ideally, around or above market value.
The wholesaler’s profit is the spread between those 2 prices. The bigger the spread, the bigger the profit for the Wholesaler. For example, a wholesaler will buy a bargain property for $100k, and resell it for $120k, pocketing the $20k difference.
Wholesalers generally find investors in that area who have recently purchased comparable properties. After finding potential investors, the wholesaler “pitches” them the property they recently acquired.
The wholesaler has 2 main tasks:
- Find motivated sellers, negotiate with them, and buy a property at a favorable price.
- Find interested buyers, negotiate with them, and sell them the recently acquired property at a higher price.
Please keep in mind Wholesalers don’t execute any work on the house whatsoever, which differentiates them from house flippers. House Flippers also act as a bridge between the “original seller” of the property and the future “end buyer”. The key difference is that flipper performs work to “embellish” the property. That extra work enables the flippers to resell at an even bigger premium.
One of the most attractive “perks” from this business model is that Wholesalers usually “buy” property with no money down!
Wholesalers do this with a contract agreement stipulating they aim to “re-assign” the purchase contract to a third party. This “re-assign” clause generally expires within a specified timeframe (usually 30 days). If the wholesaler finds a buyer, the wholesaler will re-assign the contract to the end buyer. So, the wholesaler won’t have to pay any money out of their own pocket to execute the deal. If they don’t find the buyer, the original contract will be “voided”.
This removes a substantial amount of risk from the wholesaler side. Enabling Wholesalers to scale up easily and execute as many deals as they can find, which can be very lucrative!
Real Estate Careers Option #3 – Real Estate Agents, Brokers, and Realtors:
Real Estate agents are individuals who have a professional license to help other people buy, sell, or rent different types of Real Estate properties. To get the corresponding license, each particular State has its own set of rules. Given the different rules, the required number of training hours can vary significantly by specific State.
Aspiring real estate agents first complete the required pre-licensing training. After their training, aspiring agents must successfully pass a written licensing exam. Once that milestone is achieved, they can join a Real Estate brokerage firm and begin making money as an agent.
There are 3 main types of agents with specific roles:
- Listing agents, which are agents that help and represent the home seller.
- Buyer agents, which are agents that help and represent the home buyer.
- Rental agents, which are agents that help people trying to rent properties and obtain tenants for them.
How much do Real Estate agents get paid?
Typically, agents get paid 5% to 6% commission of the total purchase price when a property is sold. These commissions vary and could be negotiated. That commission is usually split between the listing agent and the buyer’s agent. Rental agents are generally paid 1 month’s rent of the property they rented out.
Depending on the prices of the homes, agents can make a hefty commission. A listing agent that sells a $2,000,000 house will receive approximately $60,000. If they sell 3 or 4 of those houses a year, they can net approximately a quarter-million dollars in commissions!
In certain areas like San Francisco, where the average price for a property was $1,300,000 in 2019, these big paydays aren’t that hard to find.
What is the typical career progression for a Real Estate agent?
Generally, after a Real Estate agent has 3 years of experience, they can advance their career and become Real Estate Brokers. The main advantage of doing this is that they can open, manage, and operate their own Brokerage Firm.
After successfully establishing their firm, Brokers can then hire Real Estate agents under them and scale their business. This enables Brokers to execute dozens of deals per year. To become a Broker, agents need to continue their education beyond the Real Estate agent level. Again, each State has different requirements. After the post-license education, they must successfully pass a Broker’s license exam.
A Real Estate agent can also join the National Association of Realtors, and gain the title of “Realtor”. The “Realtor” title could help them differentiate themselves from other competing agents. Realtors are supposed to abide by a code of ethics that goes above and beyond State legal requirements. The Realtor code aims to keep the best interest of the client first.
Real Estate Careers Option #4 – Property Managers
Property Managers are individuals who oversee the day-to-day operations of Real Estate property. Real Estate investors usually hire property managers when the investors are unwilling or unable to manage the properties themselves.
For example, investors generally hire property managers when they desire a passive “hands-off” approach to their investments. Investors might also hire property managers when their portfolio of properties is either too large or too spread out for them to manage efficiently. In essence, investors tend to hire a local helping hand to take some work off their shoulders.
The typical Property Manager duties include:
- Managing deposits as well as rents – Setting rent, collecting rent, and paying rent to the Real Estate investor that owns the managed property. Keeping the security deposits in a “trust account” if needed.
- Managing tenants – Finding tenants and screening them. Creating leases for the different properties, managing complaints/emergencies, handling move-outs, or necessary evictions. Inspecting the property before returning the security deposit when the lease is over.
- Managing repairs, maintenance, and inspections – Performing any preventative maintenance required. Executing any repairs needed to keep the property safe and habitable. Performing the necessary inspections. Property managers typically perform the work themselves. On certain occasions, they hire qualified “third-party” subcontractors to execute the work for them.
- Supervising third party contractors – Overseeing “rehab” efforts if a property is currently vacant and repairs are being executed by third-party contractors. Managing the project, and ensuring the scope of work is completed on time and under budget.
- Record Keeping – Performing accounting duties related to the property’s finances. For example, documenting the cash flow, budgets, and repair costs associated with the property. Generating documentation needed for tax purposes. Such as preparing 1099 forms associated with the rental income.
How much do Property Managers get paid?
Property Managers generally charge a commission of the rent they collect every month. The commission tends to vary throughout the country but typically oscillate between 5% to 12%.
Property managers usually charge much higher commissions for short-term rental properties. Short-term rentals are properties listed in platforms such as Airbnb for a couple of days or weeks. In certain areas, short-term rental commissions could be as high as 30% of the rent collected.
Real Estate Careers Conclusion:
If you’re interested in making a career change into a profitable and booming industry you should certainly consider giving Real Estate a chance. These four professions will always be in high demand because people need a roof over their heads.
Depending on your particular skill set and passions there is certainly a career path that could be a great fit. There are many options, but house flipping, wholesaling, property management or becoming an agent are some of the most popular for a reason.
Another interesting Real Estate career option is renting properties on platforms such as Airbnb. This “Short-Term” Rental approach could be very profitable!
My ACTIONABLE Tips to start or advance Real Estate Careers:
If your business revolves around Real Estate do yourself a favor and check out the tools below. It doesn’t matter if you’re a Real Estate Agent, Broker, or Investor. These products and services are designed to make your Real Estate life easier. They can help you find investment properties and/or manage them.
There is something for everyone, regardless of where you currently stand in your Real Estate journey. These tools could help you beat your competition, or make you stand out.
Real Estate Agent License and Education:
Real Estate Express is the leader in the Real Estate education industry. They have been perfecting their Real Estate courses for over 20 years! Real Estate Express has trained over 200,000 professionals in more than 30 states.
They help tens of thousands of people launch successful Real Estate careers each year. Their nationally accredited platform offers ALL types of courses. You could start your studies with pre-license Real Estate courses. Or continue learning and advance your career with their post-license courses.
Real Estate Express is so confident their education materials will help you get the results you need, they even offer a “Pass or Don’t Pay” guarantee! Their Exam Prep Master is designed to help you pass your state’s Real Estate exam the first time.
Real Estate Agent Supplies:
All Things Real Estate gives Real Estate Agents all the tools they need for marketing their business. The company believes that Real Estate marketing materials don’t have to be boring/generic.
Their online store is a Real Estate agent’s playground and has everything you might need. Including open house products, yard signs, homebuyers’ guides, listing & sold stickers, personalized gifts. All Things Real Estate products have “fresh” and “modern” designs.
Click HERE to visit All Things Real Estate!
How to evaluate potential investments:
Dealcheck is considered the leading investment property analysis platform. This is a great tool for both Real Estate investors and agents. The platform makes it easy to analyze all types of potential ventures such as rental properties, flips, multi-family buildings. It also estimates cash flow and helps you compare/contrast potential deals.
Click HERE to visit Dealcheck. Additionally, I have obtained a great discount for MoneyTipsCoach.com readers. Simply use promo code: VIP25OFF to get 25% off.
Real Estate Property Search Engine (how to find cheap homes):
Foreclosure.com is the largest provider of distressed properties currently available in the United States. This information is extremely beneficial when you’re trying to find a good discount on investment properties. Distressed properties are “on-sale”. Foreclosure.com info is always accurate and up to date. (I used to look for these types of properties in places like Zillow, Trulia. Unfortunately, their information for distressed properties is highly inaccurate.)
Foreclosure.com platform is extremely easy to use and provides the most comprehensive residential foreclosure listings. They are regarded as the national expert on reporting the status of defaulted Real Estate. Click HERE to visit Foreclosure.com!
Wholesaling & House Flipping Education:
Property Mob offers a significant number of tools and services. For example, they have training courses, online coaching, virtual assistants. In this platform, you can also obtain advice from their resourceful community of Real Estate investors.
They also have very detailed tutorials like their “How to Wholesale Real Estate Step-by-step“.
Last but not least, they provide the #1 Bestselling CRM Platform (Customer Relationship Management). This is a great tool for Real Estate investors and agents!
Property Management Software:
Buildium is a software designed to help property managers and real estate investors become more efficient. It is a great tool for individuals looking to scale their business or portfolio. Their property management software is extremely powerful. With Buildium you can easily track budgets, manage rental listings, pay vendors, and run comprehensive tenant screenings. It can also help you communicate with tenants, vendors, and owners more efficiently.
Click HERE to visit Buildium!
Officially establishing your company as an LLC (Limited Liability Company):
Legally establishing your company has numerous advantages. For example, you can take advantage of business loans. It also protects your personal assets from a liability standpoint. If you’re serious about pursuing any of these Real Estate careers, forming your own LLC is a great investment.
ZenBusiness is a great company that helps you with the process of establishing your LLC at a very affordable price. They provide extremely valuable help, which will make the process smooth and efficient.
ZenBusiness offers three different packages starting at $49 to fit your specific needs and budget. Their services include Business Domain Name, Business Website, Business Email Address, DBA name registration, securing your Employer ID Number (EIN).
Click HERE to visit ZenBusiness!