Why do architects tend to live in the best houses, musicians have the best record collections, and writers have the best libraries? It’s a simple matter of expertise; if you work in an industry, you have access to the best information in the field.
This rule applies to real estate agents too. Making a savvy real estate investment is, more often than not, a simple matter of knowing what people want, what price point makes the most sense, and where the market is going. And that, in a nutshell, is exactly what good real estate agents do for their clients.
So if you’re an agent, why not use that institutional knowledge for your own benefit?
The pandemic has disrupted the housing market, and you could argue that buying is risky right now. But that only means that agents are even better positioned than usual to capitalize on this opportunity; after all, as risk increases, so does the potential reward.
If you still need more convincing, here are the top reasons why agents make the best investors—even during the pandemic.
Who Knows the Market Better Than an Agent?
Ask anyone who’s ever tried to sell a house with a For Sale By Owner (FSBO) listing—there’s a lot more to selling a house than just looking up its value on the internet and then putting out a yard sign.
Selling and buying a house requires a fine-tuned sense of not only where the neighborhood is at but also where the neighborhood is going. Is it headed up or down? Do the sellers know that? Are they pricing the house accordingly? Finding underpriced homes is crucial to successful investing, and agents have the market insight to find, and close, these deals.
A good agent is also a good reader of people, meaning they can understand where the seller is coming from. Are they a motivated seller, or are they stubborn? Do they have realistic expectations? Are they moving because they just got a divorce? Did they just get a job in a different city? An agent can understand a seller’s wants and needs more easily than a regular buyer or investor.
There are dozens of factors that can influence a real estate transaction, and an experienced agent knows how to weigh them all. That means they’ll be able to identify deals with a lot of upside and negotiate the best possible price. And the truth is, nearly any property is a good investment if you get it below value.
Agents Have a Network in Place
What many amateur investors don’t realize is that buying, selling, or renting a property really is a group project. And while the investor is the leader, they need a strong support staff around them—everything from contractors, to real estate photographers, to mortgage lenders, to home-staging services—to make sure the deal gets across the finish line.
One of the biggest challenges for investors just starting out is building up a network of partners they can depend on. Because the sad truth is, quality of work varies wildly, and not everyone in the real estate industry is totally honest. Since real estate agents already have vetted teams in place, they can avoid costly trial and error and close deals more quickly—and with fewer headaches.
But this is another area where agents have a big advantage. Agents have had to arrange photos for open houses they have run. They have helped stage homes for showings. They have also guided dozens of sellers through the closing process, and know which lenders are most efficient and which local attorneys look out for their clients most effectively.
In short, agents already know which people to avoid and which do quality work, whether it’s real estate photographers, stagers, lenders, or attorneys. This easily saves them one to three years of learning—and a lot of money that might have been wasted on subpar work—compared to the average new investor.
Mortgage Rates Are at Historic Lows
Interest rates for mortgages hit record lows in July and are still extremely competitive. At the beginning of August, the average rate for the 30-year fixed mortgage was 3.1%, and the average rate for a 15-year mortgage was 2.875%.
Considering that a mortgage is the biggest single expense for the majority of home buyers, the low mortgage rates represent a rare opportunity to borrow cheaply. If you’re on the fence, you have a little time to mull it over; the Federal Reserve said it’s keeping mortgage rates low through 2022, at least. But don’t wait too long—suburban home prices are already rising.
The Market Is Looking Rosy
It’s hard to look up the news without seeing headlines about how bad the economy is. It’s true—a lot of markets are down, and a lot of people are experiencing serious financial adversity.
But the housing market is actually doing pretty well—you just have to know where to look.
Because of the 2008 financial crisis, many members of the public are conditioned to associate any economic downturn with an accompanying downturn in housing prices. But 2008 was unique because the housing market caused the crash, so it’s no surprise that housing prices crashed. Although the pandemic has made the economy a little shaky, there’s nothing fundamentally wrong with the housing market, and it shows—average list prices are actually higher now than they were in 2019.
Agents understand what this means. While the larger economy is still experiencing turbulence, the housing market is looking up. If you’re investing, now is the time to get in because home prices are virtually guaranteed to skyrocket once the pandemic is over.
In a Time of Insecurity, Real Estate Is Still the Safest Investment
All investments are about managing risk, and in this time of high insecurity, most investors have lost their appetite for risk. This is why gold has hit record highs; with nearly everything looking riskier than ever, investors want to put their money somewhere safe.
But as safe as gold is, property is even safer. A recent Gallup poll revealed that Americans view real estate as the best, safest investment, with gold and stocks trailing behind. Real estate agents understand this on a gut level. When you stand in a home, you feel the permanence, the security, and the utility; its value is concrete, not hypothetical.
No matter how bad the economy gets, people will always need someplace to live.
Built-in Advantages
As an agent, you can represent yourself in any transaction. That translates to significant savings, as you won’t have to pay a real estate commission, which will save you an average of 5.45% of the home sale price. So any property you look at, you can figure in at least a 3% discount right off the top. For a $300,000 home you sell, you can save nearly $10,000 by not having to pay commission.
In addition, because the seller typically pays the buyer’s agent’s commission, you can also earn the 3% commission for yourself when you buy a home.
And remember the expert information we mentioned above? When it comes to closing, agents have a big advantage because they have been through dozens of closings. They know what to expect, and they know how to handle pretty much any problem that comes up. That means they can pass on hiring a real estate attorney, which is good for another few thousand dollars in savings. (The exception? There are 20 states, plus the District of Columbia, that require you to hire a lawyer.)
Bottom Line
If you’re a real estate agent for investors, you’re already advising them on market trends, helping them make offers, and building networks—it only makes sense for you to start investing yourself, especially in this moment of low interest rates and widespread market disruption. Why not make an offer yourself on a home you’d normally recommend to investors?
And if you’re a non-agent investor, it’s never been more important to tap the expertise of a seasoned agent. In this turbulent pandemic market, there’s a lot of opportunity—but a lot of risk too. Shadowing or partnering with someone in the industry is the best way to maximize the former and minimize the latter—and isn’t that what good investing is all about?
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