Is there really a difference between these two? In this article, we will talk about at least 4 differences. First, let’s discuss what’s common between them:
- Both deal in real estate
- Both work with properties
- Both make money from sales
- Both will probably be well-dressed!
So what are the differences?
REAL ESTATE AGENTS NEED A LICENSE; INVESTORS DO NOT.
A brokerage represents clients (Sellers, Buyers, Landlords, Tenants). An agent needs to be licensed to represent a brokerage. In the case of an investor, no license is needed to buy and sell properties because they are representing themselves.
WHILE Agents earn commissions; investors do not.
Earning from a real estate transaction (through buyers and sellers) is a common denominator for both agents and investors. But how they earn it lies the difference/s. Agents would normally earn from commissions. Industry standards would call for 1-5% off the total sale. But the agent, though acting under the brokerage is also an independent contractor and could command higher commissions for high-selling properties. While Agents’ commissions would depend heavily on selling a property at a higher price, Investors, on the other hand, can make profit a number of ways:
- Wholesale the property fast to another investor or end-buyer
- Rehab and flip/rent the property to an investor or end-buyer
- Purchase the mortgage note and act as the lender for the end-buyer
- Take over the property subject to the existing mortgage
Shrewd, sophisticated Investors have a nose for properties that are “diamonds in the rough” and can visualize the perfect possible transformations it can go through. They have creative ways to make their investments result in profit.
Agents NEED BRAND NAME RECALL TO market; investors do not.
It would matter to an agent if the brokerage is number 1 or number 3 in the list of top real estate firms. Name recall is crucial to marketing. You would find agents topping themselves in high-end business cards, professionally-run websites, aggressive mail/email campaigns and big billboards. He who gets noticed gets the client. Not so with Investors. They could have a simple signage, ordinary flyers, traditional mail and yet get a seller to sell to them and a buyer buy from them. The Logic: Agents help SELL the property; Investors BUY the property. On the other side, Agents “act” as buyers for their clients whereas Investors sell directly to buyers as property owners. One is a middle-man, the other a businessman.
Agents ARE AFFILIATED WITH brokers; investors are not.
Real Estate Agents after getting their licenses choose a brokerage to affiliate with. He or she could work as part of the team or individually, but always under the direction of it’s home firm. The investor is an independent individual answering to no one but himself. He will have to take the journey by himself, relying on his gut feel and wealth of experience to sniff out great deals. It’s not an easy road to traverse but a seasoned Investor knows it’s addictive, exciting and really rewarding once you hone your craft.
Whether you choose to be sheltered under a real estate brokerage or break out into the rain as an Investor is a decision worth thinking about once you get bitten by the real estate bug.
Whatever you decide, get into the action NOW. You just might be missing out on deals of a lifetime.
* Images seen here are for illustration purposes only.