How to Make Money in Real Estate
Probably the most asked question I receive is “how do I make money in real estate and is it hard”. Well that really depends on how much you want to make and what you consider hard. Personally I work 12 hour days and have been in the business for over 10 years and make well into the 6 figures. I don’t consider my job hard, in fact I don’t even consider it working at all because I love it so much. If someone would come up to me tomorrow and tell me that I was doing such a good job that the government wanted to take 50% of my pay after taxes then I’d probably continue to work in real estate and work harder and harder. To me the joy is working in real estate. When I got my real estate license it never crossed my mind that I wouldn’t make money. I started out the first year thinking I would make millions (actually made just under $70K).
What makes you happy? Sounds simple? I mean, what makes you really happy. For me making money is real fun, meeting people and helping them find a home makes me real happy. The reason why finding homes makes me happy is because I know I can sell them and make money. I guess the money part of it is what makes me the happiest. Are you more of a people person or one that would rather take the back seat in conversations?
When people ask me how to make money in real estate I don’t have the magical answer but I can help you try to make more.
Real Estate Helpful Hint #1 “Find your niche”
Don’t try to me Donald Trump and own the world. Start with a small area. I personally started with a small sub-division where I owned a home. After 5 years I knew the names of over 50 people in and around my home and was very active in all the association events. Once they found out I sold real estate I started getting calls. Then when I started advertising they had a face with the name. To me that is what real estate is all about. It isn’t sitting around waiting for the phone to ring but going out there and making sure people know who you are. I’d rather dominate a small sub-division in Orlando, FL then try to sell to all of south beach.
Real Estate Helpful Hint #2 “Don’t be afraid to ask”
I’ve heard people mess this up 1000 times over. When you meet people at the mall or at a social gathering and they ask what you do go ahead and tell them and then ask them if they know of anyone trying to buy or sell a home. Referrals are the best way for you to gain good quality business. Name dropping is something I love to do.
Real Estate Helpful Hint #3 “Work for a smaller broker first”
This is hard to do when you first get started but when you work for a larger broker firm you tend to be a number and you either sink or swim. I personally would rather get the experience with a smaller broker and then move on to becoming a broker yourself in the future.
Real Estate Helpful hint #4 “Stay on task”
When you wake up in the morning you should know exactly what you need to accomplish for the day. Who do you need to call? What tasks do you need to do? As a real estate agent you need to control everything in your life and that starts with a good plan. Without a good plan you will just waste the day away. Also be sure you have goals. How many new clients are you going to have this week?
Real Estate Helpful Hint #5 “Be unique”
In my opinion this is one that probably weighs more than any of the other helpful hints because this is the one that will make you stand out in the crowd. What makes you so unique? What makes you better than any of the other agents? It could be a simple as you are honest and trustworthy. Could be you send a letter and candy after every sale. Could be you give money away for referrals. Customers consider us thieves that take 6% of the closing cost just for showing a house to a customer.
So the bottom line is after you get your real estate license there is no golden path that you need to take to make money in real estate, but what you need is a good plan and a driving force. Donald Trump once said that it doesn’t surprise him that his competition isn’t that good because he only sleeps 3-4 hours a night and while he works his competition is sleeping.
What Bubble?
For years now we have heard people speculating about the end of the real estate era. No longer will people be able to “flip” properties (the ability to buy a home at a low price, do minor repairs, and then “flip” or sell it for a quick profit). Being from the East Coast I’ve heard this type of talk year end and year out. If you talk to real estate agents they tell you that there is never a bad time to buy real estate. If you talk to analysts they start talking about futures, economy, gas prices, social security and everything besides housing. So who do I believe and when should I listen?
First let’s take a look at the current situation and then work our way back in time. Fact #1: Interest rates are still low. Yes I said it, they are extremely low. Look back in time and you’ll see 10-13%+ higher interest rates so think again when you see a 6.5% fixed 30 year low. Fact #2: People want security. Back in the 50’s and 60’s homes weren’t looked at as investments. People lived in the same house for 30+ years or even bought the home that was once owned by their parents. This is something you don’t see today. Fact #3: Look at the world. Just look around. Where would you rather put your money? Would you live to give all your money to ENRON or WorldCom? Those were real good deal in the late 90’s and see what happened. People trust homes, they trust something you can live in and fix up and enjoy.
OK Chad so what does this all mean to me? The first thing I tell people that ask me if this is a great time to buy I always comment by asking them a few questions
- Is this is a good time for YOU to buy? That is can you afford what the market is asking. Some people might be financially ready to own a home.
- Are you buying in a place YOU want to live? Is the area or home you are looking at a place where you can live for an extended period of time?
- Why are YOU buying this home? Tell me why you really want the home.
So I guess I throw the question back at you when you ask me, but these are questions YOU need to seriously look at before you buy. If someone told me back in the mid 90’s that New York condo prices would be over 1 million I would try to sell them beach front in Arizona. Today, when you tell a customer a lovely 2 bedroom 600sq. foot home is only $960,000 they are actually excited. So what has changed? Why is $960,000 a good buy? Here are several reasons:
- The person CAN afford the property
- The person LOVES the home and area
- The person IS financially ready for the home and feels the home is a good investment.
I’m not here to tell you that homes in Arizona will reach what homes in California and New York have been at but I am telling you that homes are expensive because people are making more money these days and are willing to spend money that normally would have been saved in an account or placed on the stock market. I know of plenty of people that were burned in the late 1990’s with tech stocks and now they own several homes making 10-20% per year. And the best part is if the market ever goes down they have a house they can live in.
OK so what about this “Bubble”? Well since everyone else has a theory about it so will I. I think the “bubble” is already busted. WHAT! Yes, busted and here is why. We have seen markets increase 20-30% for that last 5 years and now almost every state is at record numbers. They are selling more homes than ever before, the prices that are being fetched are at record peaks and people can’t get enough. We have already busted. Of course the market is going to be flat for some time and then start to work its way up. Why shouldn’t it. Who said that everyone must invest in 401K or mutual funds? I think people are sick and tired of getting ripped off by Wall Street and want to buy things like real estate and land. Trust me I’d love to buy a New York condo for $250,000 again so if you really think I’ll be able to buy it once the “bubble” gets popped then should I just wait? NO and the reason is because you’ll never see $250,000 again. Now with that said are there better times to buy and are better areas than others? Yes and there will always be. The point I’m trying to make is that if you want to sit around and wait for the big bubble to burst you might be waiting until the end of time. If you think I’m not telling the truth the think about this fact. Two years ago in California people were really getting worried about the real estate market and wondering when the market would “correct”. Well 2 years later prices are up another 40%. Do you actually think the market will correct 40%? The answer is no, so the people who waited to see the market drop basically lost 40%. Now 2 years from now when California gains another 10-25% those same people will think “Wow we really should have bought that home for $300,000 less 3 years ago.” Those people will never own a home.
Do yourself a big favor and research the area where you want to live and do your homework. If you can get into a home with a good monthly mortgage payment, live in a good area and enjoy your home then you’re on your way to being a proud home owner. Don’t let the talks about this “bubble” make you lose out of owning.
