There is no doubt that being a real estate investor is completely different from being a real estate agent. So, when it comes to finances, how much does each make?
If you want to know how to get rich in real estate, you’ve got to understand one concept: working in real estate is not the same as investing in real estate. Working in real estate is exactly what a real estate agent does. He/she only deals with real estate transactions and not the properties themselves. On the other hand, a real estate investor is the one who makes a living by purchasing investment properties and using them to generate money in the long-term.
Now that we got that out of the way, let’s see who makes more money and what affects their ability to do so:
How much a real estate investor makes?
Becoming a real estate investor means that there is really no limit to making money in real estate. With the countless investment strategies and various types of investment properties, an investor can decide how much he/she wants to make. In other words, an investor’s financial goal is what determines how much he/she money makes.
Related: How to Become a Real Estate Investor: From Novice to Expert in 7 Steps
Some real estate investors make six-figure income on an annual basis. Others make more or less depending on how many properties they have in their real estate investment portfolio. So, for the next section, you will learn what really impacts a real estate investor’s money-making process.
What affects the money-making process for a real estate investor?
The investment strategy:
There are so many investment strategies for making money in real estate. For example, there are strategies that support long-term goals such as positive cash flow properties. On the other hand, there are strategies that bring about short-term gains such as fix-and-flip. Also, your choice of investing in residential real estate vs. commercial real estate can highly affect how much money you make as a real estate investor. Commercial properties are very lucrative but they involve higher stakes. On the contrary, residential properties are a bit less lucrative but they are a safer bid, especially for beginner investors.
The type of an investment property:
The type of investment property can highly affect your money-making process. Let’s take multi-family real estate vs. single-family homes. for example. A multi-family property is more lucrative due to the multiple rental incomes it provides each month. Single-family homes, on the other hand, provide one rental income – unless you have multiple single-family properties.
Related: Buying a Rental Property: Should You Go For One Expensive or Two Cheap Properties?
The number of properties:
How many properties you have under your real estate investment portfolio can also greatly impact how much money you make. Owning multiple rental properties, for instance, helps you grow your portfolio much faster. In addition, having one property with multiple living units for rent can help you grow it even faster.
The way you rent out your investment property (traditionally or on Airbnb) will also affect how much money you make as a real estate investor. There are a number of factors that determine the optimal rental strategy, such as location, rental demand, the type of investment property, etc. Thus, you have to study these factors in order to find out which rental strategy will allow you to make more money.
Estimate the potential Airbnb rental income of your property using a free Airbnb calculator.
Return on investment:
This is the part you really want to focus on. Without calculating the return on investment, you can forget all about the previous factors. The return on investment simply means how much you’ll be making in return for what you’ve invested on an annual basis. As a matter of fact, successful real estate investors start with this one and then think of the rest!
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
How much a real estate agent makes?
You already know that a real estate agent is the mediator in finding or selling investment properties. Therefore, an agent makes money through commissions. This means that after closing a deal on a real estate investment property, the agent gets a percentage from both the buyer and the seller. Of course, the amount of money they make differs based on certain factors that influence the money-making process. So, let’s get to the next section to give you a better idea of how this works.
What affects the money-making process for a real estate agent?
The factors that contribute to the money-making process for a real estate agent are different from those that affect the same process for a real estate investor. Here is what you need to know when choosing this type of real estate careers:
There is no doubt that experience is a major factor that affects an agent’s salary. Sure enough, if I am a buyer and looking for an investment property, I would choose an agent who’s been in the business for a while. If anything, it means that this particular real estate agent has done enough transactions for me to trust him/her. As you can see, it is completely the opposite of a real estate investor. An investor can get into the business with no experience at all. After all, he/she is working for him/herself.
The more time you dedicate to your career the higher the chance of it flourishing and bringing about great gains. This is exactly the deal with becoming a real estate agent. Statistics show that full-time agents make much more money than those who are working part-time. Obviously, focus and time dedication are keys to making more money through real estate.
Referrals and marketing:
I am sure that you’ve referred people to others on many occasions. As a real estate agent, it is your number one goal. The more people know you, the more clients you’ll have. For some reason, it seems that when people hear from others, they tend to trust their referrals. So, use that to your advantage and build the connections you need in the business.
A marketing strategy is also important. Some people will find out about you on the internet, so use that as well. Nowadays, there is no limit to the marketing methods you can use to advertise your business. Therefore, do not be shy and let people know about you.
Just like a real estate investor, a real estate agent’s salary depends on their property specialty. A commercial real estate agent makes more money than a residential real estate agent. That is unless you sell $100,000,000 worth of residential property. But keep in mind, the risks are much higher with commercial properties. Thus, you have to make sure you know what you’re doing first.
Related: Residential real estate agent vs. commercial real estate agent: What’s the better career for you?
All in all, making money in real estate is not about the career choice, but the decisions associated with that choice. So, if you would ask us who makes more money, our answer would be the smart guy!
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