As both a licensed real estate agent and a real estate investor, I have many more options to close a transaction than a typical agent. That means I’m not as reliant on buyers, so my income is more consistent.
This also helps with my mindset because I know I have plan B, C, D and beyond, so I tend to be less stressed than many people. That helps me to stay more focused and make better decisions.
If you want to avoid the income rollercoaster that most agents face today, you need to learn how to close more types of transactions.
That doesn’t necessarily mean you need to become an investor, though that certainly helps. There are plenty of other ways to close a transaction as an agent that don’t fit into the traditional box, but give you an opportunity to make income from a deal that would have otherwise fallen through your fingers.
So in this article, I’m going to share a few non-traditional ways you can use to close transactions and generate a more stable income. That’s especially important today, when upward of 80 percent of agents haven’t closed a single deal — up from 71 percent last year.
Learn creative financing
Sometimes, the circumstances of a deal make it impossible with traditional financing, but that doesn’t necessarily mean that it’s a dead deal. Creative financing, something most investors are deeply familiar with but most agents aren’t, can enable you to save an otherwise impossible deal.
There are several tactics you can use, but the strategy is similar — you’ll use short term creative financing to close the transaction, the agents’ commission is paid at closing by the buyer and the loan has a balloon payment that’s usually due within a few years rather than the traditional 15 or 30, which the buyer will pay off by refinancing the property later.
The key is to structure a deal as a win-win for all parties involved, and each transaction is unique.
You must understand how this works well enough to explain it to both the buyer and the seller in a way they can clearly understand. This is often easier said than done, so be prepared for some pushback in most cases.
Operate as a leasing agent
Perhaps selling the property is simply out of the question due to pricing, market conditions or other factors beyond your control. (Or your client’s flexibility.) Obviously, that means you’re not going to get a commission by selling the property, but it doesn’t mean there’s no way to make money from the property. This is especially important when you’ve already invested significant effort in marketing the property.
While you may not be able to sell the property, you may, depending on circumstances, be able to lease the property to a suitable tenant and make a smaller commission from the monthly rental income. This will not be anywhere near as much as what you’d get from a sale, but it’s a consistent monthly income that helps you pay your bills, and more importantly, it helps you to maintain a closer relationship with the owner, so when market conditions change, they’ll be more likely to list with you again.
Become a licensed mortgage broker
As a licensed mortgage broker, you’ll have the opportunity to also earn a commission on the financing for every transaction you’re involved in — sometimes on one side of the table, but often, on both sides, because most agents do not have this capability.
And in the case of a transaction where the numbers are tight, you can be more flexible on your commission as an agent because you’re also making money as a mortgage broker. This can help get some of your tougher deals across the finish line.
Plus, there’s a synergistic effect between the two roles because anyone you talk to for one also likely has a need for the other. Every prospect approaching you to list their property or to find them a property will most likely need financing, and every prospect approaching you for financing will most likely need help finding a property, selling a property or both. And you’re probably already giving your client advice on their mortgage anyway.
When speaking with a client, you need to explicitly state which role you’re advising from. For example, you might say, “As a Realtor, here’s what I see and what I think would be best for you, and as a mortgage broker, here are the implications of those choices.” This helps you stay compliant with all applicable regulations on each part of the transaction.
Buy it, and then hold, or renovate and flip
I want to emphasize that I don’t recommend this in most cases because if you don’t have a fair amount of investing experience, it’s easy to get in over your head. There are lots of landmines that can hide just beneath the surface of a deal that seems great if you don’t know what you’re looking for, and when you step on one, you could end up losing a lot of money really fast.
Don’t make the mistake of thinking your experience as a Realtor will directly translate to investing.
But if you spend time learning the investing world, find a solid mentor and carefully evaluate each deal with extreme prejudice, you may find some real gems that can add a significant amount of income to your balance sheet.
When it comes to investing, I recommend either buying and holding the property as a rental, which is usually the easiest but comes with slim margins, or fixing and flipping the property, which is harder but offers larger returns. Rezoning or ground-up development is far riskier and more complicated.
The key here is to truly understand your expertise, financial circumstances and market conditions. If you buy and hold, you need to ensure you can carry the property if it doesn’t rent immediately. If you fix-and-flip, you need to ensure you understand construction and maintain a roster of reliable contractors.
A successful career in real estate requires evolution
While some people mistakenly believe that the real estate industry is old and stodgy, the reality is that it is constantly evolving.
Those who resist evolving along with it will struggle and eventually be driven out of the industry, but the professionals who keep their finger on the pulse of the industry and proactively evolve to stay ahead of the game will not only survive but thrive.
And that choice is entirely yours.
So my question to you is this: Will you stagnate and move on to something else, or will you continue to evolve and rise to the top of the industry?
Tatiana Zagorovski specializes in helping people who have damaged credit achieve the dream of homeownership through Trio Realty Partners, based in St. Louis. Connect with her on LinkedIn and Instagram.
