Real Estate Agent vs Real Estate Investor: Four Ways to Tell Them Apart
Just what is the difference between a real estate agent and a real estate investor anyway? How do you tell them apart? After all, they both dabble in real estate. They both work with properties. They both make money from sales. Seems like trying to tell the difference between a red apple and a redder apple. Sure. I’ll buy the idea that they both use real estate as a means of generating revenue. But I think there are actually more differences than similarities between agents and investors.
Agents need to be licensed; investors do not.
Real estate agents need to be licensed by the state in which they do business. Real estate investors do not need a real estate license. People always ask me if they need a real estate license to buy and sell properties. The answer is no. You only need a license if you plan to represent someone other than yourself in the purchase and sale of properties.
Agents earn commissions; investors do not.
Both real estate agents and real estate investors earn money on real estate. They just do it in different ways. Agents earn 1 – 5% commission off every sale they facilitate. Sophisticated investors first decide how much they want to earn then find deals that meet their minimum criteria. While an agent relies on the property to sell (preferably at a higher price), an investor may do any number of things to pull cash flow from a piece of real estate including:
- Sell the property for cash at market value to a home buyer
- Flip the property by selling it at a discounted rate for quick-sale, often to another investor.
- Finance the sale of the property to a buyer so that the buyer makes monthly payments to the investor instead of a bank.
- Bundle the property with a handful of other properties and sell the entire batch in bulk.
Investors are called investors because they’re really good at finding creative ways to turn real estate into positive cash flow.
Agents rely on the integrity of their brand to market; investors do not.
Agents and investors both invest in marketing. Agents typically have websites, business cards and do quite a bit of networking and even some direct mail campaigns. Investors are known by their simple signage. You may see handwritten yard signs in the cities that say: We buy ugly houses. You can bet an investor is involved in that campaign somewhere along the way. Why is it that investors can stick handwritten yard signs along the side of the road and get just as many cards as professionally-done agent business cards? Simple. If you have something that you need to sell, who would you rather call – someone who can help you sell it or someone who wants to buy it?
Agents are employed by brokers; investors are not.
Finally, another way to tell the difference between a real estate agent and a real estate investor is agents work under real estate brokers. Once an agent is done with school and has been licensed by the state, he or she has to find a real estate broker to call home. Investors have to make their own way. They are independent individuals who go where the deals are. Not an easy road, by any stretch of the imagination. But it’s the road they travel.
I do hope this short article has cleared the basics up for you. I could go on. There are nuances in the psychology of the agent compared to the psychology of an investor. But, I think you may have a pretty good idea of what the obvious differences are between a real estate agent and a real estate investor.
Let me tell you, I’ve been a real estate agent, a real estate broker and a real estate investor. I know all three worlds inside and out. If you have questions, by all means, ask them in the comments section below.