The real estate investment market can be challenging to navigate if you don’t know where to begin. Maybe you’ve received guidance from friends and family but feel unsure about acting on it because their information is unfounded from lack of experience. Luckily, Infinity Investing has a team of experts like Aaron Adams who know enough about the real estate market’s ins and outs to get you started on your journey toward financial freedom.
Key Takeaways
- It is a good idea for investors to become licensed real estate agents because of the convenient perks of limited agencies.
- Licensed agents receive exclusive access to property databases and effective negotiation tools through multiple listing services or MLS.
- Earning a real estate license is a straightforward and affordable process considering the wealth gained from your investments.
- Focus more of your energy on the benefits of being a licensed real estate agent than worrying about liability and disclosure agreements.
- Airbnb and Vrbo are legal and practical outlets for listing short-term rental properties to generate passive income.
- Be the middleman for your landlord and tenant through short-term rental arbitrage and create a profitable scenario for everyone involved.
3 Things I Wish I Knew Sooner About Real Estate Investing
With over 2,000 homes under his management, Aaron Adams is a reliable source for understanding real estate investing. Based on his decades’ worth of experience, he shares the three things he wishes he had known before making his initial investments:
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Being a Licensed Real Estate Agent Has Benefits
It is common to feel stressed about making the right investment moves, especially where legality is concerned. You may find yourself questioning the liability and disclosure requirements that come with being a licensed real estate agent. Aaron Adams earned his license in 2000 and took several broker’s tests across multiple states. Based on this experience, he can assure you there is no need to stress; owning a real estate license has only been an asset to him.
Liability and Disclosure Agreements
This should only concern you if you intend to be fraudulent. Chances are, you fully plan on adhering to strict guidelines, so you shouldn’t worry about these agreements. Some people fear having a real estate license sets the bar high and instills performance fears. Others argue that you don’t need this tool to be an investor or complain that you must always disclose that you are licensed. Rather than focusing on the what-ifs, the real question is, do you want to get a license?
Limited Agency
Start with the understanding that the United States is the only place in the world allowing limited agency. A limited agency essentially enables you to represent an individual legally. You can sign or speak for them, or act on their behalf. Typically, the only other person with this power is a lawyer, with most countries requiring lawyer representation, adding more hurdles to the closing process. A limited agency eases completing a deal since you have fewer people to go through.
Gain Access to Multiple Listing Service
Being a licensed real estate agent doesn’t mean you are instantly better at navigating a deal. However, this license provides exclusive access to resources you otherwise would be prohibited from using. Multiple listing service, or MLS, allows brokers to share information about real estate properties, expands negotiation possibilities between buyers and sellers, and ensures fair cooperation. MLS also gives you the opportunity to write up contracts or keep commissions as a negotiation tool.
Basic Steps To Getting a Real Estate License
Earning a real estate license is an uncomplicated process that usually takes anywhere from three to six months. Of course, this heavily depends on your state’s licensing requirements, so be sure to follow what is expected of you. Basic requirements are: you must be 18 years or older, have permanent residency in the state where you are applying, and pass a criminal background check. Becoming a licensed real estate agent involves 40 to over 150 hours of formal education and passing a licensing exam. The total fees for the education courses and the exam costs $300 to $1,000.
Listing Your Rental on Airbnb Is Legal
In this regard, the focus is shifted from long-term rental investments to short-term ones to capitalize on a growing market trend. The idea is to take a house, condominium, or apartment, turn it into a short-term rental, and use Vrbo or Airbnb to lease it. This is an excellent real estate investment strategy, but it comes with some issues that need clarifying.
First, check with the city and state to see if there are any rental restrictions. Secondly, ensure the condo community or the homeowners association welcomes short-term rentals. Making sure there are no local rules preventing you from turning the property into a vacation rental is imperative. Keep in mind that some neighborhoods restrict these rental types, making it illegal to conduct business in this manner.
Short-Term Rental Arbitrage Is Profitable
Even though the property is for rent and not restricted, you still need to be fully in the clear before posting your listing. If a landlord is involved, you must verify that you are allowed to list the home as a short-term rental. Your landlord likely has a clause in the lease agreement that prohibits subletting, which refers to the process of letting someone else take over your lease for an extended period. It is worth noting that this process differs from a short-term rental listing, allowing you a chance to negotiate a deal with the landlord.
Some landlords avoid listing their properties as short-term rentals because of their obligation to furnish the home. You can provide them with a solution by offering to supply the furnishings yourself and the necessary information to prove the location could be profitable for both parties, you and the landlord.
When contacting the property owner, it is important to remain transparent. Be upfront about the possible costs and the expected percentage of the profits they will receive. Presenting a good deal that shows it is stress-free and details the potential profits shared will likely lead to the landlord taking the subletting clause out of the lease.
The Pros and Cons of Short-Term Rental Arbitrage
Purchasing a property to turn it into a vacation rental is an expensive initial investment because you are buying the home and all the appliances and furniture. Short-term rental arbitrage limits startup costs and allows you the flexibility of using the home for personal use. A constant fluctuation of individual tenants or large groups could mean more wear and tear on the home. Luckily, vacation rental applications let you charge guests extra cleaning fees to counterbalance the additional cost of maintenance.
The short-term rental market relies on seasonality and tourism. Keep this in mind when considering arbitrage because you may need to cover rent and unexpected expenses if there are consistent vacancies. On the other hand, the location’s desirability can allow you to increase the rent, take advantage of weekend or holiday rates, and generate more profit for both parties. As the short-term rental market expands, ensuring the property meets travelers’ needs, like versatile living spaces and unique amenities to entice them to book their stay with you, is beneficial.
Educate Yourself to Gain Financial Freedom
There are numerous methods to investing in real estate, such as becoming a landlord, flipping houses, and entering the commercial property market. Regardless of the real estate type, it is imperative to research and learn more about where you want to invest your hard-earned income. Being informed about the real estate investment market is essential to guaranteeing your financial success and generating lifelong wealth.
The team of business professionals at Infinity Investing recognizes that you can achieve your financial goals. Infinity Investing offers invaluable tips and tricks through its memberships to successfully navigate the investment markets. Subscribe to the 360 Pro membership to access real estate investment workshops, classes, and portfolio analysis from experienced investors.
Are you ready to begin your real estate investment journey? Consider becoming a licensed real estate agent for exclusive access to MLS databases and limited agency perks. Capitalize on the short-term rental market and list your property on Airbnb to generate long-term passive income.
Infinity Investing Featured Event
In this FREE event you’ll discover how the top 1% use little-known “compounders” to grow & protect their reserves. Our Infinity team of experts show you how to be the best possible steward of your finances and how to make your money and investments work for you instead of you working for them. Regardless of your financial situation today, you’ll have a road map to get to where you want to be.