What exactly does valuation mean in real estate?

Valuation is the process of determining a property’s value by using three different approaches: sales comparison, cost and income. Evaluating a property is no easy task and is crucial to determine a home’s value. Real estate investment companies and independent investors, especially, need potential investment properties thoroughly evaluated in order to make the best financial decision.

Who conducts valuations?

Real estate evaluations and appraisals are most commonly conducted by real estate valuation analysts, licensed appraisers, property valuers, or land surveyors.

What are the three approaches or methods to valuation?

1. Sales Approach – Best for residential properties, the sales comparison approach compares the property to nearby properties, or comps, that have recently sold. Comps should be located within a mile of said property and sold less than six months from the current date. Typically appraisers will compare the property to at least three comps that are similar in square footage, year built, location, etc.
   
2. Cost Approach – Unlike the sales comparison approach to valuation, the cost approach is best used when evaluating special purpose, new construction, or commercial properties. Instead of comparing the property to similar properties, the cost approach determines how much it would cost to replace or replicate the property.
   
   In order to find the value of a property using the cost approach, the land, construction, and depreciation costs all need to be determined or estimated as accurately as possible. According to WallStreetMojo, this formula should be used to find the value of a property using the cost approach: Land + Construction Cost – Depreciation = Value.
   
3. Income Approach – The income approach is used for income properties that will be available to rent or lease, such as apartments or office buildings. Let’s take a look at the steps to discover the value of a property using the income capitalization approach as outlined on WallStreetMojo:
   
   Find Annual Gross Income – First, the potential income must be estimated based on current market rates.
   Find Effective Gross Income – Subtract potential losses.
   Find Net Operating Income (NOI) – Calculate the property’s operating expenses.
   Find Rate of Return for Type of Property – To find the rate of return, or capitalization (cap) rate, the NOI of comps must be found and divided by their sales price.
   Find Value – Once the cap rate and NOI of your property is found, divide the NOI by the cap rate to estimate your property’s value.

How can I help my clients more when it comes to valuation and appraisal?

Though this article simply outlined the three approaches to valuation in real estate, there is so much more to this process. As a real estate agent, you must know these different methods so you can help your clients determine the price for selling or buying a property. Your clients will rely on you to advise them on the right listing price for their home or when a sales price is too high or low when looking for a new property.

If you’re interested in real estate, we would love to answer your questions further and help you prepare for your real estate licensing exam. Call us at (574) 551-0316 or visit the contact page to talk with one of our team members today!

What types of risk are present in real estate?

The main six types of risk associated with real estate investment are:

• Structural – Financial structure of the loan
• General Market – Unpredictable ups and downs of the housing market
• Financial – How much debt will it take to purchase property versus return on investment?
• Asset-Level – Low risk vs. high risk investment (ex: apartments vs. hotel)
• Legislative – Change in government regulations
• Location – The area surrounding the property

The most common specific real estate risks we see include:

• Bad location
• Hidden or missed structural damage
• Problem renters
• Negative cash flow
• Periods of vacancy
• Uncertain housing market

How do you reduce the risks in real estate?

Even though some risks will be unavoidable, there are ways to assess and reduce risks when investing in real estate.

1. Research – Take your time to analyze the data and market for the area the potential investment property is located. If local to the area, you may be able to pull together the information for yourself, but if you’re interested in a property in an unfamiliar city, consider finding a professional in that area to work with.
2. Talk with your Financial Advisor – Talking with a financial or investment advisor about your financial and investment goals is important. A financial professional should be able to go over your finances with you and help you make the best decision.
3. Inspect – Have a thorough inspection conducted of the real estate property as well as a credibility check of the seller and other involved parties.
4. Think Long-Term – Will this investment be worth it long-term? Is the surrounding area expected to increase in value? Is it an up and coming area? Are you willing to manage the property, tenants, and associated risks long-term?

As a real estate agent, how do I help my clients make the best decision?

If you’re new to real estate or considering a career in real estate you may be wondering how to help your clients with major financial decisions like these. We would love to guide you on your journey as a real estate agent through our online classes. Our classes are taught by real estate professionals with real experience in the field. Instead of just an online class, our classes are available on Zoom or with access to instructor-led videos.

We want to make sure you succeed as a real estate agent and learn everything you need to know and more! Give us a call at (574) 551-0316 or visit the contact page to talk with one of our team members today!

What is a mortgage broker?

Though there are many other careers within the real estate world, a mortgage broker is someone you will interact with often. A mortgage broker, according to Investopedia, is “an intermediary who brings mortgage borrowers and mortgage lenders together, but who does not use their own funds to originate mortgages.” The broker will usually earn commission from the mortgage borrower or lender at the home closing.

When will an agent come into contact with a mortgage broker?

During the home buying or selling process, a real estate agent’s clients will need to borrow money from a lender – enter mortgage broker. The real estate agent will correspond with the mortgage broker regarding their client’s financing information and needed documentation.

Why partner with a mortgage broker?

There are endless benefits to partnering with a mortgage broker or any real estate professional – that is. When you form symbiotic relationships with others within the real estate business, you are essentially making the home buying/selling process smoother for your clients. Not only are there numerous advantages for your clients, but your business will certainly reap the benefits. Partnering with other professionals means more referrals, more commissions, and more money in your pocket!

How do you become a better partner?

Like any relationship, these partnerships take time, trust, and communication. As previously mentioned, you are your business as a real estate agent. If you possess appealing qualities such as determination, friendliness, trustworthiness, creativity, etc., you will not only be a prosperous agent, you will also be an attractive partner to other businesses.

Ready to build relationships in this industry?

Whether you’re a new real estate agent or just looking into pursuing a real estate license, you’ve come to the right place! The Beer School of Real Estate team is here to help you succeed in this highly competitive field. We offer a pre-licensing course that will prepare you to pass your real estate exam and become a licensed real estate agent!

Please call us at (574) 551-0316 or visit the contact page to talk with one of our team members today!

What is the difference between a real estate agent and a property manager?

Real estate agents and property managers both deal with properties but at different levels. A real estate agent handles the buying and/or selling transaction for their client and is hands-off after the sale is finalized. Whereas a property manager is hands-on in managing their client’s properties either for short-term or long-term tenants.

Both real estate agents and property managers will work remotely, from the office or from home, and on-site. Real estate agents will need to be on-site to show houses to their clients and accompany them at the final walk-through to make sure everything looks correct. Property managers will need to be at the rental properties to give showings, perform inspections, or coordinate repairs.

What are the pros and cons of these career paths?

Pros:
Real Estate Agent –

• You’re your own boss
• Unlimited income
• Set your own schedule
• Help people
  

Property Manager – 

• Good, consistent salary
• Ever-growing industry
• Acquiring first-hand real estate knowledge

Cons:
Real Estate Agent –

• Competitive
• Need to be self-motivated
• Abnormal working hours
• Inconsistent income
  

Property Manager –

• Dealing with trouble tenants
• After hour emergencies
• Finding and evaluating renters

How can you do both jobs at once?

Though it depends on your state’s requirements, you can be both a real estate agent and property manager at the same time. It would take time, hard work, and determination to be successful at both jobs at once, but depending on your lifestyle and goals, it could be worth it! Like any career, you’ll get out of it what you put into it.

These two careers can feed off of each other and lead to more business, more real estate knowledge, and endless networking potential.

Are you a property manager looking to obtain your real estate license?

At the Beer School of Real Estate, we are here to help you pass the real estate exam! How can we help? We offer a Pre-Licensing real estate course that gives you everything you need to become a licensed real estate agent. This course can be attended live through Zoom or through our online course program.

If you have any questions for us about the enrollment process or course material, call at (574) 551-0316 or visit the contact page to speak to a member of our wonderful, experienced team.

Preparation

It’s crucial that you prepare yourself and your clients for the home closing. Without adequate preparation, you more than likely will hit some roadblocks that you are not ready for. To have a successful closing you need to take these steps before you get to closing:

1. Make an earnest money deposit – This shows the sellers you’re seriously interested in buying their home.
2. Order a title search to get title insurance – As the real estate agent, you want to make sure that the home your clients are interested in is in fact available – meaning no pre-existing claims or liens on the property.
3. Encourage a home inspection – A home inspection isn’t required but you should strongly encourage your buyers to have one done. Usually the offer will be contingent on the home inspection, that way your buyers won’t be trapped into the sale if the inspection goes awry.
4. Set up an appraisal – If a lender is being used, they will require an appraisal to make sure the appraisal value meets the offer amount. If less than the offered amount, the lender will not approve the request.
5. Change offer terms if needed – Depending on the home inspection, you may need to negotiate the contract to accommodate for repairs or other expenses.
6. Schedule closing date and final walk-through – As the real estate agent, you will also be responsible for scheduling both a closing date and the final walk-through. The final walk-through is imperative to check all repairs and anything discussed in the contract have been taken care of.

During Closing

The closing process itself doesn’t take too long since it’s just signing the necessary documents and double checking all the terms are correct. Usually the home closing will take place at a real estate attorney’s office or a title company’s office.

The real estate agent’s job at closing is to assist the title agent in explaining paperwork and answering any questions you have. It’s also the agent’s job to make the experience as stress-free and fun for their clients as possible. Buying or selling a home is a big, expensive decision. Your clients may be anxious when they show up on closing day and will need reassurance and support from you.

Need advice as your first home closing draws near?

Be yourself! Your clients chose you for a reason. You’ve been their sounding board and rock through the home buying or selling process. If you show up to closing with a positive attitude, ready to help them in any way you can, they will be appreciative! It wouldn’t hurt to bring them a little closing day gift and offer to take their picture to commemorate their big day!

Give us a call at (574) 551-0316 or visit the contact page to talk with one of our team members about how we can assist you in your first closing. We’d love to offer our advice and talk to you about our online real estate programs.

Being Patient

It may seem odd to think of a real estate agent demonstrating patience when stereotypes suggest the opposite. Movies and TV shows depict agents as dishonest, greedy, lazy, and prideful. In reality, possessing these characteristics won’t get you very far as a real estate agent.

The most successful agents are those who are honest, trustworthy, patient, humble, and hard working. Seeing their clients happy with their new home makes them happy, too. Having patience and displaying similar virtues will help set you apart from others.

Your clients will be looking to you for advice and direction during their home buying or selling process, so if you seem stressed or frustrated they will sense that. Staying level-headed, calm, and patient during a sale will make both you and your clients feel better.

Being Persistent

Just like patience, being persistent for your clients is key to a quick and successful sale.

As we mentioned above, the real estate industry is full of unexpected challenges. Everything could be going smoothly one day and falling apart the next. Determination and persistence are key when it comes to closing the deal efficiently and effectively for your clients.

Oxford Languages defines persistence as “firm or obstinate continuance in a course of action in spite of difficulty or opposition.” There is no other industry that has quite as many difficulties or oppositions as the real estate world.

In real estate, it’s always smart to have a plan in place, never give up, and always stay on top of the problem. Your clients are counting on you to be persistent for them in their real estate journey.

Other Helpful Qualities:

• Self-Motivated
• Able to Communicate Effectively
• Good Listener
• Detail-Oriented
• Enthusiastic
• Passionate
• ….and so many more

Are you just beginning your career as a real estate agent?

If you’re just starting your journey as a real estate agent, we’d love to offer our services and advice. Our online courses may prove helpful to you as a new agent.

Give us a call at (574) 551-0316 or visit the contact page to talk with one of our team members about how we can help you!

In the Field

As a real estate agent you’ll communicate with your clients daily, either over the phone or in person, so your personality will always be on display. To form a genuine connection with your clients and gain their trust, it’s important to be yourself. Joke with your clients, listen to them and relate to their stories using your own experiences. This shows both new and current clients you are truly interested in what they want and they’ll appreciate your ability to open up to them.

On Social Media

With the increasing popularity of social media marketing, more and more real estate agents are using this tool to connect with their clients. Using social media platforms like Facebook, Instagram, Pinterest, and even TikTok have been proven effective in boosting engagement with existing clients and prospective clients. It’s an easy way to share more about yourself and let your personality shine. Posting photos, videos, and responding to comments are all ways you can interact with your followers and show your personality through social media.

Best Personality Traits to Have as a Real Estate Agent:

• Honest
• Likable
• Love to Learn
• Detail-Oriented
• Determined
• Tech-Savvy
• Self-Motivated

There are many characteristics that will help you as a real estate agent that aren’t on this list. As long as you are enthusiastic about your job and use your personality to your advantage, you’ll be a successful real estate agent!

Need advice as a real estate novice?

Our team of experienced real estate agents are here to help! We understand how overwhelming it can be when you are first starting out as a real estate agent or are simply beginning the process. At the Beer School of Real Estate, we offer online courses for both pre-licensing and post-licensing.

Please call us at (574) 551-0316 or visit the contact page to talk to one of our team members today!

1. Low Housing Inventory

The housing market constantly experiences ups and downs when it comes to inventory. Bad news for real estate agents: no inventory to sell means no commission for you. Even for more experienced real estate agents, a low inventory period is difficult to navigate. If you’re new to real estate, it’s even harder to find clients because people are less likely to take a chance with someone with little to no experience.

In a low inventory period, word-of-mouth recommendations and referrals mean everything. Getting involved with local businesses and networking groups can give you much needed exposure in the community and hopefully a foot-in-the-door with potential clients.

2. Changing Online Trends

Though this may be easier for younger agents, more experienced real estate agents are having trouble adjusting to ever changing technology trends. That said, as a new real estate agent, keeping up with online trends is just one more thing to worry about.

If you’re just starting out, take time to set up a professional email address, social media accounts, and maybe a basic one page website. After those are set up, try posting a couple times a week to make you and your business credible.

3. Real Estate Apps

Another new challenge real estate agents are facing is having to compete with real estate platforms such as Zillow. Online apps are starting to do more and more work that was previously done by real estate agents, so agents are struggling to find their place.

Try to match the online platforms by scouting new homes for your clients right as they are posted or even before they are posted. Your clients will appreciate your commitment to finding the best fit for them without having to be asked.

4. Nurturing Existing Clients

With everything else going on, real estate agents also have to keep in touch with their current clients so they stay on their radar. Most business for real estate agents comes from referrals and business from past clients. If you have happy clients, keep them happy by engaging them with emails, texts, and incentives.

A great way to keep up with your client database is using a customer relationship management system (CRM) with the ability to automate emails and marketing strategies. Finding the right CRM is crucial when it comes to your business’ success.

5. Expensive Leads

The last challenge we’ll highlight is the increasing cost of social media ads. As real estate agents, we’re constantly being told to invest in marketing and lead generation, but is it really worth it?

Our advice is to use that money to hire an SEO expert to assist you with boosting your website’s presence. Improving your Google visibility in your area allows potential clients to easily find you.

Another great way to boost your social media showing is by frequently posting on your social platforms to increase engagement and brand awareness. Organic traffic is almost more valuable than paid lead generation, so take advantage of free traffic on your accounts.

Facing challenges as a new real estate agent?

Although there are more than 5 challenges that real estate agents face on a day-to-day basis, these are some of the biggest and newest in 2022.

We’d love to help you as a new real estate agent. Give us a call at (574) 551-0316 or visit the contact page to speak to one of our team members about our pre- and post-licensing programs!

Side Jobs in the Real Estate Field

If you’re wanting to stay within the real estate industry to gain knowledge and experience, here are a few job ideas for you:

• Remote Online Notary (RON) – Becoming an online notary is an easy way to make money from home. During the pandemic, RON became more prevalent than ever. Many states now allow RON and users appreciate the convenience of an online notary system.
• Property Manager – A common way to earn money on the side as a real estate agent is to act as a property manager. As a property manager you would be responsible for finding quality tenants, managing maintenance requests, and making sure rent is paid.
• Create Online Courses – Creating and selling online real estate courses is a great way to share your experience with others while making money.
• Credit Repair Services – Offering credit repair services to your clients provides an interesting opportunity to earn extra income while helping your clients’ credit. There are a few ways to offer these services, either from you directly or partnering with an agency.
• Estate Sales – Getting into the estate sale business can prove financially beneficial for you. You can offer this service to existing or new clients who need to downsize or sell a deceased family member’s home and belongings. Estate sales take time to organize and operate so hiring a team to help may be best.
• Stage Houses – If you have a design eye or know someone who does, you can offer this add-on service to your clients when selling their home. Staging a home has been proven to make your home more attractive to buyers, most of the time resulting in a higher selling price. This means more money for you and your clients – win, win!
• Referral Agent – To earn referral fees from other agents, you’ll need to market yourself in your area and build your reputation. Once you start becoming more prevalent in your area and have a lot of leads coming in, you’ll be able to refer them to other agents and earn a referral fee.
• Flipping Houses – In recent years, more and more agents are flipping houses on the side. They know the real estate business and what buyers are looking for, which makes them flipping experts. If you have the initial money to invest or have a financial backer, flipping houses is a great way to earn money on the side.

Jobs Related to Real Estate

Along with jobs in the real estate field, there are a wide variety of jobs that easily coincide with real estate.

• Affiliate Links and Sponsored Content – If you post often to your blog, you should be on the right track to use affiliate links and sponsored content. Posting content to your website increases your SEO and Google ranking which makes you desirable to third party companies looking to advertise. An easy way to make money here and there is linking to their product(s) to earn a small commission when a user clicks the link.
• Equipment Rental – Another side job related to real estate is offering equipment rental to new home buyers. New homeowners don’t typically have the equipment or tools they need for house projects and renting them from a big box store can be expensive. Allowing clients to rent your equipment is cost effective for them and profitable for you.
• Landscape Design
• Painting
• Cleaning

Other Interesting Side Jobs

If you’re open to side jobs that don’t relate to real estate and provide extra income, there are still many fitting jobs for your flexible schedule. Jobs like driving for DoorDash or renting out your space through AirBnB are great jobs for a real estate agent’s schedule. Being a virtual assistant for an experienced real estate agent is also a perfect fit for a newbie as you can learn from them while earning money.

Looking for a side job?

We’d love to help you as you’re starting out in the field. We have even more ideas if you’re having trouble finding an additional source of income. Give us a call at (574) 551-0316 or visit the contact page to speak to one of our professionals about starting out in the real estate industry.

Available 24/7

In the real estate industry, you may think all agents are constantly working but that’s simply not true. As mentioned above, real estate agents have varying levels of “working hours” that are up to them to set and uphold. Making yourself truly available 24/7, never missing a phone call or text message will set you apart in this industry.

There are a few downsides when it comes to making yourself available all hours of the day. It means you may have to step out of family dinner to take a phone call or work more on the weekends when your clients are off work. Though clients will appreciate your willingness to help them at a moment’s notice, you may begin to feel burnout. Read this article for tips on maintaining a personal life while working nonstop as a real estate agent.

Available to Schedule

One option that seems to work for many real estate agents is being available but scheduling on your terms. Staying in control of your own schedule will help you maintain a work-life balance. This means not letting your client control you, but suggesting meeting times that work for your schedule.

This approach lets your clients know that you respect your time and theirs as well. While you still answer phone calls and respond to texts, you give them a reasonable expectation when paperwork will be ready or you will be able to meet.

Strict Business Hours

Last but not least, setting strict business hours is another way to create healthy and firm boundaries with your clients. It is possible to be a successful real estate agent and be up front with your business hours. Clients will respect your time and understand exactly when you’ll be available and when you won’t. This means letting after hours calls go to voicemail and not returning them until the next business day.

Although this method is very different from the go go go stereotype of real estate agents, it can still be effective. It provides you with both a more traditional work schedule and a life away from work giving you true free time.

How will you set boundaries as a real estate agent?

Everyone’s boundaries will look different as a real estate agent and it may take time and practice to find what works for you. If you need real advice from experienced agents, we would love to guide you in this journey. Please call at (574) 551-0316 or visit the contact page to speak to one of our real estate professionals and learn more about our post-licensing programs.