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Question: So far in my real estate career I've worked exclusively in residential real estate. I'm doing very well and I really enjoy working with home buyers and sellers, but I've heard that specializing in a specific area, such as investment real estate or commercial properties, is the road to the really big bucks. Any suggestions?
Answer: "Find a niche and fill it" is a variation of the "find a need and fill it" advice given aspiring entrepreneurs. It's a career strategy that makes sense for Realtors too, but before you strike off on an unknown path it would be good to map your strategy ahead of time. Here are a few recommendations.
PICK A NICHE. If you are specializing in residential sales, you are, of course, already in a perfectly respectable niche. Many Realtors spend an entire career happily and prosperously listing and selling owner occupied homes and couldn't imagine doing anything else. Some may decide to concentrate on specific types of residential properties or work primarily or exclusively with buyers or sellers, but the residential agent is generally considered the "country doctor" of our profession.
As you point out, however, there are other intriguing possibilities. One of the real advantages of earning your spurs in residential sales in a general brokerage is that you are likely going to be exposed to a wide variety of transactions, which will give you a first hand look at what's involved in many of these specialized areas. For example, a previous client may decide they would like to buy a small residential investment property. Or you may somehow end up listing a small farm. In both instances you would immediately realize that your job knowledge in these areas is seriously lacking. If there were someone in your office with the appropriate experience you may want to consider working on a cooperative, fee splitting basis. It's the best kind of education - the type you can get paid for. Your first stop would be your supervising broker for guidance.
Here’s a personal example. In my first year in the profession all of my transactions were with home buyers and sellers, with two notable exceptions. First, a young couple to whom I had sold a home, contacted me and said they were interested in buying a duplex as an investment property. I learned a lot in that transaction, not the least of which was the difference between “before tax cash flow” and “after tax cash flow.” Incidentally, it turned out to be a great long term investment for my clients.
In another instance my wife, with whom I worked as a team, listed a beautiful twenty acre ranch in a nearby community. I happened to be working with a couple from Canada who were interested in a farm property. The transaction turned out to be the biggest payday I had in my real estate career, but the thing I recall most vividly was how much there was to know about agricultural property that I did’t know. For instance, just being familiar with the cost of farm machinery in extremely important.
As you are exposed to new and different situations, your overriding goal obviously will be to satisfy your customers and clients' needs in a professional manner. At the same time you will have a basis to determine whether or not any of them seem to have career potential for you. Whatever you decide, it will demand a major commitment on your part so you want to make certain it's a field that is going to hold your interest. A distinguishing feature in most commercial or investment transactions is that although you’re likely to realize an impressive commission, the time and effort required to earn it is typically much more demanding than that of a residential transaction.
GET SMART. There is not a real estate career niche you can pick that will not have a well structured Realtor education program and a professional society complete with professional designations. As soon as you've made a decision you need to plug into the system, establish short and long term goals, and start attending professional education courses. For example, if you do decide to specialize in investment or commercial properties, attaining the Certified Commercial Investment Member (CCIM) would be a logical objective. If you stay in residential sales, the Certified Residential Specialist (CRS) would be a very worthwhile designation to pursue. GRI is mandatory basic training.
Even if you were not a member of the Realtor organization, there are a variety of educational opportunities available to you. Not only will you gain professional competence by participating, but it will provide incredible networking opportunities for you.
DON'T BURN YOUR BRIDGES. If you decide to move out of residential sales, it would be wise to make it an orderly and gradual transition. If you have been successful, you are going to have a lot of satisfied past customers and clients calling you to do business. I would have a hard time walking away from that, both from a financial and a personal standpoint. I know successful Realtors who do specialize in investment properties, for example, but who still handle their old residential accounts personally. In addition to permitting continued contact with valued members of your network, that approach would provide a very valuable and reliable source of income.
FOLLOW YOUR HEART! As you consider your long term career decisions you will want to go slow, observe carefully, study hard, and discuss your goals with your supervising broker. You are correct to say that there are some really big bucks to be made in the more specialized fields of real estate. On the other hand, particularly with the advent of real estate assistants, more and more residential agents are earning some very impressive incomes. Assuming you are willing to make the long term commitment to professionalism that success in any field demands, I like the advice: "Go where your heart leads you and the money will follow."
Best Regards, Ken Edwards