Have you been thinking about launching a real estate career? If so, you may have some concerns about the state of the housing market, given the COVID-19 outbreak and the impending recession.
Being cautious is wise, especially considering how deeply the 2008 recession impacted the housing market. But I have some good news for you:
- This 2020 recession is nothing like the 2008 recession and is not expected to devastate the housing market in the same way. Remember, the 2008 recession started in the housing market with subprime loans and over-leveraging of home equity. So lots of homeowners quickly owed more than their homes were worth, resulting in excessive foreclosures. Lenders have been using better practices for the last decade to help homeowners avoid that situation. So today’s homeowners are in a better position to weather the recession. We’ll still see some short sales and foreclosures, but not to the degree of the last recession where those distressed properties drag down the entire market.
- A recession is a normal part of the economic cycle. Sure, deals are harder to come by when the market slows. But that just means you need to change your business strategy a bit.
- For new agents, there are actually benefits to launching your real estate career in a slow market.
In today’s post, we’re covering 5 key benefits of launching a real estate career in a slow market.
5 Benefits of Launching a Real Estate Career in a Slow Market
1. You’re going to learn the art of lead generation.
With the rise of paid leads, many of today’s real estate agents have forgotten (or never learned) how to generate their own leads. Instead of investing time in active prospecting, agents have invested money purchasing leads from companies like Zillow®, Real Geeks, and Market Leader. Now, I’m not lead-shaming the lead-buyers out there. If you have the money to buy leads and don’t have the time to actively prospect, buying leads is probably the best course of action for your business.
But here’s the problem: when everyone buys leads, the price of leads increases and becomes cost-prohibitive for the new agents who likely have more time than money. Another problem: most lead-generators charge a monthly fee, so when leads are harder to come by in a slow market, you’re paying more per lead. And this is where new agents launching a real estate career in a slow market have an edge. New agents can invest the time in learning how to prospect and market without paying for leads. It can be difficult for established agents to pivot, but when you’re coming in with a fresh perspective, you can build a foundation of good lead-gen practices that will bring you low-cost (or even free) leads through the rest of your career.
For slow-market lead-gen ideas, check out:
2. As the fair-weather agents exit the industry, you get to add their clients to your client base.
Through no fault of their own, agents who’ve joined the industry in the past decade likely have unrealistic expectations of the real estate industry. Housing markets across the US have been hot, and leads have been plentiful. With fewer buyers and sellers entering the market during a recession, competition gets more fierce. Agents have to be more skilled and work harder than before. And for the agents who’ve been used to simply buying leads and closing deals, this change may be too much to take.
As fair-weather agents leave the industry, you have the opportunity to earn their old clients. There are a couple ways to go about this:
- Ask your broker for orphans. Orphans are buyers and sellers whose agents have has left the industry. Your broker may be able to give you a list of the agents who’ve recently left the brokerage and lists of their clients. Reach out to each former client to introduce yourself and provide some value upfront (perhaps a local market report).
- Make a deal with agents on their way out. If you know of an agent with a strong client base, offer to “buy” their client base. You could give that agent 5-10% of each deal closed with one of their former clients in exchange for that agent helping transition his or her clients to you (making the introduction and endorsing you). You get a ready-to-serve client base, and the exiting agent gets some passive future income. Win-win!
3. You can take advantage of recession-proof income streams for quick income.
There are a handful of real estate-related services that pay more during a recession than during a strong market. By launching your real estate career during a slow market, you can take advantage of these income streams to produce some quick cash while you wait for your commission checks to become more regular. The income streams can also help you establish yourself as a real estate pro and build your client base.
Here are a few ideas for recession-proof income streams:
Property Management
During the last recession, many cities saw a jump in the single-family rental market for a couple reasons:
- Many homeowners didn’t want to sell at the bottom of the market, so they chose to rent out their homes when they had to move for any reason (job transfer, retirement, etc).
- Sadly, many homeowners lost their homes due to foreclosure and were forced back into the rental market.
This increased rental activity become a solid source of income for real estate agents who offered property management services. It just takes a little organization to stay on top of your portfolio, so make sure you invest in some inexpensive, but effective, property management software.
Property Tax Appeals
I can’t understand why more real estate agents don’t offer property tax appeal services in a down market. Well, yes I can…it’s because most agents aren’t even aware of property tax appeals.
But it’s surprisingly simple. If your county over-values your clients home for property tax purposes (which is highly likely in a declining market), you can appeal those valuations to reduce your client’s property taxes, and collect a percentage of the savings as your fee for service.
All you have to do is:
- Find the assessed values (either online or from your client’s tax bill)
- File an appeal application with your county
- Complete a CMA to show a more accurate value of the property
- Present the CMA to your county assessor (sometimes this can be done via email, and sometimes it requires an appearance at the Board of Appeals) to achieve a reduction in the assessed value
- Issue your invoice to your client, and collect your income
To learn more about property tax appeals, check out How to Make Money with Property Tax Appeals.
Tool and Equipment Rental
During a recession, homeowners are more money-conscious. They want to repair things around the house instead of replacing them. The problem is, they may not have the tools for the repairs, and they may not want to spend the money purchasing expensive tools right now.
Why not offer to rent your tools and equipment to them? In my experience, the rentals at Home Depot are often in poor condition, too expensive, and sometimes not even available for weeks at a time. You can provide a much better customer experience!
So take the tools and equipment, currently just gathering dust and spiders in your garage or shed, and put them to work making money for you.
Just make sure you get your customers’ credit cards on file for a healthy deposit in case they somehow destroy your equipment.
Learn more: How to Make Money Renting Out Tools and Equipment
4. You’ll know how to run lean.
Cutting expenses is one of the more difficult tasks veteran agents run into when markets slow. During strong markets, business operations tend to get a bit bloated, with agents spending more than necessary on utilities, subscriptions, and automated services. This makes perfect sense when you think about it: agents are so busy and making so much money during strong markets that they don’t have time to scrutinize every little business expense.
By launching a real estate career in a slow market, you have the advantage of running lean from Day One. You won’t need to make difficult decisions on where to make cuts to services and subscriptions you’re already accustomed to having. You’ll be able to negotiate utilities and broker fees upfront, and only add services and subscriptions as they become completely necessary.
5. You’ll be well-positioned when the market rebounds.
As we’ve already discussed, fair-weather agents exit the industry quickly during a recession. They may not have the skills, temperament, or patience it takes to be a real estate agent in a slow market. And lots of potential new agents are too anxious about entering a slow housing market to pursue a real estate career during a recession.
For the agents who enter the market during the recession (and the veterans who remain in the industry through the recession), this means lower competition when the market rebounds. There will be fewer agents working to handle the influx of buyers and sellers as the economy returns to normal. You’ll enjoy a magical time where leads are plentiful and competition is low. Eventually, people will catch on, and they’ll start applying for real estate licenses to take advantage of a strong market. But by then, you’ll already have a solid client base, glowing testimonials, honed skills, and hopefully some referral business. So you’ll be ready when the competition gets fierce.
Bonus Benefit: You can be your own client!
A recession is a great time to purchase investment properties while values are lower than normal. By representing yourself as the buyer, you’re entitled to receive a commission on the transaction. That money can go in your pocket or be used to make your new investment property ready for your first tenants!
Get Your Complete Recession-Proof Guide!
If you’re serious about growing your real estate business during a slow market, check out The Recession-Proof Real Estate Agent. This book offers a complete step-by-step guide to recession-proofing your real estate business.
For those looking to take advantage of the benefits of launching a real estate career in a slow market, The Recession-Proof Real Estate Agent is a must-read!
