Are you a real estate broker or investor?

There is no gainsaying the fact that there is a lot of money to be made from various aspects of the real estate market. There is money to be made as a real estate broker, a real estate developer, a real estate contractor, a real estate manager, a real estate financier and a real estate investor. While this list is by no means exhaustive,it does represent some of the key income streams in real estate. Each of this money-making aspects of real estate also have their individual variants.

Abiodun Doherty

For instance, real estate development involves planning, construction and fittings. This is an area that involves several skilled and semi-skilled professionals and artisans to make it work. Every business that is linked to property development effectively makes money from real estate. The money does not stay in the big areas alone. This is one of the reasons why real estate is one of the critical measuring criteria of a dynamic and growing economy.

In a vibrant economy, there will be an increase of activity in the real estate sector. This is a reflection of people and organisations demonstrating their long-term commitment to that economy. It is also a reflection of the confidence they have in the possibilities of that economy. When this growth is sustained, it further shows that money is circulating in the economy and several sectors are benefiting from such growth.

Nigeria is definitely a growing economy with several possibilities yet untapped. In the 2013 fiscal year, Nigeria was ranked as the leading destination for investments in Africa by the United Nations Conference on Trade and Development with over US $7billion in Foreign Direct Investment being injected into the economy by investors. The Nigerian economy also won the ‘2013 EMEA Best Sovereign Bond Award’ from the Citigroup Middle East and Africa. In addition, Nigeria is now regarded as one of the new emerging economies referred to by economist as MINT ,an acronym for Mexico, Indonesia, Nigeria and Turkey. All these are good news for the economy and the real estate sector in particular.

However, on the downside, there is a growing unemployment problem with millions of young people roaming the streets without any gainful employment .Yet thousands are been churned out by the universities every year. In a bid to survive, many have been forced into self employment and one of the professions that have witnessed an nflux of skilled and unskilled people has been the real estate sector. Many people are now working as real estate brokers.

A real estate broker is simply someone who earns a commission by helping sellers to sell their properties and buyers to acquire the properties of their choice. The fact that there is practically no entry barrier for anyone who desires to work in this field and the tales of fantastic commissions made from a single transaction seem to be driving the influx of people into this field.

While some of the reasons for the influx of people are genuine, most of the rationale behind it are unrealistic. The bulk of those entering this field lack the knowledge and mentoring required to succeed in this area. They assume that it is easy and there is really nothing spectacular that professionals in those field are doing. I disagree. Partial knowledge is one of the most dangerous things in the universe. Every profession has its own required skills set and if you desire to excel in that profession, you need training and mentoring .

In addition, although there are a few people who have made millions from a single commission, most of those who do are those who have paid a price in learning what works and what does not work. In practice, there are very few overnight success stories. Most real estate brokers are barely surviving and most earn commissions irregularly. A single successful transaction could be preceded or followed by a season without any commission. Yet you are expected to keep working and hoping that the next transaction will be the breakthrough you’ve been waiting for. Nothing really worthwhile is as free or easy as some will want us to believe.

Simply put, a real estate broker is a sales person that is striving to make a living based on commission. Sometimes, this commission may be a very good one and sometimes he may not even earn a commission. Most real estate brokers are so concerned about surviving that they do not make out time to invest in real estate.

On the other hand, a real estate investor is someone who has bought or developed a property with the intention of leasing or selling it for a profit. A real estate broker earns a one-off commission while a real estate investor enjoys capital appreciation. The gain of a real estate broker is marginal and may not even be commensurate with the amount of effort and time invested .

While the gain of a real estate investor could be so significant that he has little recollection of the effort and money invested, a real estate broker’s profit is often short term while the investor gains long term. If you need my opinion on this, don’t just be a real estate broker. If you want to be wealthy long term, be a real estate investor.