Colorado Real Estate News

IS IT TIME TO TRANSITION FROM FULL-TIME TO PART-TIME AGENT?

One of the most enticing aspects of choosing real estate as a career is the flexibility that it offers you. You can work as much or as little as you decide is right for you, and you can maintain those hours as long as they work for you.

The hard part, of course, is realizing when you need to make a change in your career that better reflects your lifestyle. Although any agent can at any point decide that it’s time to move from full-time to part-time, not every agent takes advantage of their career’s ability to flex and flow with their needs. If your motivation is flagging and you’re having trouble finding the joy in your day-to-day working life, it might be time to think about a change for the better, and that could mean reducing your hours and transitioning from a full-time agent to a part-time agent.

Why transition from full-time to part-time?

There’s a bit of a stigma against part-time agents in real estate, so it’s understandable that many agents might feel hesitant to cut their hours and declare themselves part-time after living so many years as full-time real estate professionals. But there are plenty of very valid reasons why many full-time agents choose to go part-time — and then they often stay in real estate for many years to come because they’ve managed to reclaim some of their work-life balance and rejuvenate their motivation.

Some agents might be ready to retire financially but they enjoy the business and want to keep doing a deal or two here and there, especially for friends or family members. Others may be exploring a new hobby, launching another entrepreneurial endeavor, deciding to stay home more with kids, renovating a home — the possibilities for other ways to spend your time are truly endless, and there is no single right or wrong reason why you might consider going part-time.

If you’ve had that slightly itchy feeling in your career and you sense that something needs to change, but you aren’t certain what it is, then exploring the possibility of part-time real estate work might unlock the mystery inside your head. This doesn’t have to be a permanent decision; a supportive broker should help you navigate it and give you the opportunity to change your mind and transition back to full-time if you realize that you made a mistake.

How do you know it’s time?

This answer is going to be different for everybody. Unlike many other careers, most real estate agents have to set aside funds for retirement without any help from an employer. The biggest question you should ask yourself before you transition to part-time is: What will this do to my financial situation, and can I afford it?

Perhaps you’re sitting on a sizable nest egg that you’re confident will carry you through your golden years. In that case, maybe real estate is more about a way to keep busy than earning a living, and you can consider cutting your hours and serving fewer clients every month. Or perhaps you’ve been investing in real estate and you’re now in a comfortable enough position that you want to spend some time seeing to your properties — but you don’t want to leave your career behind entirely.

Take a close look at your financial picture and ask yourself how it makes you feel. If the answer is “not the best,” ask yourself what would make it better. How much more money would you need to be making, or need to have saved in the bank, before you would feel safe making a major career change? Would you want to have some additional income streams, and what might those look like?

What does your plan entail? And what’s your backup?

After you’ve evaluated your current situation — and if you’ve decided that yes, moving from full-time to part-time makes good sense for where you are today — you’re going to need to do two things. The first is to define what, exactly, part-time means for you. Will you be scaling back your hours from 40-plus every week to around 30? Or 20? Or 15 or 10?

Again, there aren’t any wrong answers here, but you need to know how much (ideally) you’d like to work before you can decide which work you’ll be referring out and what you’ll want to keep for yourself. The idea is to take a close look at your client mix and figure out what to keep and what to shed — and how exactly you’re going to be shedding that extra weight, so to speak.

Once you’ve got a ballpark idea for how much you want to work, it’s time to take a look at your lead-generation activities and make some decisions. It’s not unreasonable to decide that you want to keep some or most — or even all — of your lead generation strategies in place if the leads you’re getting are high in quality. Referring these leads to another qualified agent who’s able and willing to close the deal can be a lucrative additional income stream for many agents. You might be able to form a partnership with an agent who plans to stay in real estate for a long time, sharing business with them and easing your transition to fewer hours.

On the other hand, you might decide that your sphere of influence and word of mouth from past clients is going to generate all the business you care to handle and save yourself some money on lead gen, in which case you might experiment with scaling back before pulling the plug entirely. That way, if your plan doesn’t go as expected, you still have a pipeline to start getting back into a full-time business as soon as you can.

Speaking of plans not going as expected, it’s probably smart to ask yourself what you’re going to do if your move to part-time doesn’t work out exactly as you’d hoped. Will you ramp back up to a full-time business, or would you prefer to find a different part-time gig to supplement your real estate work? This is another intensely personal question that’s going to depend on how long you’ve been in the industry and why, exactly, you’re hoping to transition from full-time to part-time. But it’s an important one to consider because you want to be very clear on when and how you will make adjustments to your plan.

How will you spread the word?

Depending on the details of your plan, you might want to announce to some or most or all of your clients that you’ll be changing your business model slightly. Or, you might want to keep things quiet and just inform clients on an individual basis when they reach out and ask you for help. It doesn’t matter exactly how you tell the world, or even if you do — but you need to think about it so that you have a plan and can execute that plan consistently.

The beauty of the real estate industry is that you have ultimate flexibility over your career and your schedule. If you think it’s time to consider scaling back your efforts, talk to your broker, and see what your options are. Once you’re certain you’re financially able to make the change, and you have a plan for the transition, you’ll be set up to determine whether this is the next best step for you.

Colorado Real Estate News

IS RENT-TO-OWN EVER WORTH IT?

Rent-to-own agreements have a bad reputation in the real estate industry, but is it deserved? Well, it depends. There are many different kinds of rent-to-own agreements, and each one can be modified and customized for the tenant and the landlord. Many rent-to-own agreements overwhelmingly favor the would-be seller of the property, the landlord, which is one reason why they have the reputation they do.

What do you need to know about rent-to-own agreements — and could it be worth it for you?

The rent-to-own basics

In a nutshell, the way rent-to-own works is that tenants agree to pay additional money in rent every month in exchange for the opportunity to buy the house. There are a couple of different ways these agreements can be structured, but they always boil down to above-market-level rent so that the tenant can start building some equity in the home.

This can be problematic simply on its surface. For tenants who struggle to save up enough money for a down payment, it might not be at all easy to spend several hundred dollars every month on top of their rent value. On the other hand, tenants who can’t manage to save a down payment might find that this is actually a better option — the money is going somewhere they can’t touch it, and when the time comes to buy the house, it’ll already be there waiting for them.

Lease option and lease purchase agreements

There are two essential types of rent-to-own agreements, a lease option agreement, and a lease-purchase agreement. Of the two, the lease-purchase agreement is more legally binding: If you sign one of these, you are obligated to buy the house when your tenancy is over. In a lease option agreement, however, you have the option to buy the home when your lease is up — but you are not required to.

These agreements will also include details about the home purchase. Sometimes a lease option or lease-purchase agreement will go so far as to state the sales price of the home when the tenant’s lease is up, either based on the home’s current market value or calculated as a projected value. But other agreements specify that the home purchase price will depend on the real estate market when the tenant is actually ready to buy.

In both of these lease agreements, the tenant is responsible for securing financing for the home purchase once the lease is up and the tenant is ready to buy. This means that if you sign a rent-to-own agreement and you aren’t able to get a mortgage loan when your lease is up, you may forfeit all of the extra money you paid throughout your tenancy.

The cons for buyers

There are a few big red flags that buyers should look for in any rent-to-own contract. And if you’re seriously considering buying a home like this, do lots of research on the seller. You don’t want to find yourself at the mercy of a shady person with unethical business practices because you were too excited to own a house to do any due diligence.

Buyers will have to pay an additional upfront fee for the opportunity to buy the house at a later date. Often called option money, this money might or might not apply to the equity in your home, and will almost definitely be lost if something happens and the deal falls through.

One thing that buyers need to think about is maintenance clauses. In many rent-to-own agreements, buyers are responsible for maintenance and repairs on the home during their tenancy. This might not be a big deal if you have to get a window air conditioning unit fixed, but what if there’s something wrong with your water heater or your sewer main? Or your fuse box? Those repairs can really add up, and you’re still not the owner, so you’re spending your own money to repair a house that you might not ever own.

Another clause to keep an eye on is the one that outlines under what conditions the agreement can be broken. Often, if the buyer is late with a single rent payment, they lose all of their investment. And if the landlord isn’t in good financial standing and forecloses on the house, the buyer loses all their money invested then, too.

This is why it’s important to research your landlord-seller. If they have a history of taking advantage of buyers, then you can probably find evidence of it. Ask them for references, and do your best to figure out what kind of person you’re doing business with. Lots of people who offer rent-to-own opportunities are ethical humans, but of course, there are always bad apples.

And, of course, if something happens with your job or your family, and you have to move out of the area, you’ll have to break the agreement and leave your home (and investment) behind.

The pros for buyers

Many clauses in a rent-to-own agreement are negotiable, which means you can ask for things, too! You can request that your option money go toward your equity in the home, for example, or for the seller to maintain the big systems in the house while you’re in charge of smaller wear-and-tear items. So one pro is that if you know your rights and you’re willing to work with your landlord-seller, you can come up with an agreement that works well for both of you. 

Another is that for buyers who want to own a home but aren’t quite financially ready, rent-to-own can really help you build equity and set yourself up to buy the house where you’re living in a couple of years.

A rent-to-own agreement isn’t for everyone. It can be more expensive than buying a home the traditional way over the long term, and if buyers have the ability to save up a down payment and jump through all the hoops, they will most likely get a better deal on a house that isn’t a rent-to-own. But if you’re in love with the house where you live and it’s worth it to get your foot on the homeownership ladder that much sooner, it might be something you should consider.