Warren Buffet the owner of Berkshire Hathaway once said that:
“Risk comes from not knowing what you're doing."
What Mr. Buffet wants us to understand is that the person who is unaware of the fluctuations in the market rates and the one who is not keeping an eye on these questions i.e. When to enter the market? When to leave a certain real estate transaction? And when and where to invest your money to gain more profit than the guy beside you is not going to survive in this field.
What these questions imply is that if you want to become a real estate agent in Pakistan in the future than you must know that how the business model of real estate works and how you! Can you become a competitive real estate agent?
So, we get into the topic that what does this word "Real Estate” defines?
“Any kind of property (Flats, Houses or Agricultural lands and many other kinds of properties) which are owned by a person or a group or by a company or by government authorities is the Real Estate”.
And real estate agent is the person who acts as a broker while closing a deal between a buyer and a seller.
In Pakistan we have 2 basic business models for real estate business:
- Commission Based.
- Investor Based Model.
Commission Based Model:
It is the most popular and conventional business model in the real estate business. The commission-based business model implies that the real estate agent should make some profitable commission from a real estate deal.
There are different kinds of Commission-based model:
- Exclusive marketing allows a real estate broker to make a deal at any percentage depending upon the market value of the property and middle- man might close a deal at non-conventional percentages which can be 5% to 8% of market value or the amount on which deal was closed.
- Conventional Deal Closing allows an agent to charge 2% percent of the deal to both buyer and seller in this way broker can make a lucrative amount of 4% on closing the deal.
- Rental Ware Dealing is also a conventional dealing style in which middle-man the lender and borrower 15 days of rent in a lump-sum payment or either way the broker can charge them 2% for both sides.
- Bigger deals closing these closing deals can get the broker to a hefty amount of money as the property can cost let’s say 50 million Pkr and by closing a single deal at 4% of profit gained the broker can make 2million.
- Shared Based Commission if a deal is being shared by multiple agents on either side then they are bound to share the profit equally usually this happens when the deal is very big and also involves a great amount of hard work while handling the government officials, taxations and getting documents ready.
In an investor based model, the broker can act as an investor by dumping the money on a property and wait for some reflection and then sell it on a defined profit. Or, either way, the broker can be hired by an investor to invest in properties and then the broker can have his on a defined amount of money.
A real estate agent can also act as a builder and developer and do joint ventures (JV) and make money.
And real estate agents are now getting more technological because of real estate web portals like zameen.com grana.com and PAKeProperty.com and they are doing JVs with them.
After discussing the business model of real estate business now let’s move to the topic that how a person can become a real estate agent.
5 Secret to Success for Part Time Real Estate Agent
The agent must have quality education as the official documents soon will be written in English.
The agent must establish quality networks in this field to survive. An agent must be known in the market as well as in the government sector.
The experience is the key to everything. You must make yourself a pro and have a reputed name in the market you will get more customers.
Must have complete knowledge about the market fluctuations. For example that properties in Islamabad have fluctuations in their market rates in the past few years. So being an agent you must understand these changes and close deals accordingly.
The official terminologies are very vast in number and a broker can only get these terms in his mind by daily getting in touch with them. There is a Real Estate Glossary available which can help you to understand these terms.
Must Understand the APV Formula:
Area: Means the mathematical calculations of area.
Price: Per Marla Price or per square meter price of that specific property.
Valuation Table: This is the table issued annually by the Federal Board of Revenue (FBR) to control the prices of the property sector and apply tax accordingly.
Must understand the Tax applicable on Real estate Business:
Following are the taxes applicable to real estate business deals:
Capital Gain Tax (CGT).
Capital Value Tax (CVT).
Withholding Tax (WTH).
Stamp duty tax.
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