Thinking of becoming a real estate agent? Read this first.
You are frustrated in your current position or excitedly searching out a new direction for your life. You watch tons of HGTV and just love houses. You get along with lots of different kinds of people and personalities and don’t mind talking to people you don’t know. Real estate is portrayed as a flexible career with fabulous commissions and a lifestyle that is glamorized in television and movies alike. Before you spend money and time getting your real estate license (the easiest part of the job, and least likely piece to put food on your table), let’s discuss what you need to be prepared for to have a career in real estate.
Be Prepared in your Piggy Bank
Every business has start-up costs and on-going costs, plus a lag time before you see the fruit of your labor and have money coming in. Your one time start-up expenses for real estate (in Colorado) will probably be around $2,000 to $2,500. This includes real estate school, licensing, insurance, business cards, photos, signage, lock boxes, setting up your LLC, etc. Remember you want to look professional, this is the biggest purchase or asset of someone’s life they are entrusting you with.
In addition to that you will probably have an ongoing monthly cost of $400-$800 for expenses including software to complete the transactions, continuing education, marketing, additional gas, brokerage desk fees, etc. The costs will fluctuate even more as you start having listings, but then you will hopefully have a paycheck coming in down the road to offset these costs.
In a perfect world, before even starting your real estate career, you will have saved up your living expenses for at least six months, plus an additional $5,000 to $10,000 nest egg to launch your business. This will help you with one of the greatest skills you will need to master when having your own business that fluctuates…budgeting. You could have many months in a row with no money coming in and will have to rely on yourself to save during the good times and live within your means during the dry season. Some agents don't have a single closing their entire first year, but you still have the ongoing expenses to keep your business running.
Also, remember, those huge commissions you see glamorized on TV are the results of many years of hard work and business building and they often have matching huge expenses. The average real estate agent will take home about 1 to 1.5% of the price of a home to actually feed, clothe and house their family…no matter how many hours they put in to get to the closing table. Many agents overspend trying to portray what they have seen on TV and project lavish lives they can’t truly afford to keep up. According to NAR, the median gross income of REALTORS® was $39,800 in 2017, a decrease from $42,500 in 2016. This decrease is likely due to more competition as housing markets have heated up and more individuals have decided to enter real estate. According to Glassdoor.com, the average real estate agent in Denver makes $47,222 a year.
One of the great things about being a real estate agent is that you are your own boss. One of the hardest things for many new agents is that you are your own boss. You make money with the transaction closes and that is it. If you spend 6 months or a year of driving a client around (on nights and weekends), find them a great home, complete the process of the paperwork and advising them through the transaction, and it falls through…you don’t get paid a dime. There are many factors outside of your control.
Be Prepared to Work – A Lot
Real estate schedule can be flexible, but not in the way most people think. I have the flexibility to pick my kids up after school and the flexibility to make it to a soccer game on Saturday (most of the time). However, most Buyers work 9-5 Monday through Friday and that means they need you to show them homes on evenings and weekends, so family dinner and weekend activities may suffer more. In a Seller’s Market it is even more important that you are available the moment a home comes onto the market, so you have to be flexible with shifting your idea of what you were going to do that day and find child care, if necessary, to help your client. On that same note, with weekends are when Buyers are available to look at the Open House for your listings. You often won’t have one client at a time as you work your way further into the job, and will find yourself juggling multiple clients with multiple schedules from for months on end.
When you first start out, be prepared to work 50-60 hours a week for several months with no paycheck at all…and then continue to work that amount for your first two years or so. Building a business is a process and the pieces the public sees (showings and open houses) is just a small percentage of what you will be working on behind the scenes. You will be creating a brand, building your brand out, gaining knowledge on the industry, market, and skills not taught in the licensing course, taking the time every day to reach out to people you know and don’t know to see if they are interested in buying or selling a home (and getting a lot of rejection).
The agents who are successful and build a sustainable business in our industry show up. They show up to the office during the day and show up for their clients whenever they are needed. Not “showing up” is one of the reasons that 88% of real estate agents get out of the business after 2 years.
Be Prepared to Compete
In the Denver area, there are over 20,000 real estate agents. Most individuals know at least 8-10 real estate agents and they all think we do the same thing as every other agent out there. How are you going to differentiate yourself? Why should they hire you and not their brother’s cousin’s wife who just got licensed to work on family deals on the side?
Your competition takes this career seriously, and that is how they got where they are. The are continuing to train on their skills and customer service, gain certifications, and increase their knowledge on the market. They show up to the office during the day to make phone calls, complete marketing, troubleshoot on their transactions, and find creative ways to help their clients. They know their value and are constantly striving to improve upon it with a drive to be better every day.
Be Prepared to be Wooed
When you first start selling real estate you must be listed with a broker. Be prepared to set up informational interviews with several brokers and don’t feel like you need to make a decision on where to hang your license right away. You can start your personal branding before you pick a company and may actually be better off with finding a good brokerage fit if you know your value and how you want to run your business. Find out if the brokerage will let you come to training, meetings, and pick the brains of other agents before you make your decision on where you will get the best support.
Do your research. Remember you are your brand and you are the one responsible for creating your business. A brokerages best offering will be to help you build your business…not theirs. Your sales will make them money, as will your desk fees, and many brokerages are all too happy to make promises to add you to their real estate agent roster. Look for true coaching and training masterminding with other successful agents, one on one time to get questions answered by the managing broker, coaching and accountability to help you grow personally and professionally.
Once you are licensed, you will continue to be wooed by brokerages. Your phone will also ring off the hook with companies trying to sell you services to easily get you great leads, marketing packages, the front page of Google, preferred real estate agent status. These are bogus. Lenders, title companies, and others will contact you for lunches to try and earn your business. Protect your time. Stick to your daily schedule and if you can fit in a free lunch…great!
Real estate can be a professionally and financially outstanding career for the right person. The first two years can be especially challenging as you build your business, but this success is entirely up to you and what you put into this career can reap great rewards.