If you’ve been considering a new career or starting a side hustle to earn extra money, perhaps you’ve thought about becoming a real estate agent.
Being a Realtor is great if you like houses and enjoy working with people, but it’s not always the dream job some imagine it to be. It’s a common misconception that real estate agents earn a ton of money for doing practically nothing.
Selling real estate is more work that you might imagine and, although there are some very successful real estate agents, there are many who struggle just to make ends meet.
From somebody in the business, here’s what it takes to become a real estate agent — and what you should consider before starting down the path to selling homes.
Do you have the time and cash to get licensed?
The first thing you have to do if you want to sell houses is get your real estate license. Go to the website for your state’s Department of Real Estate or Bureau of Real Estate and find a list of approved online or in-person real estate courses. Some people prefer the flexibility of online classes where others focus better out of the house in a classroom. Either way, you can count on studying for at least several months and up to year. Once you’ve finished the classes you can take the state’s official test to become a licensed real estate salesperson. The test isn’t cheap so be sure to study hard before signing up (in California, for example, it’s $60 for the test and $245 for the license).
Where will you work?
New real estate agents almost always work under the supervision of a broker. Real estate brokers offer agents marketing support and legal protections. When deciding where to hang your hat, interview at three different brokerages so you’ll get a feeling of how they work. For example, if you’ll work from home or at an office and who you’ll be working with. Some agents prefer big brokerages because the well-known company names help give them credibility. Other agents like the mom-and-pop shops because they’re more flexible about working from home and choosing your own vendors.
Can you afford the start-up expenses?
Even though you’ll be working under the umbrella of a broker, real estate agents are independent contractors. You may put Coldwell Banker or RE/Max on your business card, but you have to buy those business cards yourselves. Other common expenses include for sale signs, open house signs and a basic website.
Budget about $1,000 for these advertising start-up expenses and as you grow in business you can advertise more. Plan for annual real estate association and board dues as well as membership fees to be part of the local Multiple Listing Service (MLS). Most new agents start working with buyers rather than taking listings. All that house-hunting will mean a lot of gas driving across town.
How are your boundaries?
It can be tough to manage time as a new real estate agent, especially if you have another job or have children.
Showing houses is largely done on evenings and the weekends, so unusual hours go with the territory. That makes real estate appealing as a side hustle or for working parents, but remember that it’s not uncommon for buyers to call up asking to see a property on a few hours’ notice.
I recommend setting boundaries. You can record an answering message on your cell phone that says something like, “Hi, This is Sarah Davis. If you’re calling on a Monday through Saturday from 8am to 6pm, I’m on the other line and will call you back as soon as possible. If you’re calling on a Sunday or an evening I will return your call the next business day.”
Even then, you may have to make exceptions during negotiations. Be prepared.
Okay, so how much can I earn as a real estate agent?
Real estate is a commission-only business. And commission-based based jobs are “feast or famine”.
You can — and will — go months without getting a paycheck. You’ll need to learn how to budget for variable income.
But unlike W-2 jobs, a commission-based job such as being a real estate agent or broker has a limitless income potential. Some agents make over a million dollars a year. You get back in income what you put into it in effort and time. So how much can you really make? Commissions are typically paid by the property sellers and are negotiable by law. Some listing agents get 2.5 percent of the contract purchase price and offer out the same to buyer’s agents, but it varies. For example purposes we’ll use 2.5 percent.
If you sell a $300,000 home, 2.5 percent of the purchase price is $7,500.
Then you’ll have your brokerage split (this is how the broker makes their money for letting you use their offices and branding). New agents typically have to give more to their brokers because they require more training. Let’s say you have a 70/30 split with your brokerage. That leaves you with $5,250.
$5,250 for one house, you’re thinking. Not bad. But don’t forget how long it took to earn that money. Escrows are typically 30 days, and assuming you represent the buyer, you may have spent weeks driving them around all day to look at properties. If you want to earn a modest $60,000 a year, you’ll need to sell an average of one $300,000 house every month.
Can I really sell real estate part-time?
Yes. In fact, I recommend everyone start this way.
The hardest part of building your real estate business is developing clients. It takes a long time. If you dive into real estate full time — putting up all the money for training and start-up necessities — you may find it takes six months to sell your first house.
Selling real estate part-time is a good way to get into the business without going broke while at the same time supplementing your income.
Being a real estate salesperson can also be a great career for mothers of young children because it’s somewhat flexible. You can work from home part of the time (doing emails, making calls, online marketing and other tasks), then have your spouse or a babysitter watch the kids while you go out to showings.
Finally, some people maintain their real estate agent’s license simply so they can buy and sell their own properties and represent a family member every now and then.
Questions? What else do you want to know about becoming a real estate agent? Ask me anything.