You probably didn’t become a real estate agent on a whim and you certainly didn’t pass your licensing exam without plenty of studying and preparation. You’ve heard that it could take 60 or more days before you begin to make any kind of money as an agent. Now you’re wondering how to keep your costs low as you build your real estate career.Costs of being a real estate agentMany people seem to think that as a realtor, you are paid big commissions and that, “agents make way too much money overall”. What the general public may not know is where an agent’s money goes on a monthly and annual basis related to supporting the agent’s business.Real estate agents are not employees – they are independent contractors working under the license of a real estate broker. Some brokerages will cover a larger portion of the agent’s monthly expenses. Other brokerages expect their agents to handle nearly all of their individual expenses of operation.The monthly / annual cost of being a real estate agentAmong the agent’s monthly and yearly operational costs (estimate, costs vary widely from state to state):
Licenses and permits – $100 – $500/year for initial sales license and renewal fees.
Realtor Association dues – +$120/year.
MLS fees – $25 – $100/month; there may also be a startup fee.
Commission splits – 30% – 85%/transaction; 50/50 splits are common.
Desk fees – $25 – $750/month for desk space and branding.
Some brokerages are marketing themselves to agents as “virtual” offices where the agent works from a home office rather than a store front. While this is good news for many agents, there still are monthly and annual expenses an agent must cover:
Computer, office equipment, supplies
Specialized industry software
Mobile phone with strong service package
Home internet services
Vehicle expenses including maintenance, gas, insurance
Marketing costs (online marketing can cost $1,000 or more a year)
Keeping costs lowKeeping costs low as you begin your real estate career takes ingenuity and careful planning. Here are some ways to keep costs down:
Choose a supportive brokerage -One national brokerage helps new agents establish themselves by absorbing a larger portion of an agent’s startup costs such as desk fees, marketing costs, cost of signage and business cards, no agent transaction fees, and more.
Blog/website – Develop a blog/website presence; it can be a cost-effective start to promoting your real estate services. Keep content current and fresh.
Social media – Market through Facebook, LinkedIn, Pinterest, and Twitter but don’t stress about creating content for each. Republish some of your blog content on sites like Facebook and LinkedIn. Pinterest can be used to attract clients to your business, blog site, Facebook, and LinkedIn accounts. Use Twitter for sending out price and real estate alerts and micro-blogging.
Avoid elaborate, high-cost image advertising – Ads placed in local magazines and TV are costly for a startup business.
Track your advertising- Regularly evaluate all advertising expenditures and their results. Keep working with what produces the most favorable results and shelve what doesn’t work.
Watch your budget – Be mindful of every expense and planned purchase. Take advantage of deductions that can apply for working from home and small business tax incentives.
Full time vs part time – It may be difficult to sustain yourself full-time at first. Many agents advise against building your real estate business on a-part time basis. It will be difficult to sufficiently build a client base if you are unavailable for meetings, client contact, viewing and showing houses on a timely basis.
Supporting yourself as you develop your real estate business will take time and creative money management. Study the successful brokers and agents, learn from their best practices and adapt what you can to your own marketing and budget situation – and believe in your own success!