How much can I really make as a new real estate agent?

How much can I really make as a new real estate agent?

So, you are considering starting a new and exciting career as a real estate agent. Many jump headfirst into their new business, enthralled by all the stories of limitless potential, flexibility, and the possibility of escaping the office 9-5 drag.

And some of the stories are true! There are many realtors out there living a dream life, making hundreds of thousands of dollars for what is proportionally easy work.

But what does that dream really look like for the average real estate professional?

Agent vs. Broker vs. Realtor

Before we can discuss the numbers, it’s important to realize that there are multiple types of jobs in the real estate sphere. Knowing the differences between these jobs is crucial in projecting your income potential.

Real Estate Agent

After taking a mandatory pre-licensing course and passing the state exam, you are now considered a “real estate agent”. This means you are now licensed to help clients buy and sell properties. However, you cannot work on your own or hire other agents to work for us. You must work for a real estate broker. And while the income isn’t as high, that’s ok! You are just starting. Working as a real estate agent is a fantastic way to learn all the ins and outs of the job, plus the broker is responsible for you which means you will be provided some legal protections.

Broker

Real Estate brokers are real estate professionals that passed the second level of testing by passing a broker exam. Each state comes with their own specifications for testing. In most instances, you need a few years’ experience as a real estate agent before becoming a broker. A real estate broker now has more knowledge on issues such as law, insurance, ethics, contracts, and taxes. They are also now able to hire agents to work for them and grow a business.

Realtor

It’s common to hear the term “realtor” and “real estate agent” used interchangeably. Both are licensed agents, and both are tasked with helping clients with any real estate related issues. However, realtors separate themselves real estate agents as they hold membership in the National Association of Realtors (NAR). Members of the NAR have a strict code of professional conduct and ethics.

Difference in Income Structures

Your income potential will vary greatly depending on which path you have elected to take. Naturally, a real estate broker will make more than a real estate agent as have invested more time into testing, have more experience and take on extra managerial duties.

But do you have to become a broker to make a dream living? Not at all! However, being a broker means that you receive a percentage of sales made from the agents under you and that passive income stream can really make a difference in the life of a real estate professional.

Average annual earnings

Income reports vary across sources, so to get a picture of what a real estate professional makes; it is best to look at a wide range of sources. Here is a compiled list of the average yearly earnings for real estate agents and brokers across a variety of sources.

Average income for real estate agents

According to Payscale.com, the median annual salary for most real estate agents comes in at slightly above $47,000. Keller Williams Real Estate reports a similar average income of $50,000. Keep in mind that these averages take into account agents with varying levels of experiences. New agents often report making very little as they invest their time into acquiring clients. However, a substantial tipping point in income can occur after investing time into your business.

    Average income for real estate brokers

For brokers, Payscale.com reports an average income of approximately $52,000. However, since a broker benefits from the multiple agents working under them, they additional income on each sale made by the agents. This, alongside profit sharing and other bonuses, can shift income dramatically.

Expenses

Income is only half the battle when it comes to determining how much a real estate professional can make. Expenses factor heavily when determining what you can potentially take home.

As a real estate agent, you are still technically an independent contractor, even though you work for a brokerage. And this means you must account for expenses. The brokerage will most likely provide a workspace for you and access to office equipment. They may also give you access to trainings, though some may require a fee. However, they will not provide business expenses such as insurance.

Here are some of the most common expenses for new agents.

    Licenses and registrations

Now that you are a licensed professional, you still must invest in maintaining that license. Requirements change on a state-by-state basis, but new agents should expect to pay an estimated $600 + per year, not counting any additional educational classes or training.

    Promotional and marketing material

You’ve set up shop; you’ve found a great brokerage- but now comes the most crucial part. You need to find clients. And while the brokerage may help you with a few leads, the majority of marketing will fall on you. When you are just starting out, time is of the essence. You need to get your name out there fast. Business cards, a professional website, membership in a local business association chapters; all these expenses will add up quick. New agents should expect to spend approximately $1000 + per year.

    Insurance

You’ve invested a significant amount of time and energy into becoming a real estate professional. Now it’s time to protect it. A Professional Liability insurance policy protects you and your business from the extreme cost of a lawsuit which result from claims of bad advice, poor planning, failure to deliver and other alleged errors, omissions or negligence. Whether the lawsuit has any real merit or not, you still need insurance to cover the costs of hiring an attorney to defend you in court. BizInsure works with a variety of top carriers to help real estate professionals find the exact policy they need.

Conclusion

Life as a real estate professional comes with a significant amount of variability. Variable hours, variable pay structures and unfortunately variable income. When projecting what your life may look like as a real estate professional, it is essential to consider all of the factors that go into determining your income potential.

And while the variable lifestyle can sometimes be stressful, it comes with an unbelievable number of perks. Do your research, structure your business wisely and protect yourself with a Professional Liability policy. By following these simple steps, you put yourself on the path to a comfortable and exciting career as a real estate professional.

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