What does it cost to get started in real estate?

Always two questions

Every potential real estate agent, when speaking with an experienced agent about the business, invariably asks two questions. One, how long does it take to start making ‘real’ money? And two, what does it cost to get started in real estate? Both are great questions, but for the purposes of this blog post, we’re going to focus on the latter. After all, if you can’t afford to get into this business, it won’t matter how long it takes to start making money.

But before we dive into specific numbers, it’s important that you have a certain level of financial literacy. Any business will require competency with budgeting, money management, bookkeeping and a solid understanding of profit and loss statements but real estate agency requires agents, and in particular new agents, to do all of this while actually trying to grow their book of business. It’s not for the faint of heart and the main reason most seasoned agents offload the work the first chance they get.

Today though, we’re going to be looking at three things in particular:

Startup costs
Planning for your first six months
Ongoing costs of doing business

Costs of Entry

So you’ve made the decision to jump into the business. Your very first expenses are going to be related to the costs you pay for real estate licensure. And that will vary greatly depending on which State you live in. In Texas for example, new licensees are required to take six, thirty-hour courses, the current cost of which through The CE Shop is $357.00. Most new agents will also take an exam prep course that adds another $60.00. So your classes will run you $417.00.

Keller Williams Realty however is working to remove even this barrier. Through their KSCORE program, offered in partnership with Kaplan Real Estate Education, new licensees can get pre-licensing, exam prep and continuing education classes at absolutely no cost. Either way you go though, in Texas the state exam costs $185.00.

Next up is onboarding with your broker of choice. Again, prices will vary by State, by Broker, and even by Market Center (what Keller Williams calls offices). Keller Williams market centers in our area for the most part, are under $500.00 to get started. This fees includes your sponsorship, startup materials, technology setup (website and email address), launch classes, and in some cases some basic coaching.

Finally, you’ll need to pay your local board dues. As an example, the dues for the Houston Association of Realtors, for 2023, are $132.00. The Texas Association of Realtors adds another $152.00 and finally $195.00 for the National Association of Realtors. All told, that’s a total of $479.00 if you are a Realtor in Houston. In many cases, local associations will require memberships in both the State and National associations as well.

So before you even do a deal, whether it’s a purchase deal or sale deal, you’re looking at $1,581.00 to get licensed in Texas, join a brokerage, and join the local, state, and national associations.

Planning for your first six months

Making the shift from a paid job where you take home a paycheck every two week to a business owner where you take home a check when you have a closing takes some adjustment. Even if you’re among the few who secure a listing or put a home under contract immediately, you still face a 30 to 45-day wait before the transaction closes and you get paid. So it’s for this reason that we always recommend you have several months worth of living expenses in reserves to carry you through to your first closing.

You’ll also need some operating funds to run your business until such time that the business is self sustaining. You’ll need money for quarterly MLS dues – in Houston they’re approximately $64.00 per quarter. In addition, reserve some funds for one-time expenses such as Yard Signs ($70.00), Supra Lockboxes ($100.00), and business cards ($50.00). You’ll need to account for your auto insurance (adding your broker) and keeping your gas tank full. The good news is you can now write off these business expenses on your income tax return. It’s time you start thinking in terms of running a business.

Ongoing costs of doing business

Real estate can be an expensive hobby, but believe or not there are thousands of licensed real estate agents across the country that do a grand total of ZERO transactions. It’s unclear whether this is due to a lack of skill or simply a desire for access to the local MLS, but with the median income for licensees in 2022 being just $56,400, the ongoing expenses can be prohibitively high.

With association renewals at $479.00 per year, $110.00 annually to renew your license, $64.00 quarterly to maintain your MLS dues, likely $100.00 per month for office dues, an agent would be in for over $2,000.00 before we even talk about continuing education requirements. Add on other expenses like farming, digital marketing, data services, and technology platforms and that figure could easily double or triple. So it’s easy to see why failure in this business can be costly.

But even understanding all of these fees, there’s a few takeaways that you should keep in mind:

Even at $2,000 to start your business, that’s still an extremely low barrier to entry. What other business, outside of some shady MLM program, could you get started for only $2,000?

Eventually, good agents cross that threshold where they are not personally pay for company expenses out of pocket. When the company pays those expenses, you’re no longer draining that reserve account that’s padding your lifestyle.

With rising property prices in today’s market, commissions on even one entry level property could likely pay for an entire year’s worth of expenses for a beginner real estate agent.

If you’re ready to start your real estate classes, we highly recommend The CE Shop. Follow our link to sign up, then drop us a quick email to let us know you’ve started!