Starting a real estate career requires knowing a few critical details to set clear expectations. As the saying goes, “Knowledge is power.” And as much as one could assume real estate school would have answered all of your questions, I got to thinking about the top 5 things to know before getting into real estate. So in today’s post we set about answering that question as best we can.
Here’s what we’ll be discussing:
- How much money can I earn?
- What does it cost to get started?
- How much should I keep in cash reserves?
- How do I get started?
- How do I select the best Keller Williams office for me?
How much money can I earn?
That’s the magic question isn’t it? And the answer is how much do you want to earn? One of the most amazing parts of this business is that there really is no ceiling on how much you can earn. But… because the job is 100% commission based, there isn’t a floor either. Your income will be determined entirely by your dedication to doing the right tasks to keep leads flowing into your sales pipeline. But if you want the data, we’ll give it you… sorta.
The truth is it’s really impossible to know what the average agent earns in a year. The National Association of Realtors says its $46,014. Glassdoor says its $120,164. And industry tracking databases suggest its $90,506. Why the huge discrepancy? Easy – some agents work full time, some only work part time, and some don’t work at all. What’s more, there’s a HUGE variance in the quality of training between brokerages, so some agents who get amazing training and models pull the averages up, while those who don’t, or don’t do any business, drag it back down.
A little math…
If you want a ballpark number though, find out what the average home sale price is in your area and then multiple that by 3%. That’s what we call Gross Commission Income*. Then multiply that by the number of homes you think you can sell in a year. It’s not at all uncommon for a well trained agent to close 10 – 20 homes per year. Do you think could sell 1.5 homes per month? With this example, 20 homes at 3% commission on a $300,000 average sales price equates to $180,000*.
OR, if you want to see if real estate can effectively replace your current income, take your annual salary and divide it by the commission you calculated above. For example, let’s say right now you earn $65,000 as a teacher. Let’s also assume the average home in your area costs $300,000. In this case, a 3% commission on that sale would equate to $9,000. If we then divided your current $65,000 income by $9,000, you would need to sell 7.22 homes to replace your income*.
* You’ll need to keep in mind that this income is BEFORE broker split and taxes. First, you’ll have a SPLIT with your broker, which will vary by broker. Second, you’ll have to set aside money for income taxes with each closing.
What does it cost to get started?
Not as much as you think, and a lot less than just about any other business you could open outside of an MLM. But you ARE starting a new business and there will be some startup investment required. These will include costs for licensure classes, your state exam, broker startup fees, membership in your local, state and national association of Realtors, as well as some basic business expenses for phone, computer, signs, lockboxes and marketing.
All told, and on average, you would be safe in estimating for about $2,000 to get you through licensing and in business. But if you want to take a deeper dive into it, you’re in luck because we wrote an entire blog post on this exact topic.
How much should I keep in cash reserves?
That depends on your specific situation. Full-time agents can earn a great income, but most people don’t make a sale in their first month, especially if they’re new to the industry. Building a successful career takes time, so having cash reserves is crucial to give yourself the greatest chance of success. So what does that mean in hard numbers?
Save three months of expenses if you’re single with no dependents and have a stable income, or if both partners in a marriage have stable incomes. Save six months of expenses if you’re married with a single income, a single parent, have a seasonal job, or if you or your spouse are self-employed or have highly irregular incomes.
Desperation can have a huge impact on your fiduciary duty to your clients. You are supposed to keep your clients interests above yours always. So consider then what happens if you HAVE to have a closing to put food on your table or pay your next mortgage payment. Having reserves in the bank lightens your load and allows you to focus on giving your clients the absolute best service even when it may not benefit your personally. And those are the kind of relationships that amazing businesses are built on.
How do I set started?
If you read our post Employee to Business Owner in Three Easy Steps, you’ll remember that we covered this topic in detail. But to review, it basically went like this:
Research your state’s requirements and enroll in classes either online or off. Complete your classes, including exam prep classes if available, then register for your state exam. Once you’ve passed your state exam, you’re ready to join a broker… and we can help with that.
How do I select the best Keller Williams office for me?
That’s where we come in.
Once you’ve completed your real estate classes but before you take your state exam, reach out to us, and we’ll schedule a personalized consultation to review your next steps. We’ll discuss all things Keller Williams and answer any lingering questions you may still have. Next, we research the best Keller Williams market centers in your area, and personally connect you with the local team leader for an office tour and one-on-one discussion.
In that meeting, you can learn about the office culture, meet the leadership team, and likely be introduced to top local producers. You’ll also learn about their launch programs for new agents. If it doesn’t feel like a good fit, let us know, and we’ll introduce you to another market center. Our job is to help YOU find the right home for your business.
