Working as a real estate agent can sound pretty appealing. You get to spend time in beautiful houses, help make people’s dreams come true, and function with a flexible schedule. But because real estate is commission-based work, it’s important that you crunch the numbers before you dive in.
Really, there are two areas where you want to be prepared: financially and business developmentally. How will you pay your bills, and how will you get the new clients you need to consistently see money coming in?
To help you address both, we’ve got a list of eight to-dos for you: four to plan your cash flow and four to plan your sales pipeline.
The commission real estate pros make on a home isn’t a fixed number. It can fluctuate from agent to agent and deal to deal. That said, the nationwide average falls somewhere between about 5.5% and 5.8%.
That doesn’t mean you’ll pocket 5+% on your sales, though. Usually, that commission gets split evenly between you and the other agent involved. So if you’re a seller’s agent, expect to split the commission with the buyer’s agent — and vice versa.
Beyond that, you need to be prepared to share your cut of the commission with the brokerage that hires you. It could be a 50/50, 60/40, 70/30, etc. split. It’s best to plan on the conservative side.
Look into what kind of commission agents are charging in your area, then split that by four. That’s a realistic low-end figure for what you can expect to earn on each sale.
Next up, it’s time to figure out what you can live on. Most people earn more after a few years of building their real estate career, but the early days can be a little bit meager. To make sure you’re still able to make ends meet even when you’re first launching your career, do a little math.
Let’s look at an example. If houses in your area sell for $350,000, on average, and you’re estimating a 1.375% commission for yourself (from the previous exercise), you’d pocket about $4,800 per house. How many houses would you need to sell each year to live? Knowing that number can be a big determining factor in whether or not real estate is right for you.
Home prices obviously fluctuate a lot from area to area. Spend some time looking at local listings to get an idea of what houses cost — and, consequently, what you can expect to make — in your region. To get you started, here are median home prices by state.
If the last exercise stressed you out, this one can offer some reprieve. Now, it’s time to dream. While we took low-end estimates before, you might say that you could close sales with a 6% commission rate and find a brokerage that offers you a 70/30 split. That would mean you’d make a little over 2% on each sale.
With that number, calculate an ideal salary. This can give you an aspirational goal to work toward in the first few years of building your career.
Here’s the thing about real estate: it’s not always consistent. It usually booms in the summer, when moving sounds a little less daunting with the kids out of school, and slows during the holidays, when people want to be able to hunker down at home with their loved ones.
To ensure slower seasons don’t create problems for you, make a plan to sock away a little bit from each sale. That nest egg can hold you over and give you a cushion to weather any dry spells.
What are top-performing agents in your area doing? There’s probably something that really speaks to buyers and sellers, whether that’s a robust, personalized website or ultra-detailed listings with stunning pictures.
You don’t have to reinvent the wheel here. For early success in building your sales pipeline, mimic what’s already working for other agents in your area.
One of the biggest challenges in building a real estate career is landing those early leads. Who will your first clients be? If you already know that you have a bunch of friends and family who want to buy or sell in the near future, great.
But if you’re not so lucky, you need to develop a game plan. Your broker should be able to help you here but, ultimately, finding leads is your responsibility. Some good lead source options include:
Referrals from friends and family (don’t be shy about asking people to recommend you)
For sale by owner (FSBO) listings
Social media, including Facebook, Nextdoor, and Instagram
Real estate websites like Zillow, Redfin, or Trulia
Identifying potential lead sources before you need to make a living through them can make things a whole lot less stressful.
Some agents choose a niche market in which to work. That can potentially make it easier to make a name for yourself there, which would eventually lead to plenty of word-of-mouth referrals.
Figure out which specialties play in your local area — like luxury real estate, first-time homebuying, or green homes — and see if any feel like a fit for you.
Really, your success as a real estate agent will come down to two things: delivering good service and offering something other agents can’t. Look for holes in your market that you can fill. If no other agents offer virtual walkthroughs, for example, getting that technology set up can be a huge draw to sellers.
With a little planning, developing your lucrative, enjoyable real estate career gets a whole lot easier. Then, all you need to do is knock out your pre-license education, pass your exam, and hit the ground running.