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Real Estate Agent Start-Up Costs

November 28, 2018

Launching a career as a real estate agent is likely an easier process than you think. For most people, obtaining a real estate license will be the most time-consuming part of the process. So, it’s easy to assume that the license is all you need to get started. Don’t fall into that trap! A license is essential to starting your career as a real estate agent, but it’s not the only piece of the puzzle. If your goal is to be a successful real estate agent – which I bet it is if you’re taking the time to read this blog – then you need to understand that there are other tasks and costs associated with getting started. If you’re lucky enough to work under an experienced broker, then you should take full advantage of all the guidance your mentor has to offer. But, at the end the day, you should approach your career as a real estate in much the same way as you would approach starting your own small business.

 

What should you know before you start?

Before you do anything else, there are a few essential truths about being a real estate agent that you must understand. You should know that:

  • As a real estate agent, you will be an independent contractor, so you will need a standalone business model and a business plan.
  • Your business expenses can be deducted on your tax return – so keep good records.
  • You should start saving money to fund your start-up costs and first-year expenses as soon as possible. First-year agents will need income buffers to help them whether the first year in business.
  • You will work off commission and must be prepared to live as many as six months before receiving your first check.
  • Your income will ebb and flow, and it’s up to you to manage the cycle.

What start-up costs should you expect?

All new agents will have start-up costs. The amount, however, will vary by state and market and on your arrangement with your broker. This is just one reason why it’s vitally important for new real estate agents to really research different brokerages, and talk to other local real estate agents, before joining a team. Brokers can – and often do – pay for certain marketing and other expenses necessary for the operation of a new agent’s business. Assuming you already own items like a laptop, smartphone, and basic office furniture, you should be prepared to invest in:

  • Office Fees
  • MLS Fees
  • Errors & Omissions insurance (a kind of professional liability insurance)
  • Advertising
  • Marketing Materials
  • Business Cards
  • Mailings
  • Desk Fee
  • Computer Hardware and Software

 

What first-year operating expenses should you expect?

Start-up costs are the first expenses you will encounter as a real estate agent, but they’re only the tip of the iceberg. Financially-savvy new agents prepare themselves for a host of first-year operating expenses. A lot of these seem insignificant, but if you aren’t prepared then they will add up, and you might find yourself struggling after a few months on the job – especially if you haven’t closed your first deal yet. You should prepare for:

  • Increased cell phone and car expenses. You’ll be using your phone and your car a lot more, so be prepared for additional expenses – unlimited data plans and extra tanks of gas don’t come cheap!
  • Six months of living expenses. Experienced agents recommend saving at least six months of living expenses and several months of business expenses – not just your start-up costs.
  • Annual continuing education classes. Continuing education is required to renew your license each year.
  • Marketing expenses. These are among the largest expenses for a new agent, with some agents spending up to $1,000 per year on marketing.
  • Website, business cards, signs, flyers, and brochure expenses. These are all essential marketing expenses, and add up when you need to buy them all at once.
  • Online leads from sites like Zillow or Realtor.com. Online leads are priced by zip code and can be costly if you intend to purchase leads on a regular basis.

 

Is it worth it?

Yes. Starting a business is a costly undertaking – but the expenses pale in comparison to the rewards from a successful career as a real estate agent. A career in real estate is interesting and rewarding with lots of room to grow. Plus, there are plenty of real estate education opportunities to help agents – new and experienced – learn how to invest wisely in tools and apps that will save them time and money in the long run. With a little preparation and some expert advice, your first year as a real estate agent will proceed smoothly and successfully.

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