How much money do you need to save before becoming a real estate agent?
Becoming a successful real estate agent or realtor is one dream job that many people all over the world aspire to get. The reason is simple, a lot of money! Real estate is a business that can make people very rich. However, the income of all real estate agents varies as people from different walks of life enter this profession. The levels of education and motivation influence the earnings for each agent.
As tempting a career as real estate sounds, the success rate can be highly disheartening for the new agents. In most of the cases, about 80%, new real estate agents tend to quit in their first year. It generally takes a while to get a steady income in this business. Your first sale may take a month, two, or even six to get closed and earn your first commission check. Even to get a license and be a member of a brokerage. Thus, when you start your career as a new real estate agent, be prepared, and plan your finances accordingly.
Before you know how much money you need to save before becoming a real estate agent, here is a brief of what you are going to do as a real estate agent and how much money you will make being one.
The job of a Real Estate Agent
As per the definition, a real estate agent is a person whose business is to arrange the selling-buying-renting of the properties. It includes land and building, both residential and official. However, this definition may not suffice all that a real estate agent does in a day. There are a number of tasks that an agent has to perform until he actually reaches to closing the deal. The daily tasks of an agent include:
- Keep up with the latest market & industry updates
- Research on daily listings
- Paperwork & documentation of agreements and records with state agencies
- Coordination appointments and meeting with clients & other agents
- Creating marketing and advertising plans
- Maintaining regular communication for follow ups & follow backs
- Creating influencer profile with the help social media and digital platforms
The better you will work on the above tasks, the more profit you will earn. In addition to the above points, there is one thing that needs continuous efforts from an agent. It is regularly studying the business and keeping yourself updated with the knowledge of the domain.
How to Become a Real Estate Agent
People try to enter the real estate business from different age groups and career backgrounds. The process of becoming a real estate agent varies with the state to state. An agent requires a license that the state authorities issue to practice realtor services. However, there are some basic requirements of eligibility that are universal throughout the country. The process of becoming a real estate agent includes:
- The applicant must be at least 18 or 19 years of age
- Should have a legal US residency
- Complete the required pre-license education
- Appear and pass the state real estate license examination
- Find a sponsoring broker to work with
While following the process of becoming a real estate agent, you need to be careful and find the right real estate broker who can be your mentor.
How much you should save before becoming a Real Estate Agent
To answer the question of how much money you need to save before becoming a real estate agent, you should understand two important factors – (i) How much money an agent can make and (ii) How long it takes to make money as a real estate agent.
To answer the first point, you need to understand that becoming a real estate agent is risky as there is no steady income in the beginning. It may also take years before you become an established real estate agent. Despite the odds, people are still motivated to become real estate agents for various reasons. Some choose this profession for the money, while others may be attracted to the excitement & challenges of selling properties. In general, a full-time real estate agent can make anywhere between $45,000 to $60,000. But a few years in this business can help agents make near and even over $100,000 in a year.
The amount that you need to save before becoming a real estate agent is directly dependent on the second point. The more leads you get, the more chances are there to close the deals. Sometimes, agents can make one or two sales in the initial months of their careers, if they put sincere hard work. In about six months, you can really make your efforts pay a steady income. However, it may also turn to about a year for many agents to secure their regular checks. Depending upon the capacity of your turnaround time, you need to have backup money to keep you running in the initial few months.
The number of sales affects your steady income but you also have to spend money before you become a full-fledged real estate agent. The amount an agent pays depends on the contract he has with his sponsoring broker. Sometimes an agent may get a 100% commission or a greater split of the commissions by paying his monthly desk fee. Traditionally, the brokers share 50% commissions with the agents.
An agent has to pay for E and O insurance, MLS fees, advertising, marketing materials, business cards, mailings, office fees, and the cost of getting a license. In addition to this, you should have equipment and materials for operations such as a phone, laptop, and other supplies.
In general, it costs about $2,000 at the kick-off to obtain the license, pay for insurance, MLS & board dues, and initial marketing. Above it, an agent needs about $500-600 to carry out minimum monthly costs such as office fees, MLS and board dues, insurance, and marketing, etc.
Conclusion
First of all, I recommend you figure out your monthly personal expenses such as rent, insurance, car payments, bills, food & grocery expenses, etc. You can use budgeting applications like mint.com, YNAB, everydollar.com, etc. to track your expenses. Once you finalize the monthly budget, keep the corresponding savings for at least six months in your pocket. For example, if your personal monthly expenses are about $2500, then you should have at least $15,000 in your savings to sustain the living expenses for six months.
In addition to the personal expenses, your savings should also pay for the initial start-up cost which is about $2,000 and an average of $700 operational costs per month.