So many people come and go in the real estate industry. If you’re in the field right now, you might have seen a few people join your brokerage firm one month, and they’re gone the next. The real estate field has a super high turnover rate. It’s so high that experts estimate it to be in the 80% region over 5 years.
The statistics show that 80% of the real estate industry calls it quits every five years and turns over. These are terrible numbers. We don’t want to discourage you. Instead, we want you to understand the hard truths so that you can know what to expect when you get into this challenging business.
In all honesty, the real estate career is hard, and it’ll take a ton of work. However, if you’re prepared, you can build something very successful and become successful in the business. If you’re not well-prepared, this business can completely break you, destroy your goals and send you back to a 9-5 job that you don’t want to be in.
In this article, we’ll dive into why real estate is such a tricky business to get into so you can decide if it’s right for you or not.
Real Estate Competition
This industry is packed with competition. Just think about it. Even in the smallest markets in some states, you’d find about 5,000 agents competing for the same business. This is a huge challenge.
There are about 2 million realtors in the US alone. Other than the number of realtors in the market, other various factors continue to contribute to the competition. They include:
- Low housing inventory: There has been a decline in housing inventory in some markets. Imagine over 5000 realtors each competing to have their share of the pie?
- Low entry barrier: Due to the low entry barrier in the real estate industry, many new professionals are getting their licenses every day.
- Technology: Technology has revolutionized how real estate is sold and continues to boost competition for closing real estate deals.
One of the most important ways to give you a competitive edge over other realtors is to have a consistent web presence. In this digital age, failing to have a web presence will mean you’ll miss out on many fantastic deals and clients. Do you know that a staggering 51% of homebuyers now find their ideal properties online?
Also, we’ve always insisted on becoming the best at what you do. You need to offer value to your clients and make sure they won’t find the services you offer anywhere else. Leaving your customers satisfied is also a way of marketing your business as you’re most likely to receive referrals from them.
Tough competition should not be that much of a worry if you completely immerse yourself in your market and become a well known real estate professional.
The Market Itself
Not only are you competing with agents in the same market, but you’re also competing with the market itself. Interest rates, housing inventory, and many other factors can impact the way you operate your business.
These things can either make it more challenging or more manageable. The market is also consistently fluctuating, and you’re going to have to adjust to mirror the market. This helps you stay productive and close deals throughout the year, no matter the state of the market.
You don’t have to be scared about the competition. You can get good at what you do and beat your competition. Don’t think of it as an impossible business to get into and be successful in. Just keep it in the back of your mind that it’s challenging and it’ll take long hours.
This might not be for you if you’re not committed. However, if you have a passion for it, you can build a profitable business and beat your competition in any market. Don’t let this discourage you. If you put the hours in, you can end up in the top 20% category of the agents who earn 80% of the income.
The Numbers
The real estate industry is all about the numbers. It’s a huge numbers game, and the earlier you realize that, the better.
The thing is, the more leads you contact and the more times you prospect every day, the bigger your pipeline is going to become. Every single deal that you work on isn’t going to close. It becomes frustrating when a deal you’re working on doesn’t get to the finish line.
However, you need to realize that the more deals you work on, the more you will close. Instead of riding the real estate rollercoaster and getting super upset when some of your deals die out, just realize that the more deals you work on, the more deals that you’ll be able to get to the finish line.
As time goes on, you’re going to see this more and more. However, as a new real estate agent, it can get really tough because you might have two or three deals that you’re really focused on, and they might decide to do something else.
For example, they might decide to hold onto the house and take it off the market. Your clients might also decide they don’t want to buy anymore and instead continue renting and wait it out until the market does something different. This can be super frustrating, primarily if you’ve worked on the deal for a couple of months.
If you spend your time prospecting for new business every day, this won’t be a huge problem. On the other hand, if you don’t realize that real estate is a numbers game, you might get discouraged and want to quit because you’re simply not working on enough deals at a particular time.
Long Sales Cycle
If you’re from a 9-5 environment, you might not realize that real estate takes a long time to close. While some deals close fast, the majority of deals are going to take multiple months to close.
If you’re working with a first-time buyer and get them under contract, it might take up to 60 days to close on that property. That’s two months. We’re not even accounting for the amount of time you took driving that person around, showing them houses, and doing homebuyer consultations. This time can add up and create a long sales cycle.
From a money-management standpoint, it can make it even more challenging. This is because it’s hard to budget your money when you don’t know when the next commission check is coming in. You might have a significant pipeline, but if no one is under contract and you don’t know when one will close, it can create a considerable challenge.
How To Budget
There’s a solution to this challenge, though. You need to have a lot of savings and budget the amount of money you’re spending every month. As time goes on, you’ll have a grasp on the amount of money that’s coming in versus how much money is going out.
By managing your money this way, you’ll gain perspective on how many deals you need to close per year to be able to cover bills, make a profit, have enough money to reinvest in your business, and sustain the lifestyle you want.
When you first start in the industry, it can be pretty challenging to know how many deals you need to close, how much money you need to hold onto and how tight you need to keep your budget.
Saving for taxes
One of the essential aspects of your money management program has to be paying taxes. So many agents get through their first year without realizing that they have to pay taxes, even when they have a successful first year. You have to pay taxes every single year on the money that you made.
As an agent, you’re an independent contractor. This means that your taxes aren’t taken out ahead of time. You’re a business owner now so you have to realize that you need to manage your money the right way and put money aside for taxes. This ensures that you’re not short at the end of the year.
Budget for marketing
Another essential aspect of money management is putting away money for marketing. If you’re going to last in this business, you’ll have to reinvest in your business and get new leads. You can only achieve this by doing more marketing. You have to get your business out there, and it all comes at a cost in your monthly business budget.
Make sure you account for this and figure out how much money you need to set aside for marketing each month. This helps you grow and be responsible and not run out of money before you can close your next deal.
This is quite stressful when starting. However, we recommend keeping your marketing budget as small as possible and putting large amounts of sweat equity in.
For example, you can target to knock on 100 doors a day. It might cost you a small amount of money in printing flyers and handouts, and your time too. We highly suggest that you go for this kind of model when starting and put in a lot of sweat equity instead of cutting a ton of checks for marketing and lead generation companies. These can be expensive, and the bad news is that if you don’t close those deals, you may be out of business before you even close your first deal.
You have to set this upright. Having structure is the most critical part of this business. For example, you can take the 9 am-12 pm period to prospect. Buy a dialer and get on a dialing system to call possible sellers or buyers. Just get in the groove and build a structure.
You also have to build a structure around your money management system. You have to make sure that you have a reasonable budget in place and follow that budget.
Conclusion
You need to realize that this business is simple yet complex. There are a lot of ups and downs. Things get a little easier once you know that it’s an enormous numbers game at the end of the day. You’ll also take things a little less personal when you encounter challenges.
The more prospects you load at the top of your sales funnel, the easier it’ll become. If you have 20 deals in your sales funnel and 50% of these deals close, you have ten closings. On the other hand, if you have two deals in your sales funnel and 50% of them close, you only have one sale. You have to look at it this way. The most important thing to do every day is to load the sales funnel up with new clients, new potential deals, just get out there and have new conversations about real estate.
If you can do all these things and keep a solid budget, you’re going to be good. Real estate will get easier and easier as the years go by and you build a strong foundation.