Thanks in a big part to HGTV more people are interested in the real estate profession. Buying, selling, flipping and renovating have never looked so simple and fun. Our resident Realtor at Eighteen21, Deb Sarsany of the Deb Sarsany Team at The Real Estate Group says the fact is HGTV doesn’t come close to revealing the true side of real estate. It’s not as easy as it looks.
Real Estate is one of the very few businesses where you are required to spend money to make money. Yep, that’s right. Startup costs alone will be upwards of $2,500. This will cover your exams, license fees, and memberships to the local MLS, Illinois Association of Realtors, and National Association of Realtors. You will have application fees, annual dues and assessments, security fees, and set up fees for key card access and the appointment center. You will also need signs, business cards, and basic office supplies.
Once you have your license and join a broker office you will have monthly fees associated with that office. You can also expect office space, advertising, marketing and franchise fees. There are different options that can range from a flat monthly fee to 50/50 commission splits. You will also have your own marketing and advertising cost. Monthly fees for an agent average around $1,200, but can be upwards of $3,000 per month. Real estate agents are considered independent contractors, which means you will need to purchase your own health insurance and manage taxes.
There are no guaranteed paychecks. Real estate agents are paid on commissions only so you can see how easily you can build debt if you are not closing deals. The fees continue – even if you are not selling. Make sure you have adequate financial resources before quitting your 8am to 5pm job. It’s not just about having enough cash on hand to make it to your first commission check, but also knowing how to budget and estimate expenses.
In 2014 NAR (National Association of Realtors) reported 87% fail at real estate. Most agents fail because they don’t educate themselves on the time and cost involved. They don’t leave because they make too much money it’s because they don’t make enough.
There are no business hours in real estate. To be effective and successful you need to work with the schedules of your buyers and sellers. Plan on spending evenings, Saturdays, and Sundays working. When you are not working with a client you will want to spend time marketing and following up on your paperwork and files. It is very important to have a strong work ethic, organization skills, and the ability to multi-task.
Real Estate is intense and requires a very thick skin. Many Realtors come into the business thinking, “I’m good with people, I have a huge family, and lots of friends,” and that all friends, family, neighbors, previous co-workers, and past classmates will call if they need to buy or sell a home. That can’t be further from the truth. Out of your circle of friends, there will only be a small fraction that will buy or sell property in a given year. Don’t be surprised to wake up one morning and see a ‘For Sale’ sign in your neighbor’s yard and it doesn’t have your name on it. Don’t get your knickers in a bunch when you attend a social event and hear a friend telling everyone about their new home. Believe me, it happens all the time. You can also plan on spending hours and hours, days, weeks or even months with a buyer and have them decide they no longer want to buy or worse yet they find a FSBO. You can also invest hours and money into marketing a listing and it may never sell or the seller decides to go with another agent. If you can’t get past these possibilities this business is not for you. False expectations can and do lead to disaster. The one thing you can be sure of is nothing is promised and nothing is guaranteed. That goes for client loyalty and paychecks.
When I entered into real estate many years ago a very wise mentor told me the best business plan includes a stop loss plan. I didn’t know what that meant but soon learned it is exactly as it states: stop the loss, or in better language, “know when to fold ‘em.” Don’t let pride get in your way of knowing when it’s time to hang up the shingle. Real estate is not for everyone. If you are spending more than you are making or using every commission check to pay office fees it’s time to think of another career. Don’t drain family savings on the hopes that things will get better. If you don’t have a good pipeline of solid business then it’s time.
If you can navigate the hurdles and build a solid customer foundation you can be very successful. Real estate can be a very profitable and rewarding career.
For more information about the Deb Sarsany Team at The Real Estate Group visit: facebook.com/debsarsanyteam or call (217) 313-0580.