By Jesse McCarl
We’ve all heard the adage that it takes money to make money, but deep down we hope such a statement isn’t actually true. Most of us don’t have much of a savings at the start of a new career; that’s why we’re starting the new career in the first place!
Ideally, it would take a lot of hard work and determination to make money. And maybe this is true in a lot of career paths, but does it apply to real estate? Let’s look at various aspects of cash flow for Realtors to find out!*
How Much to Become an Agent
So, what does it cost to become a Realtor?
There are some necessary checks you’re going to have to write if you want to break into real estate. Here are the essential expenses you’ll have to get started:
Acquire Education & License: $1,000
Web Site Design & Launch: $500
Initial Marketing Campaign: $500
MLS Set-Up: $200
PLEASE NOTE: This section makes a lot of assumptions in order to stay on the cheaper side of the spectrum. For example, we assume you’ll pass your real estate exam the first time, and not have to pay for it again. And although this marketing campaign cost covers flyers, business cards, signs, and so on, it’s only covering enough to get you started those first few months until commission checks start coming in.
There are plenty of other fees such as IDX set-up, insurance costs, etc. But those things are either a) not 100% necessary, or b) often covered by a broker, so they were not included in this list of minimal needs.
How Much to Stay an Agent
Once you’ve established yourself as a real estate agent, there will be other consistent expenses that you’ll need to budget for. Here is what those costs look like on a monthly basis:
MLS Fees: $50
Gas/Car Related Expenses: $150
Web Site Upkeep: $12
National Association of Realtor Dues: $10
Those are the minimal costs to maintain your presence. There are plenty of other potential expenses for an agent. Agents spend the most money on online lead generation services, followed by paid internet advertising, and database management. (Just as a reminder, all of those expenditures are bundled in one cost-efficient, streamlined HouseHunt membership. Apply for your exclusive territory in the bar to the right.)
Yes, yes. Monthly expenses may seem a bit startling at first, but there are plenty of free ways to keep relevant as an agent. If you want to increase your revenue as an agent, there are ways to spend time in order to save money. Here are some weekly resources that develop your database online without hurting your wallet:
Content Development: 2-3 hours
Social Media Presence: 2-3 hours
Video Resources: 1-2 Hours
E-Mail + Newsletter Marketing: 1 hour
Former Client Follow Up: 1-2 hours
When Will You Start Making Money?
It takes time to start making money in real estate; it’s not like an office job where your first paycheck comes a few weeks after your start date. Why the delay in revenue? The main reason is simply that it takes time to close on your first house. With all the inspections and paperwork that go into a real estate exchange, it can take weeks or months before you see your first commission check.
Furthermore, it can take time to find that first client without any prior experience or word-of-mouth from prior clientele.
And even then, most of those initial paychecks go to covering the cost of getting started.
You may not actually see a return on investment (ROI, or profit) until you’ve settled into a routine with your budget and income. If you want to calculate exactly what your client base will have to look like to cover your expenses, you will need to calculate your personal Formula for Success.
Click here to download a PDF of the Formula for Success Worksheet.
IN CONCLUSION: Yes, it takes money to make money in real estate. But don’t despair, if you’re able to get started with a chunk of what you have in savings, you can soon minimize your expenses and focus on branding yourself for past and prospective clients.
*All the listed expenditures were kept at a relative minimum and can vary by location, brand, etc.
What do you think? Do you think it’s a hard and fast rule that you need money to generate profit? What major expenses do you have that we left off this list?