It is not uncommon for the allure of the real estate industry to demand an individual’s attention. A career as a real estate agent offers limitless wealth building opportunities. However, many do not realize what it takes to become a practicing agent. In particular, people do not know the costs that go into entering this profession. So I ask you this, what does it cost to become a real estate agent?
A new Wall Street Journal report highlights the number of new, young entrants into real estate education programs and the common disconnect that exists between their expectations and the reality of becoming a Realtor. The report suggests a shift in the dynamics of who is becoming a real estate agent, how many are really making top end incomes and what the true cost of getting there is.
How much can you make as a Realtor? What will it cost you to get to that point? More importantly, would you be better off becoming a real estate investor instead?
Becoming a Realtor
Even though some states are reportedly toughening up on licensing exams, becoming a real estate agent isn’t that difficult. After a few weeks of real estate education, trainees are eligible for examinations. This normally sets hopeful agents back a few hundred dollars and some time out to study.
Getting hired by a real estate brokerage is pretty much a slam dunk. You really don’t cost them anything. In fact, you basically pay them for hiring you and allowing you to hang your real estate license on the wall.
However, the costs don’t end here. Most brokers will require agents to join the local board of Realtors.
There are also a lot of start-up costs that many may be unaware of. These can vary depending on the firm you go to work for and what they will provide. For a great number of new agents, this ends up including things like name badges, business cards, signs, lots of copies of materials, new tech gadgets, software, pictures, lock boxes, new clothes for looking the part, transportation expenses, and even brand new cars. This is all in addition to being bombarded with pitches for “must have” additional education courses and marketing systems.
To get going, most real estate agents are going to spend on marketing and branding up front. One PA broker told the Wall Street Journal he forks out about $335k a year upfront in advertising, and about $20k for gifts and mailers to closed clients. However, he does point out that has helped sell over $1B in real estate in the last 13 years.
Making the Money
Of course it’s possible to become a real estate agent without splurging extravagant sums. An administrator at a WA real estate school says most new agents spend about $2k or more to get started.
However, approximately 30% go on to make $80k to over six figures in income a year. Remember there are commissions to be split with the house, which can be as high as 50%, after 50% of the selling commission is split with a buyer’s real estate agent. Then there can be months of waiting for those first checks to come in.
A Better Alternative?
Many may find that investing or flipping houses can deliver faster paydays (and larger ones) without all of the upfront bleed. However, it is still important to invest in some form of real estate investing education. Doing so will place you and your business on the fast track to wealth building. Before becoming a real estate agent, consider the benefits provided by investing in the same industry. If you are intent on becoming an agent, you can always invest and earn your license later.