Expected Average Income and Expenses for a New Real Estate Agent

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Expected Average Income and Expenses for a New Real Estate Agent

If you are reading this blog post, then you are likely considering a new career as a Real Estate Agent. Or maybe, you have already gotten your real estate license and are busy setting up your business.

Many get into this business tempted by the limitless potential, the opportunity to avoid sitting in an office for 9 hours a day, the flexibility in the work hours.

We all know the success stories – those realtors that live the dream, raking in hundreds of thousands of dollars for relatively easy work.

But what does success look like in real life?  What are the average numbers that you can expect to make?

In this blog post, we’ll discuss the average incomes and the difference in pay of agent vs. broker. We’ll also touch on the expenses that are common when you are just starting out. All this information will help you have realistic expectations and give you some tools to help plan for the future.

Maybe it makes sense to work the real estate business as a side hustle, keeping your full-time job until you start making money. Or perhaps the flexibility will allow you to stay home with your children but unstable income, especially in the beginning, will be your trade-off.

Let’s start by looking at some of the main differences between real estate agents, brokers and realtor.

Real Estate Agent vs. Broker vs. Realtor

Before we dive into the numbers and the income discussions we want to highlight the differences between the few types of Real Estate professionals. These differences are important to know as they bear a direct correlation to the average income you can expect to make.

The three Real Estate professionals are Real Estate Agent, Real Estate Broker, and a Realtor.

Real Estate Agent

Once you complete your mandatory pre-licensing course and pass the state exam, you can start helping your clients buy and sell properties. Your business card will identify you as a “Real Estate Agent.” As a Real Estate Agent, you can not work on your own or hire other agents to work for you. In fact, you are required to work for a Real Estate Broker. Working under a broker is an excellent way to learn the ropes and the ins and outs of the business. The broker is also responsible for you, so they will provide you some legal protections.

Broker

A Real Estate Broker is a Real Estate professional that has invested additional time and money into their RE education and passed a Broker exam. Each state has their own requirements for a certification training and exam process. Typically you need to have a few years of experience as a licensed agent to be allowed to become a broker. The focus of broker studies generally is on real estate law, insurance, ethics, contracts, and taxes.

A Real Estate Broker is very knowledgeable and is usually more experienced than an agent. They are also able to hire agents to work for them.

Realtor

Often the terms “realtor” and “Real Estate Agent” are used interchangeably. Both are licensed agents that can help a client with their real estate needs. However, a Realtor is called so if they are a member of National Association of Realtors (NAR). This is a trademarked name and can only be used by those that are part of the NAR. Members of the NAR are held to a strict code of professional conduct and ethics. You have to be a licensed RE Agent to become a member.

Broker, realtor and agent income

This is undoubtedly the section that you have been waiting for. This section talks about the income a RE Professional makes on average. Of course, every profession has outliers that perform either far above or below the averages. Real Estate is no exception. Some agents are wildly successful and make in a month what an average RE Agent makes in a year. On the other hand, some struggle even past the “brand new agent” stage and make far below the average.

Why does the income differ for Agent Vs. Broker?

Now let’s have a look at how your average income will change based on the path you chose to take. As you might have guessed a RE Broker makes more simply because they are responsible for the actions of other people and have more experience. Does it mean that you have to become a Broker to earn a good living? Of course not. However, one of the benefits of being a broker is getting a percentage of the commission from those Agents that work for you.

Average annual earnings

Below are the average yearly earnings for RE Agents and Brokers according to a few online sources.

Average income for RE Agents

According to Payscale.com[1], the median annual income for a RE Agent is a little over $47,000. Glassdoor[2] page for Keller Williams Real Estate reports a similar average income of $50,000. Keep in mind that these averages take into account agents with various levels of experience, both the new agents and ones that have been at it for a while. It is entirely possible that you will not make anything for the first few months as you just begin acquiring clients. However, undoubtedly with hard work and dedication that income will go up.

Average income for RE Brokers

Payscale.com [3]shows us that the average income for a broker is about $52,000. Since a broker has agents working under them, they get a cut from every sale on top of any sales they make themself. Of course, this can boost income significantly as well as profit sharing and other bonuses.

Expenses – Expected and unexpected

When we talk about the income, we also have to talk about the expenses. Aside from acquiring clients and closing deals, the toughest part of the job for many new agents is to make the mental switch that you now own a standalone business. Even though you’ll be working for a broker, you are still an independent contractor. As such, you’ll have expenses that you might not even consider, especially if you are coming from a 9 to 5 job.

The brokerage will typically provide a cubicle in an office space for you to use as well as office equipment such as printers. You will also likely have access to trainings (some free to you, some for a fee). They won’t, however, pay for any costs to run your business, such as Insurance for example.

Below are the most common expenses for new agents:

Licenses and registrations: estimated cost $600+ a year not including additional trainings

As a licensed professional you will need to invest money into obtaining and keeping your license. The requirements to obtain your license vary by state. You can expect to spend at least a few hundred dollars on a pre-licensing course, exam fee and license fee.

Additionally, once you pass your licensing exam, you will need to take continuing education classes to keep your license active. This is it for the mandatory expenses. However, many agents invest in training and courses to help them gain traction and get ahead in this business.

Promotions, marketing materials, and advertising – estimated cost $1000+ a year

As a new agent, this is one of your biggest and most important expenses. While the brokerage provides basic office necessities and maybe occasional leads, all of the marketing is on you. When you are just starting out, you need to get your name out there, and fast. Marketing expenses include a professional website, membership in your local business association chapter, flyer, business cards and so on. All this adds up fast. Don’t let the cost scare you though. When done right, this investment pays for itself and more with new clients and closed deals.

Insurance – estimated cost $800

This is another fairly large expense that you should be aware of. A Professional Liability insurance policy protects your new business from the cost of a lawsuit. Whether the grievance the disgruntled customer has against you is real or only perceived, you will still need to hire an attorney and defend yourself in court. BizInsure works with many carriers that offer Real Estate Agent Professional Liability insurance. We are happy to send you an instant quote if needed.

Business Expenses – Estimated cost: varies

Your other miscellaneous business expenses may include client closing gifts, client lunches, and transportation costs and insurance. Also don’t forget about your phone bill, internet, and computer expenses.

All these are necessary expenses that you have to incur to keep your business running. Budgeting for these will help you come up with a plan as to how to cover these until you start making money.

Conclusion

Remember, the numbers that we presented in this article are just the average earnings across all experience levels and zip codes. When creating your business plan, take into account the average income, but also the common expenses that you will face.

 


[1] Payscale.com. (2018). Real Estate Agent Salary. [online] Available at: https://www.payscale.com/research/US/Job=Real_Estate_Agent/Salary [Accessed 4 Oct. 2018].

[2] Glassdoor.com. (2018). [online] Available at: https://www.glassdoor.com/Salary/Keller-Williams-Real-Estate-Agent-Salaries-E114145_D_KO16,33.htm [Accessed 4 Oct. 2018].

[3] Payscale.com. (2018). Real Estate Broker Salary. [online] Available at: https://www.payscale.com/research/US/Job=Real_Estate_Broker/Salary [Accessed 4 Oct. 2018].

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