Being a real estate agent isn’t a salaried profession. Since you are considered an independent contractor, and ordinarily your pay is based 100% on commission, you are responsible for certain expenses that a salaried worker would not be responsible for while working under the employment of their company. Real estate is a lucrative business as long as you keep track of and account for these expenses within your budget. We’ve estimated the nine typical costs involved in becoming a real estate agent so you can manage your money wisely.
1. Prelicensing Education Costs
Each state has specific prelicensing courses you need to take in order to become licensed in that particular state. Prelicensing education covers laws, regulations, documents, deal management, and more. Although there are national-based questions on the exam, there are state-specific questions as well. So, unfortunately, the cost of real estate education depends on where you are located within the country and can range anywhere from $79 to $999.
Pricing also depends upon the school that you chose to complete your education, which can be in-person or online. Check out our guide to the 5 Best Accredited Real Estate Schools for Online Learners to determine which school is the best fit for you.
2. Time Spent to Complete Tasks
In the real estate industry, time equals money, so it’s important to account for the time that you’re completing tasks to estimate your pay rate. In conjunction with the cost of prelicensing classes, each state mandates a certain number of hours in order to fulfill its educational requirements.
The clock doesn’t stop there. You must also account for the time it takes to find a brokerage, training at that brokerage, and eventually, the time to complete a real estate transaction.
The time to complete a real estate transaction from beginning to end can differ significantly based on the deal: a rental, first-time home buyer, all cash client, short sale, and so on. Obviously, you are not billing by the hour, but if you have a client who seems to be taking advantage of your time and effort, you may want to rethink continuing to work with that client. Since you are a commission-based worker, make sure every minute is worth it to avoid burnout or frustration that can lead to quitting the real estate industry.
3. Real Estate License Application & Exam Fees
Once you’ve completed your education, you have to pass a state exam as well as apply for your real estate license in order to begin your journey to success in the real estate industry. Again, the cost for both of these items can vary depending on the state you are receiving your license. These prices can range from $70 to $443 and anywhere in between.
Fortunately, along with prelicensing education, these should be one-time fees as they only apply to your initial real estate license.
4. Brokerage Desk Fees
A desk fee is usually a monthly flat rate charged by a brokerage to reserve a desk for you within their office and use supplies such as the copying machine, Wi-Fi, and conference room space. There are many companies that do not charge this fee and some that charge up to $2,000 per month, so it’s important to calculate this toward your monthly expenses. Take a look at the range of desk fees for these brokerages:
$50 to $200
$150 to $1,000
City Connections Realty, Inc
$825 to $1,325
Realty ONE Group
Pro tip: When you’re interviewing at different brokerages, make sure to note not only the desk fees, but also any other expenses that could influence your take-home pay. For assistance, read through our guide about How to Choose a Real Estate Company to Work For.
5. Board & Multiple Listing Service Membership Fees
An expense that often gets overlooked is your membership fees for local and national boards. Although these expenses are able to be written off on your taxes, they can be on the expensive side. Becoming a member of the National Association of Realtors (NAR) costs $150 per year; it’s optional, but it will give you the official designation of “Realtor.”
If you decide not to become a NAR member, you will likely have to join your local real estate board in order to gain access to your local multiple listing service (MLS), which will make it possible for you to advertise, view, and schedule showings for listings in your area. Board fees vary and are usually a couple of hundred dollars per membership, and MLS fees are typically between $20 and $50 per month on top of the board fees. Take a look at your local MLS to see the pricing that applies to your area.
6. Marketing Fees
It’s suggested spending about 10% of your commission on marketing expenses, but top agents may spend anywhere from 15% to 30% on their marketing strategy. Your brokerage may offer to cover the expenses of some marketing services, such as headshots and business cards, but for the most part, you’ll be responsible for branding yourself.
Marketing will assist in building your client base, and is therefore an essential expense to calculate for your business. If you’re looking for additional marketing advice, especially with building your real estate website, take a peek at GoDaddy with features like built-in search engine optimization (SEO) tools, website branding templates, unlimited storage, and low pricing.
7. Advertising Costs
To get your listings out to the public, it’s necessary to invest in advertising in order to generate leads. Since 84% of home buyers utilize the internet to search for homes, it is in your best interest to create a strategy for advertising your listings. There is a multitude of sites where listings can be advertised, but here are a few of the top vendors:
When you are first starting out, you are not required to advertise on every site available, but you definitely want to start somewhere and continue adding to your advertising repertoire depending on what is feasible. The more you advertise, the more likely you will be able to rent or sell your listing as well as keep your clients happy by doing so. A popular option for homebuyers, renters, and real estate agents alike is Zillow, which gets traffic of about 36 million visits per month. Getting your listings advertised there will maximize exposure and lead to profit for your business.
Client relationship management (CRM) tools are essential to keep organized in the real estate industry. Some brokerages will provide a CRM free of cost, but if not, you want to be aware of the best CRM options for real estate agents as well as the pricing of each to factor into your expenses.
CRM systems can range from $12 to $300 per user, per month depending on the size of the business. Each CRM has different features they highlight, which could include marketing, integration, automation, and more, so it’s important to decide which features are most crucial to your business.
Starter CRM Tools
From $79 per user, per month
9. Other Expenses
There are miscellaneous expenses that agents tend to forget, just like when you buy a plane or concert ticket and additional taxes and fees are tacked onto the final price. These expenses can range from travel to client lunches, phone and internet, health insurance, and taxes.
Pro tip: Open a business credit card to use exclusively for these expenses and keep track of each transaction using QuickBooks. Luckily, many of these expenses can be deducted from your taxes, but you have to be able to account for them in order to do so.