As a new real estate agent, embarking on your exciting journey in this industry can seem overwhelming with the number of fees and expenses that you are faced with. From the costs of obtaining your license, study materials, and taking the real estate exam, to the various broker startup fees and ongoing monthly expenses, it can feel as if everyone has their hand in your pocket.
However, it’s important to understand that starting a career as a real estate agent is essentially starting a new business. With every new business venture, there are unavoidable start-up costs and ongoing expenses that come along with it.
So, let’s explore some of the average costs and fees that you can expect as a new real estate agent.
A Comprehensive Guide to Expenses That New Real Estate Agents Incur
When starting a career in real estate, it’s important to have a good understanding of the costs involved. This will help you to create a budget and plan your finances accordingly. In this article, we will go over the most common expenses that real estate agents incur and explain them in detail.
- Pre-Licensing Education
The first step in becoming a licensed real estate agent is to complete pre-licensing education. This education is mandatory in most states and is designed to provide you with the knowledge and skills needed to pass the licensing exam. The cost of pre-licensing education varies depending on the provider, but it can range anywhere from a few hundred to a few thousand dollars.
- Testing Fees
After completing pre-licensing education, you’ll need to take the licensing exam. The cost of the exam varies by state, but it typically ranges from $50 to $200. It’s important to check with your state’s licensing authority to determine the exact cost.
- Continuing Education
Once you have become a licensed real estate agent, you’ll need to complete continuing education courses to maintain your license. The cost of continuing education varies, but it typically ranges from a few hundred to a few thousand dollars per year.
- Professional Development and Conferences
In addition to continuing education, real estate agents can attend professional development courses and conferences to enhance their skills and knowledge. The cost of these courses and conferences can vary, but it’s important to budget for them as they can be an essential part of your professional growth.
- MLS Fees
The MLS, or Multiple Listing Service, is a database of properties for sale and rent. As a real estate agent, you’ll need to pay fees to access the MLS and list properties. The cost of MLS fees varies by state and can range from a few hundred to a few thousand dollars per year.
- Association Fees
Most real estate agents belong to a professional association, such as the National Association of Realtors (NAR). The cost of association fees varies, but it typically ranges from a few hundred to a few thousand dollars per year.
- Errors and Omissions Insurance
Errors and omissions insurance, also known as E&O insurance, is a type of liability insurance that protects real estate agents from financial losses related to mistakes or oversights in their professional duties. The cost of E&O insurance varies depending on the coverage, but it typically ranges from a few hundred to a few thousand dollars per year.
- Broker Costs and Desk Fees
Many real estate agents choose to work under a broker. The broker provides support, training, and resources in exchange for a portion of the agent’s commission. In addition, some brokers may charge desk fees for use of their office space and resources. The cost of broker costs and desk fees varies, but it’s important to factor them into your budget.
- Self-Employment Income Taxes
Real estate agents are considered self-employed, and as such, they are responsible for paying their income taxes. This includes both federal and state income taxes, as well as self-employment taxes. The cost of self-employment taxes varies depending on your income, but it’s important to budget for them and set aside money each month to cover them.
- Health Insurance
As a self-employed real estate agent, you’ll need to purchase your health insurance. The cost of health insurance varies depending on your age, location, and the type of coverage you choose.
- Office Supplies
Real estate agents need to have a variety of office supplies, such as business cards, brochures, and signage. The cost of office supplies can add up, so it’s important to budget for them and plans accordingly.
- Marketing Materials
Marketing is a critical aspect of a real estate agent’s job, and it’s important to have a budget for marketing materials such as flyers, postcards, and online advertising. The cost of marketing materials can vary, but it’s important to allocate funds for them to effectively promote yourself and your listings.
- Internet and Cell Phone Service
A reliable internet and cell phone connection is essential for a real estate agent. You’ll need to budget for both your internet and cell phone service, as well as any related equipment or devices.
- Technology Products and Services
Technology plays a big role in the real estate industry, and it’s important to have a budget for technology products and services such as a website, customer relationship management (CRM) software, and virtual tour software.
- Vehicle Expenses
As a real estate agent, you’ll likely be driving to show properties, attend open houses, and meet with clients. It’s important to budget for vehicle expenses such as fuel, maintenance, and insurance.
How to do Budgeting as a New Real Estate Agent?
Budgeting is a crucial aspect of any financial planning, and real estate agents are no exception. As a new real estate agent, you will likely encounter various challenges as you start your career in this dynamic industry. From managing expenses to keeping track of income, budgeting can seem like a daunting task, but it doesn’t have to be. With the right approach and tools, budgeting can be a straightforward and manageable process that helps you succeed as a real estate agent.
Here’s how to get started with budgeting as a new real estate agent:
- Determine your Income
The first step in budgeting is determining your income. Real estate agents usually earn a commission on the sales they make, which can vary depending on the deal. As a new real estate agent, it’s important to have a realistic understanding of your potential income so that you can plan your budget accordingly. Research the average commission rates in your area, and use that information to estimate your income.
- Identify your Expenses
Next, you’ll need to identify all of your expenses. Some common expenses for real estate agents include marketing materials, transportation costs, professional development courses, and licensing fees. Make sure you include all of your fixed and variable expenses in your budget. This will give you a comprehensive view of your financial situation and help you make informed decisions about how to allocate your resources.
- Set a Budget
Once you have a clear understanding of your income and expenses, you can start setting a budget. Make sure you allocate enough money for your expenses and also leave room for savings and emergency funds. Your budget should be flexible and adaptable to changing circumstances. If you have a slow month in terms of sales, don’t be afraid to adjust your budget accordingly.
- Track your Spending
Tracking your spending is an essential part of budgeting. Keeping track of your expenses will help you stay on top of your finances and make sure you’re sticking to your budget. You can use a variety of tools, such as a spreadsheet, a budgeting app, or even a pen and paper, to keep track of your spending. The important thing is to choose a method that works for you and use it consistently.
- Review and Adjust
Finally, make sure you regularly review your budget and adjust it as needed. Life is unpredictable, and your financial situation can change rapidly. Regularly reviewing your budget will help you stay on top of your finances and make any necessary adjustments.
Budgeting may seem like a daunting task, but it’s a crucial aspect of managing your finances as a real estate agent. By determining your income, identifying your expenses, setting a budget, tracking your spending, and regularly reviewing and adjusting your budget, you can ensure that you have the financial stability and security you need to succeed in this exciting industry.
How to Handle New Expenses Smartly?
When it comes to handling new expenses, the first step is to accurately assess and quantify each expense item to the best of your ability. While it’s not crucial to achieving exact precision, it’s important to have a general idea of your upcoming expenses to effectively plan and allocate your income from various sources.
By gaining an understanding of the expenses in your market, you’ll be able to make informed comparisons between brokerages and the benefits packages they offer. Keep in mind that expenses are only one aspect to consider, and not necessarily the most critical. A brokerage that offers robust marketing training and resources can significantly impact your lead generation and income stream, offsetting expenses and increasing profits.
New real estate agents need to understand that they operate as independent contractors with their standalone business models. While a brokerage can provide leads and benefits, your income will depend on various factors, including expenses. When choosing a brokerage, make sure to take into account all expenses so that you can make an informed decision.
Once you’re established, it’s even more vital to have an accurate estimate of your business and personal expenses. Many promising real estate careers are thwarted due to a lack of cash flow, so use the tips and spreadsheet provided to identify expenses and ensure your success in the industry.
As you embark on your journey in the real estate industry, it’s important to understand that the first year can be a bit of a learning curve. This is completely normal and nothing to worry about. According to our national survey, the average income of real estate agents doubles after the first year on the job. With time and experience, real estate agents generally see an increase in earnings.
To reach financial success and maximize your earning potential, it’s crucial to adopt the strategies of top-performing agents. One of the most essential strategies is to closely track your return on investment for marketing and business development efforts. This way, you can make informed decisions on how to allocate your resources and optimize your earnings.
Getting through your first year in real estate may require a bit of effort, but with proper planning and anticipation for start-up costs, you’ll be well on your way to long-term success and financial rewards. Don’t let the initial hurdles discourage you from pursuing a fulfilling and lucrative career in real estate.
Last modified: February 13, 2023