20 Nov

Many people want to become real estate agents because of the freedom and possible income you can make. Real estate agents can make a lot of money, but the average income for a real estate agent is only $39,000 a year. Such a low median income for real estate agents deters many people from looking into the profession any further, but there are many reasons the average real estate agent does not make much money.

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Over 21 percent of Realtors make over $100,000 a year, which shows Realtors can make a lot of money when they work full-time and have a plan. Here is an article that describes why it is hard for part-time real estate agents to succeed. I also describe how hard it is to get your real estate license in this article. You need a plan, goals and to be able to run your business to succeed in real estate. If you can become a successful agent, the money and freedom cannot be beat!

A real estate agent has gone through the licensing process in the state they are selling real estate in. A real estate agent also has to have their license hung with a real estate broker or be a broker themselves. A Realtor must do everything a real estate agent must do, but also belongs to the National Association of Realtors (NAR). NAR requires their members to abide by a code of ethics and belong to a local board of Realtors. The income levels for Realtors and real estate agents is different, because more Realtors are full-time and take their job more serious. That doesnt mean every Realtor is better than a real estate agent, but the averages do show Realtors make more money. Here is a great article that shows the real estate licensing requirements for all 50 states.

If you look up the median income of a real estate agent you may be surprised that it is only $39,000 a year. There are almost 1 million agents in the United States and income statistics can be very misleading, because there are many part-time agents.  The average income for a real estate agent that works between 40 and 59 hours a week is $54,000 a year. Not only do part-time agents bring the median income down, but many agents dont work very hard. Real estate agents have to push themselves to be successful, because they do not have a boss to tell them what to do. I hear stories over and over from buyers who have to call five agents before one will call them back. I recently tried to refer out a buyer to an agent in Florida and I had to contact five agents before one responded! If you work hard and full-time you can make a lot of money in real estate and blow that median income figure out of the water. My team sold over 200 homes last year and I know many agents including three in my office who make well over $300,000 a year.

Becoming a real estate agent is not an extremely difficult thing to do. You must take pre licensing education in most states, pass a test and then work under a broker for a certain amount of time. Working under a broker does not mean you do everything they say and you are their assistant. It simply means you hang your license in the brokers office and they oversee your activities to make sure you dont do anything illegal. If you want to get your real estate license I highly recommend Real Estate Express. which offers classes in all 50 states and has some of the lowest prices for real estate classes. Two of the agents on my team took online classes through them and easily passed the exam.

How much money does a traditional buyers agent make?

A buyers agent sells houses to buyers and earns commissions on each house they sell. There is no set or typical commission, but I will use a 3 percent commission as an example. The buyers agent may not get to keep all of their commission, because they must pay a split to their broker in most cases. We will assume the split is 70% to the agent and 30% to the broker. I think if an agent works hard and full-time they can easily sell 20 houses a year.  In my market the average price is $175,000 allowing a real estate agent to earn over $70,000 ($175,000 x 20 houses x .03 commission x .7 split to the broker equals $73,500). The real estate agent will have expenses to pay like an office bill, MLS fees, insurance and other miscellaneous items. Those fees will vary depending on the real estate agents agreement with their broker, but the total expenses should be under $5,000 a year depending on the office set up.

If you sell more than 20 houses (which is very possible) the yearly income can rise significantly. The more houses you sell, the smaller broker split you will usually have to pay as well. Even if you sell less than 20 houses a year you can make a decent living as a real estate agent, especially if your market has higher prices. A buyers agent may also sell listings for sellers who they are helping to buy a home. A buyers agent is not limited to only selling homes to buyers.

For more information on how to become a great real estate agent, check out my E book: How to Make it Big in Real Estate, From a Millionaire Agent available at Amazon  as a 125 page E book or as a PDF for only $6.49. The book includes details on how to get started as an agent, getting your license, finding a broker, making money your first year and much more. 

How much money can a listing agent make?

A sellers agent or as they are typically called a listing agent, has a completely different role in the sales process. A listing agent will make about the same commission, but go about it in a completely different way. I wont go into details for the income that can be made, because you can use the same math I used for the buyers agent. The biggest difference will be a sellers agent can typically sell more houses than a buyers agent, because it takes less time to list a house than it does to show homes to buyers. A listing agent can also sell houses to buyers and may double end many deals. Double end means they represent the buyer and seller in a transaction. Because they have the listing, a buyer may use the listing agent to buy the house if they arent already using a buyers agent. Listing many houses also brings in buyer leads. which we will get into more when I talk about teams.

This my specialty and you can make great money as a REO agent, but it isnt easy. I detail what a REO agent does in this article that describes how to list REO properties. If you are an established REO agent you can sell many houses a year. I have sold over 400 REO listings in the last three years. The commissions vary with REO listings as I receive 3 percent on some properties and as low as 1 percent on others listings. I assume the average commission I receive is about a 2.5 percent on each REO I sell. When I sell REOs they typically sell for less than the average sales price in an area. If I assume the average price is $120,000, multiply that by 100 houses, times 2.5% commissions and assume a 90% commission split, that equals $270,000.

The expenses are much higher for the REO agent than they are for a typical listing agent. To be successful in REO you have to belong to REO organizations, register with REO companies, carry more insurance, and pay expenses for the banks on REO properties. Many times you will have to eat some expenses and pay fees to pay the banks bills for them (not logical, but that is the deal). The REO agent also needs to attend conferences  to meet clients and gain business; I attend at least two conferences a year. I would assume the expenses to be at least $20,000 or more a year for most successful REO agents.

If you sell 100 houses a year it will be almost impossible to handle everything yourself. Most likely you will need at least one full-time assistant who will cost about $30,000 a year. After expenses and staff, a REO agent selling 100 homes a year may profit $220,000 a year just on the REO listings. The great thing about listing a lot of properties, is listings bring in buyer leads. A good REO agent will be able to sell as many houses to buyers as they do listings. Having that many listings is also a great opportunity to start a team and let other agents sell properties for you without doing any work. To learn how to get started in REO, please check out my REO starter kit. which details how I have sold hundreds of houses for banks and HUD.

How much money can a real estate agent make by building a team?

When you start selling homes and getting busy, it is time to start a team.  I dont think you can hire people soon enough if you want to be successful. The more people you hire, the more money you can make while doing less work; it is a beautiful thing!

I have 8 people on my team including five licensed real estate agents. They dont all sell a lot of homes, but I get a cut of each house they sell. I give incentives for them to be on my team by giving them leads, paying some of their expenses and providing staff to help them with paperwork.

I have my team set up so that agents under me can sell houses easily, which allows me to receive a check for doing very little to no work. If you have a lot of listings it is much easier to start a team, because you get many buyer leads with listings.

If I were to have three agents on my team activity selling houses then I can make great money from them. A typical setup would be the agents get a 70% commission split of their own clients and 50% of the leads I give them. If they are all able to sell 25 houses a year, which may be very possible with many buyer leads coming in from 100 listings, here is how much they would bring in.

• Average house price $175,000
• Average commission 3%
• My cut from our broker is actually 100%, but I will use 90% because that is more common

• 75 houses sold; 50% my leads and 50% their own clients

For my leads that math breaks down to:

$175,000 average sale x 37.5 (half of 75 houses sold) x 3% commission x 90% split with broker x 50% split with me =$88,600.

For their own leads the math is:

$175,000 x 37.5 x 3% x 90% x 30% =$53,150

I will have expenses that may add up to $15,000 a year for these agents, but I just made over $140,000 gross profits and over $120,000 net profit. The agents working for me each made about $65,000 a year and they had to pay very little of their own expenses. It works out great for everyone as I make money for doing very little work and the agents get leads and their expenses paid.

How much money can you make in other real estate ventures?

There are many other ways to make money as a Realtor and I talk about the top 9 ways to make money as a real estate agent in this article .

• Broker Price Opinions (BPOs) are reports done to figure value. I (my staff) do about 1000 BPOS a year and get paid an average of $50 a BPO. That is about $50,000 a year, but I have to pay for someone to take pictures and do the reports. I make about $20,000 a year on BPOs without doing any of the work, but you can make much more if you take the pictures and do the reports yourself. I also detail how to get started with BPOs in my REO kit .
• Property management can also bring in  good money with enough volume. A typical fee for a property manager is 10% of the gross rents and leasing fees. With 100 homes rented at $1,000 a month that would equal $10,000 a month, but you may need staff to handle that many rentals. If you add a one months rent leasing fee to that each time a home is rented that figure can rise significantly. Property managers may also use their own maintenance people and take a profit on each repair done, but this must be disclosed.

How long does it take for a real estate agent to make a lot of money each year?

Now that you know how much money a real estate agent can make, how long does it take? The truth is it is very hard to make money as a real estate agent right away. Being a real estate agent is like or is running a business. To build up a business it takes time and a lot of effort. In the beginning of the business you are going to have to work hard and get out of your comfort zone. Once you build up a business and get clients, the business will come to you and you will have to put less effort into the business. I have seen agents make over $100,000 in their second year in the business. It is not easy but possible. It took me 6 years to make $100,000 a year, but I did not plan or build my business like I should have in the beginning of my career. Here is a great article on how much money real estate agents can make in their first year .

How much money will you save as a real estate agent when you invest in real estate?

I buy long-term rentals and fix and flips; I usually save a lot of money on commissions for each deal I do.  I have 8 long-term rental properties and I have 6 fix and flips in various stages of repairs. I talk much more about my real estate investing in my complete guide to long-term investing here. On each flip I buy through the MLS I save a commission when I buy the home and when I sell it. This can equal $5,000 to $15,000 I save on every deal. I also save a commissions on each rental property I buy, which decreases my investment and increases my returns. I estimate being an agent saved me at least $70,000 in 2013 alone on my investment properties.

I am also able to get better deals on my investment properties that I buy, because I know my market extremely well. I am also able to act extremely fast when a good deal comes along; quicker than an investor without a license. I am also able to pay more for a property than an investor without their license, because I am saving my commission. The $70,000 I saved on commissions does not include the profit I made on deals that I would not have gotten if I was not an agent.

If you have questions on becoming a real estate agent be sure to check out the Invest Four More Forum .

Conclusion

If you want to become a real estate agent, dont pay attention to the average or median income statistics you see. I have money coming in from my team, REO listings, BPOs, my rental properties, fix and flips  and the few buyers and sellers I work with personally. It takes time to get to where I am at, but it can be done with hard work and planning. If you want to become a real estate agent, check my article what is the best way to get a real estate license .