The graph above shows what’s happened to the real estate workforce over the last thirteen years. There was an obvious dip between 2008 and 2010 because of the housing crisis then. The next dip occurs in 2020 due to the pandemic. What does this mean for potential real estate agents? Essentially, there are openings in the field for new real estate agents.
The cause of this is very evident: there was a large drop in property sales and rentals over the past year due to Covid-19 and the various lockdowns. Some real estate agents found new or other work during that time and while some returned, others have not or have kept their real estate careers in part-time mode.
The end result is a large open area for new real estate agents. With that said, there are plenty of other factors yet to look into before deciding on becoming a real estate agent. Let’s dive into another!
This is where things get a little trickery. Because we can look at the graph above and clearly see where we’d all like to be with our individual incomes. The problem is that it really isn’t that cut and dried.
How long it takes to close a deal and make good money really isn’t that plain at all. You might have older clients that take longer and need more help to close a deal. That could cause an agent to work more for less payoff. It’s really just a matter of knowing the possibilities. You’re unlikely to work a set amount of hours per week. The hours will always be flexible but you’ve still got to put in the work, regardless of when you and the clients agree to do it.
Paperwork is a large part of a real estate agent’s job and it’s a time consuming one. There’s also plenty of travel time between properties and clients. If you’re a couch potato hoping to do all your work from home, then this is not the career path for you. If you like an adventure and getting around town a lot, then this probably is the career path for you.
If you’re okay with around $40,000 a year as a salary, then you’ll probably work between 20 and 40 hours a week. If you’re the type looking for the big bucks… Then chances are that you’re going to really hustle as a real estate agent.
Being a real estate agent really is a flexible career path. It’s flexible in that you determine the hours you work, the amount of money you make, the success you have, and whether you’re happy with it.
Most real estate brokers will allow you to be very flexible with your time but keep this in mind: Most clients want to meet during the evenings and on weekends. That is just something you have to be prepared for because that is when most people are free to look at houses or talk about selling their properties. It might even be wise to get a second cell phone line or house phone line with a voicemail that states when you’re available. Again, this line of work does not appeal to everyone for a reason.
There’s an obvious place you want to be and it probably isn’t where you’ll be for your first deal in real estate. A lot of agents tend to start as Listing Agents. Real estate is a great market to make good money but you’re probably going to start closer to the bottom than not. It’s also wise to keep in mind that commission work is nothing like a regular salary.
For example, if a house is sold for $1,000,000 and the agreed upon commission rate is 6%, then you will generate a total commission of $60,000. That’s a good chunk of cash but the reality is that you will only get to keep some of it. You have to factor in your state and local taxes. There’s also an amount that your broker gets. Hence why so many agents choose to become brokers and ultimately become their own boss.
Brokerage commission sharing.
In general, the buyer’s agent brokerage will get half of the commission. For their efforts in bringing in the qualified buyer, the seller is entitled to receive a bonus of $30,000 because ($60,000 divided by 2) equals $30,000.
Divided commissions between your real estate broker and you.
The remaining amount would be split with your real estate broker since they have been providing you with support (i.e., admin, training, marketing, etc.).
With a 50/50 split, you would receive $15,000 in commission ($30,000 X 50%).
Most agents do work under a broker or a Realtor for a while before becoming one themselves and thus becoming their own boss. This doesn’t happen overnight and can take some time. With that said, you’re still going to be taking a lot of initiative and talking to a lot of clients on your own.
It’s all part of gaining experience and learning the ropes on your own path to success. Most brokers won’t mind when you do the work, as long as it gets done and deals get closed. These are all factors you have to consider before choosing a Career as a Real Estate Agent.
A Real Estate Education
There is some work and education that goes into being a real estate agent. Becoming a real estate broker is a little bit more education and required experience in the field as well as the office. Not all real estate brokers require you to have your agent’s license before going to work for them. Some will hire you on as a go-for or offer you an internship until you get your license.
This could mean getting everyone coffee or filling out paperwork. It’s all a part of getting started and paying dues. As for the actual education you need to get, your local area or state will have reading materials you’ll need to go through. You can also find actual textbooks written by pros. We advise using both of these assets to assure that you pass your state and local real estate agent exams.
A large part of being a real estate agent is being thorough. You might as well start that right at the beginning of your career.
Did you know that real estate agents don’t just help clients buy and sell houses? Their responsibilities can truly be far-reaching. Some real estate agents even manage properties for clients who rent them out. A lot of brokerage firms take on these types of tasks to earn the extra cash in between making the big deals. Some brokerage firms focus solely on rentals and others solely on vacation rentals in tourist areas.
That is part of the reason why choosing the brokerage firm you want to work for when you first start out is so important. It determines what you’ll be doing and your satisfaction with that, as well as the experience you gain while with that firm.
Watching The Market Trends
Paying attention to your local real estate market is a huge part of being a real estate agent. Part of your job, with the help of your broker, will be advising clients when to buy, when to sell, how much to buy for, and how much to sell for. To do this, you’ll need to pay close attention to your local area’s real estate market.
If the market is up and your clients are being low-balled for their property that is worth more, you wouldn’t want them to close a deal that didn’t satisfy them. You need to watch factors like Inflation or Supply & Demand, which drive the real estate market. Demographics are another huge factor in a local real estate market.
The point is that there are many different roles that a real estate agent can end up in and with. If you’re going to be an agent then you need to be prepared for them. The following items are likely the main roles a real estate agent falls into:
Helping clients purchase property.
Helping clients sell property.
Looking for rentals for clients.
Looking for tenants for clients with rentals.
Manage rentals for clients of the brokerage.
Doing general paperwork for the brokerage.
Looking for prospects or “prospecting for new clients and properties.”
Advertising for yourself and the brokerage.
That covers the general roles of a real estate agent, but there’s always room for more to boost business.
Residential Real Estate
You might think you already know a lot about residential real estate. There’s a high probability that you rent or own a home right now. Chances are, you’re not reading this from a mobile device under a bridge. (Sorry if you are.) With that said, your first area as a real estate agent will likely be Residential Real Estate. Commercial Real Estate is a whole different level of difficulty, rules, regulations, and paperwork.
How Does Residential Real Estate Work? A single-family home, a multi-family house, or a housing development can all fall under this category.
Additionally, vacant lots in residentially zoned areas are included. Apartments and buildings may be found near residential areas, but they are mostly considered commercial real estate.
For this reason, apartment buildings, hotels, and condominiums are viewed as profitable ventures by commercial businesses.
The term single family home refers only to houses in which one family may live. In addition to being self-explanatory, a multi-family home allows for more than one family unit to live on the property. Housing developments are the most complex since they consist of a group of homes in a particular area.
Know Your Market. Become an expert on a particular market. It would be wise for real estate agents to familiarize themselves with the local market. You should also familiarize yourself with the process of inspections: how long they take, how a property should look for one, what the results mean for federal and state regulations, etc.
The bottom line is that you’re going to have to deal with residential real estate whether that is your aim as an agent or not. Getting to know as much as you can about it will greatly improve your experience and your performance if you choose to become a real estate agent. Knowing the different types and styles of houses would make it easier to find what a client is looking for or to advertise to potential buyers.
The following are the base requirements for becoming a real estate agent in the United States.
Legally reside in the United States.
Pass the state exam for a real estate license.
You must be either 18 or 19 years old depending on your state’s law.
Obtain the pre-license education required by your state.
A real estate agent must meet the following high-level requirements. You will need to make some decisions in order to have a successful real estate career. Licensing requirements vary from state to state. You can find the official requirements for pre-licensing on the website of your state’s real estate commission. You can learn the steps to obtain a license in your state by familiarizing yourself with the licensing processes in your state.
Next you’ll need to look into those approved schools for real estate licensing in your state. Check out reviews and their website to get more information on what it would be like. Soon after you finish your schooling, you’ll need to be seated for your licensing exam. So, you’ll need a plan for that.
You may be required to submit fingerprints and pass a background check in some states. It may take several weeks for this to happen. Prior to scheduling an appointment for your exam, you have to complete the application process.
Even if you pass your state’s real estate licensing exam, you do not have a license just yet. Agents or salespeople are permitted to work on behalf of brokers and cannot work independently as real estate agents. A real estate broker should be found as soon as possible as part of the licensing process.
After you have completed the state’s pre-licensing requirements for education and passed the exam, you and your broker need to complete the final paperwork. Upon acceptance of the form, your license will be issued, and you will be able to practice real estate under the broker’s sponsorship. If you’re looking for the right brokerage firm, keep in mind that there are a few things to consider.
If that all seems like a lot of work, it is because it often is a lot of work. You’ll need to have the time and energy to get it all done.
Just as a heads-up, there are a lot of terms that real estate agents need to understand. We won’t go through all of them, but we’re going to give you a few so that you can get an idea what you’ll be dealing with. You’ll definitely learn more about them in your pre-licensing education, should you choose to become a real estate agent.
It is a clause of a financial contract that becomes effective upon the transfer or sale of a particular asset. There is often an alienation clause in mortgages that provide full repayment if the real estate property ownership changes. Insurance policies typically cover them as well.
Assignees are entities, persons, or companies that receive rights, property, or title from a contract. Assignors transfer ownership to assignees. A real estate title may be transferred from an assignor to an assignee, for example.
By-laws govern institutions that have governing bodies that are similar to boards of directors, whether elected or appointed. Condos and homeowner associations are often subject to these rules and regulations in real estate. Bylaws vary from one area or state to another.
Code of Ethics
How does a code of ethics work? In real estate, what is a code of ethics? A list of principles for professionals of a particular field can be defined as a written description of what they should do. Real estate professionals who are active or intend to be active must follow this list of rules and obligations. Real estate professionals are included in this list. Realtors, real estate agents, brokers, investors, county recorders, notaries, and fiduciaries are among the professionals we are discussing.
Those are just a few examples of terms that real estate agents need to know. If you can wrap your head around those then you’re good. Granted, there are more complicated terms, but those are for you to learn about in your pre-licensing education.
Independent contractors have different tax return forms than employees. As someone who is self-employed, here’s a look at the various forms you’ll need.
Your income is reported on Form 1099-MISC. An independent contractor will receive a 1099-MISC every year from their broker to provide proof of earnings throughout the year. A 1099-MISC is the equivalent to a W-2 for self-employed individuals. (You may be familiar with a W-2 for an employee)
Rather than a form, the 1040-ES is a booklet. Using this form, you will estimate your quarterly taxes and pay them.
Annual tax returns are filed on Form 1040. You may need to fill out this form if you are self-employed. Schedule SE calculates self-employment taxes Schedule C calculates your real estate net profit.
Understanding State Income Taxes
State and federal income taxes are levied in the US. Since federal income taxes apply to all real estate agents, this post focuses on federal income taxes. There may also be additional state taxes you need to pay (on top of federal taxes described here).
In this post, we will tell you which states do and do not impose a state income tax, rather than detailing details about all 50 states.
States with NO state income tax
Congrats to those who live in these states! Alaska Florida Nevada South Dakota Texas Washington & Wyoming have no state income taxes.
States with limited state income tax
State income tax is not charged to residents of New Hampshire or Tennessee on income made through your occupation, but they do charge state income tax on income earned through investments.
States who levy full state income taxes
In case you are not located in one of the nine states mentioned so far…sorry. On top of your federal income tax, you must file and pay state income taxes.
The most common reason that individuals switch careers is that they are unhappy with their present careers. They’re not always unhappy with their work. Sometimes, they are unhappy with their pay, or even the people they work with. That is why it is important to compare your old career to the new career you’re pondering undertaking.
Becoming a real estate agent is certainly no different. It is important to weigh your options and weigh the pros and cons of switching to it from your current career. Becoming a real estate salesperson is another viable option for potential real estate agents. It still requires a license but it’s a step below a real estate agent.
So, what are the pros of becoming a real estate agent?
Fairly flexible hours.
The possibility of far better pay.
Meeting new people.
Going to new places.
New and exciting challenges all the time.
Inevitably becoming your own boss if you choose to.
The cons of becoming a real estate agent:
The possibility of failure.
Possibly long hours, even during evenings and weekends.
The occasional frustrated or rude client.
The added education and starting costs.
A lot of travel time and miles on your vehicle.
Now, you’ll need to look at those pros and cons to weigh them against the pros and cons of your current career.
The percentage of Americans older than 65 or at the age of 65 who are still working remains at nearly one in five today. It is the highest value for this group in over 50 years. A significant number of retirees age 66 and older state that they are currently still working part-time or seasonal jobs.
The real estate profession fits the mold of what retirees are looking for both in terms of social outlets and income, as many of its professionals say it provides both. In terms of a new career, real estate is an excellent choice whether you are seeking a career change or just looking to return to work.
Due to their years in the workplace, seniors are more than capable of becoming a real estate agent, even though licensing and training are required. Both their professional and personal experiences have given them many skills. In any career in business, you gain skills in marketing, negotiation, and client acquisition. You can jumpstart your real estate career with these three skills and get the jumpstart you need.
The average baby boomer has held around 12 different jobs before they turned 48 years old, which should give you some insight into whether you might want to change careers or get back into the workplace later in life. That shows you are among great company!
Home buyers used an agent more than 85% of the time in 2015, and 88 percent said they would refer their agent to their friends and family because they enjoyed working with them.
Being older provides you with both life experience as well as professional expertise that will enhance your chance of success as a real estate agent. A good way to occupy your time is by helping others find the home they dream of!
On top of all of that, there’s no other career choice for retirees that will allow them to have so much time with their loved ones. As you get older, spending time with the family and spending the rest relaxing is what we all want to do. Real estate agents typically have that kind of time, hence why it’s such a great choice for retirees.
The common answer for most people here is yes. Other than passing a licensing exam, having a high school diploma is the only education most states require. Having a business degree or something similar would certainly help, but is definitely not required in most areas, just encouraged.
It is mildly important that you not have any serious criminal history and that you make sure you never have one. Keeping your public image in good standing is generally a good rule of thumb. Other than that it’s more a matter of cross-examining the different factors that go into this decision process.
Do you have the personality for it?
Are you good with basic to mild mathematics?
Do you have the time for it?
Are you up for the education and exam?
These are all fairly basic questions but good ones to ask yourself when thinking of a career as a real estate agent. The one question not asked up there or anywhere else in this is the most important…. Will you be satisfied with a career as a real estate agent? The real estate market is always hot for new agents in some area or another. There’s always going to be an opportunity to make money in this field of work. Being a real estate agent isn’t always a cake walk, but it certainly can be rewarding.
So, that is by far the most important question. Its importance rises above everything else we’ve talked about here. As far as career satisfaction, Real Estate Agents usually are happier.
2020 was truly a rollercoaster of a year. 2021 has only been slightly calmer and that probably depends on who you ask. If you’re feeling stuck in a dead end career and ready for a change, then maybe 2021 is the year to become a real estate agent. If you’re looking to make more cash and have what it takes, then maybe this is the year to make it happen.
On the other hand, becoming a real estate agent is a big jump. It is, as we’ve said, a flexible career, but you still have to put in the time and effort. It all comes down to your personal preferences and situation. No pressure.
A realtor may seem like the perfect job if you enjoy working with people and enjoy houses, however it isn’t always a dream job. Real estate agents are often thought to earn an incredible income for doing virtually nothing. There are many real estate agents who struggle to make ends meet, despite the fact that there are some extremely successful real estate agents. It all depends on you at the end of the day.
New real estate agents find it challenging to manage their time, especially if they have another job or small children. It is very common for real estate agents to show houses in the evenings or on weekends, so unusual hours are part of the deal. The convenience of real estate makes it appealing to working parents and for side jobs, but keep in mind that it’s not uncommon for buyers to contact you a few hours before showing up.
Weigh all your options before you start making plans. Make sure that becoming a real estate agent fits with where you want your life to go and how it is already going. Remember that starting something new means focusing on it rather than the past.