How much Does a Real Estate Agent Make?
When you are working for a salaried position, your income is fixed, and dependent on corporation rules and advancement tracks. There is not always a lot of opportunity to improve your economic situation without moving departments, or sometimes moving to a new company.
A real estate agent is in a unique position where they can control their own income in a way that many people only dream of. A first year real estate agent can make up to $100,000 or more, and the only thing holding them back is their own motivation and drive to succeed.
Most real estate agents are independent contractors, and work on a commission base, with no salary or hourly wage. This means they give up the cushion and stability of an employee, and that includes many of the benefits. As an independent contractor, a real estate agent rarely receives any medical benefits or retirement plan. They don’t get paid sick leave, and they generally don’t get an end of year bonus. If an agent is willing to give up these benefits, they must be getting something in return to make it worth their while. What do they get that is so valuable?
Who can you turn to for answers on the best way to advance your career? There are many avenues to success, and you can get advice from many sources, but the only person that knows what is the best fit, the right career move, and the greatest opportunity for you, is you. Nobody knows you like you do, so why turn to someone else to give you direction in your career? Why not sit yourself in the driver’s seat and make your own decisions that can determine your economic prosperity?
As a real estate agent, an independent contractor, not only will you have the freedom to determine your own work hours, and be your own boss, but you will also be a direct recipient of the benefits of all your hard work. If you close a deal, you are the one getting paid for it. Every hour you spend working is directly for you, and your own income. For many, that is what they need to find the drive to succeed. Reaping your own rewards can be very satisfying.
Let’s take a look at the numbers. A residential sales agent sells a home for a client for $300,000. They have an agreement with their seller for a 6% commission on the sale of the home. They agree to split the commission with another agent who represents the buyer. 6% on a %300,000 home is $18,000, so each agent receives $9,000. Each agent is required to be supervised by a broker, and this agent’s broker agreement is for the broker to take 30% of each transaction, which leaves the agent with $6300.
$6300 for the sale of one home. But before you take that number to the bank, remember that as an independent contractor, all of your business expenses are your own. So let’s look at those expenses. Self-employment tax is the first consideration, and if we assume 15%, that is $945. Other expenses could include $500 health insurance, $150 monthly advertising, $50 office supplies, $150 trade membership dues, $200 for software tools, $50 for errors and omissions insurance, $400 vehicle payment and maintenance, and $500 for office space. If you consider all of those monthly expenses, and you sell one home a month, that leaves $3,355, which is $40,260 a year. According to the National Association of REALTORS, the median income for REALTORS was $42,500 in 2016, so we’re pretty close.
Now is that how much a real estate agent makes? What if you are able to sell 15 houses in a year? What if you are able to sell 20? On the other hand, what if you only sell 5 houses in a year?
Do you see now that there is a great opportunity here for you, as an aspiring individual, to control your own income, and finally begin making what you are worth? Not without risk, because you would be giving up some of those safety nets that give you a sense of security. Nearly all rewards come after some risk, but if you are willing to put in the work, you can increase your income, enjoy some more freedom, and live life by your own terms.