Being a new real estate agent and paying for the costs

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Being a new real estate agent and paying for the costs

Deion Alaei
United States · Member since 2013 · 26 posts · 0 votes

Hello BP,

I'd like to get opinions from fellow BP members on the following question.

When a person first becomes a real estate agent, they have plenty of costs/expenses: both personal and business expenses.

My question is: in order to be able to pay for costs like marketing, advertising, fees, phone, computer, rent, gas, car - how do you feel about a new real estate agent using debt to be able to pay for those costs and hold them over for a certain period of time until they're able to start cashing commission checks?

More specifically, how do you feel about, for example, a new agent getting a personal loan from his/her bank in order to "finance" the many costs/expenses.

It's something that recently crossed my mind, and it got me to thinking - "if a person did do that, monthly payments would probably be a few hundred dollars a month, which would mean that would really be their only expense, which would mean they'd at the most need a part time job to pay for that as opposed to needing a full time job, therefore having more free time to dedicate to their real estate agent career, therefore better their chances of being successful at it."

Please do feel free to give me your thoughts and opinions on this. Do you think it can be a strategically good idea? do you think its too risky? do you think the quicker accumulation of funds alone makes it worth it? Let me know :)

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Jerilyn D.
Real Estate Agent · Peachtree City, GA · Member since 2013 · 34 posts · 12 votes
12y

Hi Deion,

If you are new to the business, how about starting out as an assistant to a busy agent in your area? It is a great way to learn the business, and get paid while doing so. Just my 2 cents : )

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  • Hans Langsholt
    Oslo, Ostfold · Member since 2012 · 65 posts · 1 vote
    12y

    What is your general cost through a month to actually do this full time?

    Same question if doing it 50%, 30%?

    Are you able to do this i.e. 50% and have a other job to cover your private expenses Until the business catch up? Please tell about yourself.

    I am asking because I am looking to get into the business as a small investor. I do not wanna give false hope but send me a mail with CV and tell abut yourself. Generally its a small chance to invest in businesses.

    Best regards

    0Reply
  • Jerilyn D.
    Real Estate Agent · Peachtree City, GA · Member since 2013 · 34 posts · 12 votes
    12y

    Hi Deion,

    If you are new to the business, how about starting out as an assistant to a busy agent in your area? It is a great way to learn the business, and get paid while doing so. Just my 2 cents : )

    3Reply
  • Account Closed
    Orlando, FL · Member since 2013 · 165 posts · 62 votes
    12y

    Deion

    Becoming a Realtor and making a living is career decision. It is a great way to make a living. Getting started is the tough part. Incurring debt is for certain not good.

    If you want to get started in a real estate career, you need to have rifle barrel focus. Forget your hobby. Forget your friends. Forget everything that is not leading you to get a listing and get it to closing. Most people don't embark on a real estate career with this much commitment. Read every book you can find about real estate. Attend every seminar. The more you learn , the more you earn. You don't have to keep this up forever. You have to keep it up until it starts to work.

    As for the expense, most of the expense comes from joining the Association of Realtors, not from getting a real estate license.

    http://www.biggerpockets.com/blogs/3840/blog_posts/33767-the-difference-between-a-realtor-and-a-real-estate-licensee

    Here is an article to explain the difference in cost.

    Good luck in your endeavors .

    1Reply
  • Account Closed
    Involved In Real Estate · Lynchburg, VA · Member since 2013 · 246 posts · 75 votes
    12y

    Hi Deion,

    Please don't take out loans and such to get started. Throughout the country, getting started as a real estate agent costs about $1k to $3k (from what I've seen). It's not a lot of money compared to other businesses. Just try to save up that money while working another job, and start part time until you gain momentum.

    The 3 best ways to get results fast cost virtually nothing - networking, cold calling and door knocking. They aren't scalable like direct mail but you can't beat the return.

    0Reply
  • Holly Baldwin
    Realtor · Layton, UT · Member since 2013 · 84 posts · 37 votes
    12y

    @Deion Alaei

    My opinion is that incurring debt would NOT be the way to attack it. Save up and pay cash.

    Financially speaking, interest is only your friend if you are collecting it. If you would have to PAY, stay away!

    I am assuming you are wanting to do real estate to better yourself financially. Who doesn't?! If you focus on steering clear of paying interest, especially in regards to consumer debt, you will start off on the right foot to achieving financial greatness!

    Gotta work smart!

    0Reply
  • Deion Alaei
    OP
    United States · Member since 2013 · 26 posts · 0 votes
    12y

    Thank you everybody for the responses so far.

    I read each and every last one of them, and for the most part - Patrick and Holly really answered my question directly and in depth - its all good though, I appreciate all the responses I can get as this is an important question to me.

    Patrick - I realize the start up costs of being an agent is low - but I wasn't just talking about that set of costs - I was talking about finding a way to pay for the first 6-12 months of those expenses and personal expenses. They say to have 6 months of personal and business expenses saved up first and thats what I was more referring to - and getting a loan was just an alternative idea that crossed my mind that seemed to be less time-consuming than personally saving up money.

    Holly - I could not agree more on your views on personal debt - I've been the poster boy for years advocating no debt unless its debt to buy an asset that actually makes you money as opposed to costing you money - having said that, I've slightly entertained the idea of a personal loan because the way I figured - sometimes in the beginning you gotta compromise or do something you generally would be against - nonetheless I get what you're saying though and I completely agree

    0Reply
  • Bryan L.
    Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
    12y

    @Deion Alaei - Not wanting to burst your bubble, but just to let you know that most new Realtors don't survive in the biz. Probably not a good idea to borrow to get started. I don't mean to discourage you though. Best wishes.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Deion what is your current lifestyle level??

    You said 6 to 12 months of reserves. This is generally true. What would you be leaving to do real estate??

    If you were working for 9 bucks an hour before and surviving that income is more easier to replace for reserves than making 80k or 100k yearly etc. and making the change.

    You have to write down all lifestyle expenses and know what the monthly nut is to break even and be comfortable but not rich or having to take on debt when you start out. If you are needing to buy things now is the time before you go agent status because then they want to see 2 years income statements for extending credit etc. with a career change.

    Next you have to ask yourself WHAT you want out of being an agent?? Write down in a perfect world what your career and income level will look like. Then look at what niche you want to focus on. Anything with residential say goodbye to nights and weekends as an agent. Buyers unless investors will be making emotional decisions and you will deal with lots of drama. Some agents enjoy homebuyers and others who are brokers/agents like me can't stand it.

    I enjoy commercial real estate and working with investors. I still love helping people and the relationships but it's regular daytime hours with professional investors and business owners and developers etc. They value your time unlike a home buyer because they know what being busy is like. Decisions are made based on data and numbers and not emotions.

    You also need to know what your split will be. If you are on a 300 transaction fee you will need to do less business to meet that reserve than if the split is 50/50 or 75/25 etc. If you need cash NOW then working for an experienced agent as an assistant or buyers agent on their time should bring you in some business but you still have to be personable and good at sales to close deals even with good leads.

    You can also "sit a subdivision" as an agent and make great money now that building is coming back in many areas. When the economy was great in 2005 I know some subdivision agents bringing in 175 to 200k a year in commission. You still have to sell them as the buyers are likely viewing competitor subdivisions unless the developer/builder built at amazing product at a great price and you are selling out.

    Hope it helps.

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    0Reply
  • Lauren Taylor
    Columbia, SC · Member since 2013 · 73 posts · 14 votes
    12y

    Let me start by saying I think you've gotten some good advice here. But realistically, when you are getting into real estate think of it just like starting a business. And though there are ways to lessen your cost/risk you are smart in planning for 6-9 months of reserves. Certain areas as mentioned above can take longer to see results. As for the loan you have to look at your risk vs reward, it's a very good idea to figure out exactly what your expenses will be and then add about half of that amount. If you do decide to go this direction make sure you have a few things in place, an iron clad business plan, a mentor, and a strong focus on sticking to the plan. I personally did take a loan in order to start my real estate career and it worked beautifully or me. But that being said it worked because I planned ahead knew what direction I would go in and is not deviate from my plan (on top of working 90 hr weeks. Haha) I was able to accelerate my career much faster because I wasn't just "some part timer". Both ways can be done just wanted you to hear a different opinion from someone who had gone about it that way as well. I just want to be clear that its not for everyone you have to stick to the plan and work yourself to the bone to make sure you don't prove the guy right above about "most people failing". ;) Good luck my friend if you need anything reach out.

    0Reply
  • Deion Alaei
    OP
    United States · Member since 2013 · 26 posts · 0 votes
    12y

    Lauren Taylor - Thank you, very sincerely, for your comment - It really is refreshing to get the perspective of someone that's actually been there and actually did get a loan to start their career - I definitely plan to work very hard at it, and definitely plan to succeed - im not gonna try to succeed, I AM gonna succeed - I think saying the word try is planning to fail, that's why I wont use it here - Again, thank you for your comment, and thank you everybody for your comments as well - much appreciation and respect :)

    0Reply
  • Account Closed
    Involved In Real Estate · Lynchburg, VA · Member since 2013 · 246 posts · 75 votes
    12y

    Deion, it really sounds like you already had your mind set to it and you were only looking for validation.

    The reality is that being an agent is like a snowball that gains momentum over time. Unless you plan to do cold calling/ door knocking 8 hours a day, 5/6 days a week.. there is no reason to start full-time and especially take a loan.

    When you're just getting started, you won't have 25 listings/buying clients to manage. In the first several weeks/months you'll be lucky if you have a handful. Managing those properly will take a few hours a week but definitively not 40-80.

    Might as well find a temporary job and use those proceeds to fund marketing yourself as an agent.

    0Reply
  • Deion Alaei
    OP
    United States · Member since 2013 · 26 posts · 0 votes
    12y

    Patrick D.

    thank you for the follow up sir - truth be told, getting a loan was something I was considering, but no it wasn't something I had my mind set on and needed validation for - I can understand though why it may have seemed that way, but honestly, im still trying to weigh my options and determine whats best

    I completely understand what you're saying about the field of being an agent is very difficult, especially in the beginning, and thankfully I've been fortunate to have the support/encouragement of my friends, family and the wonderful community here on BP

    it sounds cliche, but I sincerely do value all these responses and perspectives from all different types of people on here - you're words are much appreciated and will most definitely be taken into serious consideration

    as I said before, im still undecided in regards to method of paying for initial expenses, but im confident that ill be able to figure it out, especially now that I have the opinions and perspectives of all you guys on here. Thanks again :)

    0Reply
  • David Hunter
    Residential Real Estate Agent · Cleveland, OH · Member since 2008 · 579 posts · 225 votes
    12y
    Originally posted by @Jerilyn D.:
    Hi Deion,

    If you are new to the business, how about starting out as an assistant to a busy agent in your area? It is a great way to learn the business, and get paid while doing so. Just my 2 cents : )

    Jerilyn said it best. Become an assistant to a top agent, learn the business, and get paid for it. Then you won't have to go into debt.

    Only 20% of the agents who get into this business make it the first year. Then, only 10% of the 20% make it the second year. Something to think about.

    1Reply
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