Yearly Cost of Being a REALTOR

[Deren Huang]

Hey all,

Just wanted to give a frame of reference for those who are thinking about being a real estate agent, whether it is to do "retail" sales or investing here are some of the cost associated to being an agent:

I am located in Tulsa, OK each region/brokerage/style is going to be different

P.S. other realtors feel free to chime in

Greater Tulsa Association of Realtors (access to MLS): 663/year (paid quarterly)

National Association of Realtor fees: 685/year (paid in full upfront per year)

Monthly Desk Fees: 990/year(HUGE range depending on style of broker)

Continuing Education/Renewing License: 150/year (Just an estimate on the high side, new license last 1 year, then 3 years after, may want to upgrade to broker's etc.)

Bare Bones: 200-250/mo or 2400-3000/year

Not that bad if you ask me, but there are a ton of other cost that you may not of thought about:

On the "retail side":

Advertising Costs, Marketing Materials, Coaching, Health Insurance - 1000/mo (doesn't include my health insurance)

I am pretty conservative in my marketing also: 1250-1500/mo or 15000-18000/year

BREAK EVEN POINT:

Here are more costs when you do make money:

Taxes - 1099, there are a ton of things you can write off, but you are still responsible to pay the 7.5% that most companies pay off the top

*Commission Split - most start at 50/50 some go to 100%, depending on how you start this could be even lower than 50/50

*Splits, franchise fees, and commission vary a ton

REALTOR BREAK EVEN:

Let's just assume that our break even point is 1000/mo, I advertise more than a newbie (I know most of the things I mentioned are tax write-offs, so I wont include that in our calculations)

1000x2(commission split of 50/50) = 2000

2000/.93(franchise fee of 7%) = 2150

2150/.03(commission off sale) = 71,666 (price point of house needed to be sold)

71,666x12 = 859,992

You need to sell almost 900,000/yr or 71,666/mo to break even in this industry... 

REALTOR LIVABLE WAGE:

let's say that 36,000 is a good wage after tax

36000/.7(30% for taxes) = 51,428

51428x2 (commission split of 50/50 this would change though) = 102,856

102856/.93(franchise fee) = 110,597

110597/.03(Commission) = 3,686,594

3686594+859992(cost of fees/marketing) = 4,546,586

So you would need to sell 3.8-4.5 million/yr (your split would not stay at 50/50) or 316,000-375,000/mo to net 3k a month (This is a high estimate)

INVESTOR BREAK EVEN

you just have your license to invest

2400x2 (commission splits) = 4800

4800/.93 (franchise fee) = 5161

5161/.03 (commission) = 172,043

You need to sell/purchase a home that is 172,043/yr to break even what you have spent (there are other benefits for investors/realtor of course though)

*DISCLAIMER: I am not trying to set commission fees. Splits, franchise fees, and commission are different.