Before You You Choose a Real Estate Career - Know Why People Fail
Being successful in a real estate career isn't "rocket science," but it isn't "as easy as falling off a log" either. Entering the business with realistic expectations and a plan for overcoming obstacles will help to avoid becoming a statistic.
According to the Department of Labor, the median real estate agent's income in 2004 was $35,670 (median means half above and half below). That's gross income, out of which all their business expenses had to be paid. The bottom 10% had a gross median income of only $17,600. Even if you're with a broker that provides an office, phone, business cards and some prospect leads, you'll still have expenses for your car, personal marketing, client gifts/entertainment and more.
These figures fly in the face of perceptions that there is lots of easy money in real estate, and part timers can make good money as well. Some do, but many do not and end up going on to other careers. I really have a problem with the low barriers to entry and the perception of lots of easy money. Those two factors combined lure people into the business that shouldn't be there and will likely fail.
The Competition Is Fierce with More Agents Than Ever
With over 1.18 million members of the National Association of Realtors®, and record numbers entering the field each year, it's imperative that new agents understand their market and the competition. Know your abilities, both business-wise and financially. Learn everything you can about your market and where buyers and sellers come from. Then plan your marketing to capture them at the best value.
After the housing and mortgage crash that began in 2006, agent numbers declined dramatically. Many couldn't make a decent living and new agents fell out quickly. I personally knew some who also lost their homes to foreclosure. However, by 2015, the number of agents had risen back to almost pre-crash levels.
Are Your Expectations Realistic?
Something we've heard many times is "I'm good with people and I've got a huge number of friends and family. They'll give me enough business to carry me through my first year or so." That's not the way it goes. First, they have over estimated the number of actual transactions all those friends do in real estate. Only a small fraction will buy or sell property in any given year. Also, they don't owe you the business, and you may find that they don't remember you when the time comes.
Be Financially Prepared for Lean Years in Your New Business
Not entering the business with adequate financial resources is a common reason for failure. It's not just having enough cash on hand to make it to the first commission. It's also making a plan and a budget that is realistic in estimating expenses, allows for the unforeseen and hopefully includes a budget for marketing. Don't rely only on your broker for prospects and business. Make a marketing plan and develop a budget to fund that plan through the first year. Debt may be a viable vehicle for a good plan.
One reason given by agents who've left the business is that they just burned out. It's usually in relation to working with Buyers and driving many miles showing hundreds of homes without a deal. The temptation for a new agent is to take any prospect that comes along, hoping for a deal at the end. You can avoid this ticket to Burn-out City by qualifying your customers as to their motivation and buying schedule. Develop a list of tactful questions that help you to do this.
Better marketing for better prospects can go a long way toward avoiding burnout.