The real estate industry can be grueling. In fact, 87% of new real estate agents leave the industry within their first five years. The first year, in particular is especially challenging. For many new real estate agents, building a foundation for success during this first year is critical to their ability to build a thriving career in real estate.
If you go into your new career with the expectation that becoming a successful realtor takes hard work and persistence, you’re much more likely to become one of the 13% who thrive over time. However, becoming a successful first year realtor takes a lot more than hard work. The following tips will help you not only survive your first year, but set yourself up for long-term success.
It’s important to set realistic expectations for what it takes to succeed in real estate. Being a real estate agent is much harder work than most people realize. You’re getting into an extremely competitive industry, and you’re often forced to juggle a wide range of responsibilities.
While you’ll be part of an established brokerage, you won’t be an employee. Instead, you’ll be starting your own business. This means that you don’t have set hours, consistent income or benefits such as health insurance and a 401k retirement plan. Your ability to earn a living is dependent on closing real estate deals, and you’ll be responsible for figuring out your own health insurance and retirement benefits.
Anytime you build a new business from scratch, it takes a tremendous amount of time, hard work and persistence. You should expect to put in long hours and invest the upfront money necessary to get a business up and running. It may also take about six months before you start seeing income from your efforts. To survive your first year as a real estate agent, you must not only have these realistic expectations for what is involved, but you must embrace them.
As we just mentioned, most real estate agents aren’t employees of their brokerage. Instead, they are independent contractors affiliated with the brokerage. This gives you a status of “self-employed” in the eyes of the IRS, which comes with certain tax obligations that are typically covered by your employer when you work for a company.
In addition to federal tax obligations associated with income and employment taxes, you must also address the following financial obligations:
It’s recommended that you allocate 35% of your income to cover these business expenses. Therefore, you must factor this money into your financial goals for your first year as a realtor. For example, if your goal is to make $60,000 in your first year, you’ll need to earn $81,000 to ensure your take home pay hits your goal.
While you must pay all your income taxes, many of your business expenses will be tax deductible. In order to avoid overpaying the IRS, you’ll need to carefully track all of your deductions.
The following items may be claimed as deductions on your tax returns:
In order to claim these items as deductions, they must be directly associated with your real estate business and be paid for by you, not your brokerage. In addition, you’ll need to provide proper documentation for every deduction you take.
Since you’ll be running your own business, you must do some financial planning. It’s important to determine who much you need to earn to support yourself during your first year as a realtor. As you’re setting this financial goal, talk to other local real estate agents about what they earned their first year to make sure your goals are realistic. You want to make sure you don’t overestimate how much you can reasonably earn in this first year, since this can potentially set your new business up for failure.
It’s common for first year real estate agents to work a second job while their new business gets established. If you prefer to focus all your energy on building your real estate business, it’s a good idea to have at least six months of income saved up since it may take awhile to start closing deals.
In addition to setting realistic income goals, you’ll need to create a budget for your first year. One of the most common reasons new realtors fail is because they don’t create a budget, which makes it hard for them to know how much they need to make to cover all of their expenses. In addition to the amount of money you need to live on each month, this budget should include all the upfront expenses associated with starting a business, such as:
Your brokerage is more than the company that you run your business through. It also serves as your initial network of colleagues and mentors. For this reason, your first real estate brokerage can often set the success trajectory for your career.
The importance of having a strong mentor as you start your real estate career can’t be stressed enough. Your mentor becomes your go-to source for advice and guidance as you work through your first few transactions. This person can also introduce you to a larger network of real estate industry professionals who can help you grow your fledgling business.
For these reasons, it’s important to be selective when evaluating potential real estate brokerages. Make sure you choose one that has a reputation for high quality, high producing real estate agents. When looking into brokerages, talk to the agents working at each one. You’ll want to identify one or two potential agents who can serve as your mentor before you agree to join the brokerage.
While you’ll have just completed 168 hours of pre-licensing education courses, it’s important that you don’t neglect your education as you build your real estate business. The real estate industry is constantly changing, and it’s important for you to stay on top of the latest developments. In addition, you may identify a specific niche you want to pursue which requires more specialized knowledge. The main takeaway here is that you should always strive to expand your knowledge of the real estate industry, and this requires a focus on continuing education.
Most brokerages and local realtor associations will offer continuing education classes and seminars to help you expand your industry knowledge. In addition, you can take online continuing education classes that allow you to work at your own pace around the hectic hours associated with a first-year realtor.
While taking continuing education courses won’t guarantee a thriving business for a new real estate agent, it will help round out your knowledge of the industry at a critical time in your career. You’ll most likely come away from each training or seminar with a few valuable pieces of information that you can apply right away. This can be extremely helpful as you learn the ropes in a complex, competitive and challenging industry.
The decisions you make as you embark on your real estate career will be critical to your ability to thrive in this highly competitive industry. At Colorado Real Estate School, we can set you up for success. We offer a wide range of online real estate courses to address just about any need you may have:
We’re the only real estate school in Colorado delivering an Experts on Demand Approach™ focused on helping you pass your exam and building the foundation for career success. Our dedicated team is available to help you choose the best program for your unique needs. All of our online real estate courses meet the Colorado educational requirements for licensing, and you’ll have 24/7 access to the materials, allowing you to fit your studying into your schedule.
In addition, our exclusive Experts on Demand Approach™ delivers:
You’ll also benefit from our TruSupport Pass Guarantee™. This is our commitment to providing all the support you need to pass your exam. If you don’t receive a passing grade, our team will analyze your results to develop a personalized test success plan. You’ll also receive extended access to our course materials as you prepare to retake the exam.
At Colorado Real Estate School, we’re committed to helping you get established in your new career so that you can become a successful first year real estate agent.
Contact us today to learn more about our online real estate courses.
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