There are many things that make a career in real estate highly desirable. You’re able to enjoy a flexible schedule that allows for great work/life balance. You get to meet a lot of interesting people and make numerous connections through your clients and your professional networks. You’ll experience tremendous job satisfaction as you help clients find their dream homes or bring in a good return when they sell their current home. And of course, you also have the potential to earn a lucrative income.
This last factor can’t be overstated. We all want to be compensated well for the hard work we put in at our job, and we all want to be able to enjoy a comfortable lifestyle. Unlike many salaried or hourly jobs that experience relatively small raises per year, real estate offers tremendous potential for high annual earnings that can grow significantly over time as you become more established.
This sounds great in theory, but you may be wondering how much most real estate agents actually make. Unfortunately, it’s hard to put a specific dollar value on the average income of a real estate agent because there are many factors that will impact your earnings. Let’s examine these factors so that you can gain a clearer understanding of what you can expect to earn as a real estate agent.
Real estate agents typically don’t earn a salary. Instead, they receive a commission for every deal they broker. This commission consists of a percentage of the property’s selling price. Commission rates are negotiated with the seller at the start of the process and vary from sale to sale, but on average commissions typically fall between 5-7% of the sale price.
This commission is split between the seller’s agent and buyer’s agent. While commissions are often split evenly, they don’t have to be. In addition, each real estate agent will need to give a percentage of their portion of the commission to their brokerage based on the commission split deal they’ve negotiated when they joined the brokerage.
Not all of the money you earn from each commission will be part of your income. Even though you work for a brokerage, you’re not considered an employee of the brokerage. Instead, you’re essentially a small business owner which means you’re responsible for paying the overhead expenses associated with running your business. These expenses must be paid from your commission, and whatever money remains will be your income.
Some of the expenses associated with running a real estate business may include:
While your income is largely dependent on how many deals you close, the reality is you have unlimited earning potential as a real estate agent. The more deals you close, the more commissions you’ll earn.
Real estate agents in high demand, high-cost metropolitan areas typically earn more money than agents in less competitive rural markets. These cities typically have higher property values than many rural markets, and the larger populations in these regions mean that more real estate transactions are conducted. This leads to larger commissions per deal and the potential to close more deals per year in these high demand, high-cost metropolitan areas.
Seasoned real estate agents will generally earn significantly more money than new agents. There are several reasons for this increase in earning potential as you become more experienced:
Economic factors such as interest rates, housing demand and local market trends can impact your income as a real estate agent. For example, agents typically earn more in a seller’s market with low interest rates and high demand than in a buyer’s market with high interest rates and lower demand.
Since real estate is a commission-based income structure, agents who close more deals and handle higher value transactions will earn more money.
However, you should consider this an investment in your career. In most instances, this mentoring will prove invaluable to your growth as a real estate agent, helping you become more successful over time. As you become more experienced, you can then negotiate a better commission split with your existing brokerage or find a different brokerage that caters to more experienced agents and offers more favorable splits.
One of the ways to boost your income is to specialize in a niche. This will give you greater specialization, making it easier to attract clients in need of a real estate agent possessing your specialized skill set. In addition, certain niches such as commercial real estate or luxury homes typically allow you to close deals with significantly higher property values. This will increase the commission you earn on each deal.
Your ability to get clients will impact the number of deals you close and the amount of money you make. As a new real estate agent, a lot of your clients will be generated through your marketing efforts. The more effectively you’re able to market your business, the more clients you’ll be able to work with. This will lead to more deals and higher earnings.
Keep in mind that over time, your marketing efforts will become a smaller component of your lead generation efforts. As you grow your referral network, you’ll find that the majority of your leads consist of referrals and repeat clients.
Real estate agents who provide exceptional customer service and build strong client relationships are more likely to generate repeat business and referrals, leading to increased income over time.
In certain real estate niches, additional education or certifications can increase your level of expertise and potentially lead to higher earnings.
If you’re considering a career in real estate, Colorado Real Estate School can help you build the foundation necessary to unlock a lucrative income. Our online real estate courses contain all the critical information necessary to pass your real estate exam and build a successful business.
All our courses are developed and taught by local, licensed real estate professionals who can help you understand the latest trends impacting the real estate industry in Colorado. In addition, the online format of our courses makes it easy to move through the lessons at your own pace to optimize your learning.
We enhance our online real estate courses with our exclusive VideoConnect Success Learning System™ containing the largest library of video content available. These video lessons transform your learning environment into a dynamic, engaging classroom that makes you feel like you’re sitting in the room with your instructor.
At Colorado Real Estate School, we’re truly committed to your ongoing success. All our courses are backed up by our exclusive TruSupport Pass Guarantee™ that allows you to receive additional support if you don’t pass your exam on the first try. You’ll receive extended access to our course materials, and one of our instructors will work with you to develop a customized study plan focused on the concepts and topics you struggled with when you first took the exam. This approach will help set you up for success the next time you take the exam.
Contact us today to learn more about our online real estate courses.
