For many real estate professionals, the first year is the hardest. However, our new study, published in our 2018 Real Estate Income Report, reveals a big incentive for sticking around: the average real estate income doubles after year one.
Agents in our study reported earning an average of $19,375 when they had been in business for under a year.
However, agents with between one and three years of experience saw their earnings increase to $41,023. It doesn’t stop there — longevity in the business continued to be a strong predictor of take-home pay throughout an agent’s career. Agents with four to 10 years of experience reported an annual income of $62,138, that number jumped to $83,177 for agents with 11 to 25 years of experience and went as high as $86,329 for agents who had been active for more than 26 years.
Real estate income grows for many reasons
The 2018 Real Estate Income Guide shows that other factors influence an agent’s pay in addition to longevity, and present opportunities to grow real estate income down the road. These factors include everything from how many hours worked in a week, to location, to real estate specialization, and more.
But it’s undeniable that the longer agents stay in the business, the more they earn.
This can be welcome news to agents who are struggling through the early stages of their career and wondering when they’ll see an uptick in their earnings. On average, the most significant one-time jump in income an agent will experience during their real estate career happens after the first year. However, it can be tough for new agents to stick around long enough to break through.
Here are some tips to help new agents succeed in the first year of real estate and increase their earnings.
FREE Guide: See how agents in your market are earning money with our 2018 Real Estate Agent Income Guide.
3 tips for first-year agents to double real estate income
Staying in real estate long enough to see that initial income double is crucial, but it can be discouraging to keep going if the results aren’t there. These strategies can help agents stay in the business and continue improving.
1. Have savings to rely on in your first year
Do you know how much it will cost you to get started in real estate? Like any business, real estate requires some investment capital. Here are a few of the initial start-up costs you can expect:
- Pre-licensing real estate classes. Estimated cost: $300. You’ll need these before you can take the real estate exam.
- Brokerage fees. Estimated cost: Can be anywhere from $25 to $500 a month. Brokers can take a commission on your real estate earnings or charge you a monthly desk fee, or both.
- Marketing costs. Estimated cost: About $1000 annually. Announcing yourself to the community and developing leads takes time and money. Be prepared to spend a significant amount of energy and resources in your first year on marketing.
Not only does it take money to start your business in the first year, but you’ll also need money for living expenses while you’re waiting for your initial transactions. The more money you have saved, the longer you’ll be able to last in real estate while you’re learning and waiting for your real estate income to double.
How can you save money fast before going into real estate? Here are two budget apps that can help you stay on track:
- Use a money management app. Apps like Mint allow you to track your saving and spending as your work toward your financial goals. Mint will send you updates to help you stay on target and automatically analyze your finances to let you know where you can cut some expenses.
- Find an auto-saving tool. If thinking about putting aside money is stressful for you, or if you just forget to do it when you get paid, use an app that will do it for you. Apps like Digit analyze your finances and put small increments of money away automatically so you don’t have to think about it. With their technology, they’ll make sure you’re saving money at the right time of the month so that you don’t put money into savings when you have more upcoming bills and expected purchases on the way. Your saved money will sit in a Digit account and accrue 1% interest every three months.
2. Find a supportive brokerage
A supportive brokerage can be an impactful ingredient to agent success. Leaning on the collective wisdom and resources of other agents will help you learn quickly so you can earn double real estate income after your first year.
Here are some ways to assess if a brokerage is right for you.
- Do they have a track record of being supportive and inclusive? Ask potential brokerages how many women or minorities are on the team and what common strategies they use to support new real estate agents. Do they have processes in place for new agents? Do they have examples of how they’ve helped new agents in the past?
- What is the commission split? Since most real estate agents are paid on commission, if you want to double your real estate income you’ll have to find a brokerage that will take a fair cut of this commission and not take advantage of you. Your commission split will vary depending on your market, the size of the brokerage and your niche. Talk to other real estate agents in your market to get a sense of what a good commission split is for you.
3. Create a mentor relationship
Having a mentor you can look to when learning the ropes can help you double your real estate income after the first year. Finding and cultivating a mentor relationship can be the tricky part. One strategy to consider is an inverse mentorship. If you’re good at a skill that more established agents don’t have — like website building or social media management — you can offer to teach your skill while they teach you other valuable lessons in real estate.
Doubling your real estate income is possible
The statistics show that the majority of agents who last through their first year will see double real estate income after that. Learn the important lessons early on, recover quickly from your mistakes, and start earning top dollar!