As you begin your real estate agent career, you may be envisioning glamorous television real estate moguls and anticipating making the big bucks. The potential for making big commissions is a definite possibility, but it’s important to have realistic expectations of what you’ll be making, especially in your first year.
The median annual earnings of a real estate agent in the U.S. are about $46,410. However, this is by no means a limit to your potential annual pay. In fact, you could make much more (or much less) than this depending on several factors including location, experience, taxes and expenses, and overall effectiveness at selling homes.
The housing market where you work could make all the difference in how much money you make as a real estate agent. If you’re working in an area with lower housing values, there is less room for your commission to grow. However, if you’re working in an area with significantly higher housing values, such as Beverly Hills, your commission will naturally grow along with it – running even into the millions annually! Of course, this also requires a significant level of experience and sales talent.
When you first start out, you’ll need to work under a real estate broker. You may choose to continue doing so even down the line, or you may eventually become a broker yourself. Either way, when you’re working under a broker, your level of experience will effect the percentage of commission that you actually take home per sale. In the beginning, you’ll likely be giving your broker over half of whatever commission you earn.
Taxes and Expenses
As a real estate agent, even within a brokerage, you’ll be working as an independent contractor. As such, you’ll be responsible for paying your own taxes and paying for necessities such as health insurance and marketing. Prepare for these expenses to take a portion out of your earnings, and set aside a portion of your income throughout the year in preparation for paying taxes.
Ultimately, the most important determining factor in your earnings will be the effort you put in and your effectiveness as an agent. If you consistently work hard, go above and beyond for your clients, do your research and always provide the best service, you’re likely to end up earning a much better income than someone who only sells occasionally or who doesn’t give their best to their clients. You’ll be able to sell higher value homes and more of them, which will ultimately be reflected in the amount you take home with you.
As you’re getting started, it may be tempting to envision a glamorous lifestyle and simple work. However, as you start working as your own boss in a highly competitive field, you’ll need to bring your A game and be prepared for the additional expenses you’ll incur as an independent contractor. The more you know the playing field, and the more you’re willing to work, the more potential you have to make that luxurious commission.