If you’re considering getting into real estate and are curious about the steps needed to be licensed and how much it will cost. In that case, it will probably surprise you to know that for an industry so potentially lucrative, it doesn't really cost that much to become an agent.
If you’re like me, it can be stressful and uncomfortable to think about your expenses and how they impact your budget.
On my YouTube channel, there is a video titled, “What are the REAL costs of being a real estate agent,” where I discuss how monthly, quarterly, and yearly expenses can sneak up on you, so you need to make a plan that considers these expected costs and budget for more than you expect.
In general, the real estate industry has an easy entry-level, and because it’s relatively easy to begin, people start out thinking it’s going to be simple. However, like all businesses, real estate demands that an individual have a high level of motivation and work ethic and be strategic in how they bootstrap their startup.
Also, because it’s relatively easy to get started in real estate, people assume that there aren’t going to be overhead costs and expenses like in other businesses. The truth is, though, that, like most start-ups, your business expenses can creep up on you and cost a lot more than you think if you’re not careful and strategic.
Most new agents don’t realize that there are many hidden fees and costs that can severely impact your budget if you’re not careful.
The Hidden Costs Of Becoming a Real Estate Agent
When you become a real estate agent, you become both a business owner and an independent contractor, which means that there are expenses that you will be responsible for.
And as you are a business all by yourself, there are a variety of fees that you’ll need to plan for and budget around.
You’ll need to plan for education, examination, and post-licensing costs to get started.
- Education: licensing classes, exam fees, fingerprinting fees
- Real estate membership dues and fees: local and national real estate board fees, MLS fees
- Brokerage and desk fees: broker fees (when applicable), desk assignment fees
- Continuing education: Additional coursework to stay compliant, conferences for professional development
- Insurance: Business insurance and car insurance costs
- Business expenses: Business license, office expenses, business coaching, taxes, other general business expenses
- Marketing and lead generation: general marketing costs, signage, lead generation costs
Being a real estate agent is very affordable in terms of upfront costs; you pay to attend an accredited course, pay to take and pass an exam, and that’s it for initial upfront costs.
But when you’re planning on being an active real estate agent, you need to calculate your expenses and income like you are operating a start-up business because that is exactly what you’re doing.
The True Cost Of Becoming A Real Estate Agent
Becoming a real estate agent and running a real estate business are two entirely different things.
To understand the actual cost of becoming a real estate agent, you need to plan a business plan that accounts for the direct costs to start up and budget for any potential unknown expenses.
1. Education
Estimated Costs: $200 to $1,000
Each state has different requirements to become a real estate agent, so contact your state regulatory commission to see what you need to do to be compliant.
There is no national license, so the requirements vary by state. Still, in general, a licensee is required to do a predetermined amount of studying and education before taking a licensing exam.
The amount of “credit hours” required by each state also varies significantly, ranging from 63 hours in Florida, 135 hours in California, to 180 hours in Texas.
Understand that there are bare-bones ways to prepare for a licensing exam, but typically you get what you pay for with your course requirements.
It's entirely possible to receive an “acceptable” education for as little as $200, but that would be on the lower end of the spectrum and may not be the best preparation you can find.
Expect to pay $200-1000 for the comprehensive education to satisfy your state's requirements and give you the best preparation for your exam. Often these courses will guarantee your passing grade or provide you with free reviews before a retake.
When you’re looking at the cost of your education, do your research. Ask around to others and find what courses they took that benefited them and what schools they’d recommend.
Since every state requirement is different, real estate schools vary in terms of curriculum, student support, and cost. By asking for recommendations and spending time researching, you can find the right fit for your needs. As you look around, pay special attention to the following:
- Exam pass rates. What is the pass/fail rate for students from the school and coursework?
- Is the school online, in-person, or hybrid? Chances are that you’re doing more than simply studying for the licensing exam, so choosing a school that provides the best access to course materials is crucial.
For example, can you access your coursework from your cell or tablet, or will you need to be on campus? - Student support. What type of instructional help will you have access to, and is there a real estate professional available to answer any questions?
- Price. What is the cost of attending, and does it fit your needs and budget?
Once you settle on a course and pass, you’ll need to schedule a test. There will be various fees to pay to be eligible to take your exam, from application fees to testing fees.
Researching your licensing coursework can help you prepare for your exam and save you some money in the process.
Finally, you will have to take some continuing education courses and possibly take another exam at some point in your career, so budgeting and planning for those potential expenses is something you need to consider and plan for.
2. Exam Fee: $40 per attempt and Application Fee: Approximately $80-100 (depending on your state)
After you pass your class, you'll need to take the state exam. Depending on your state, the exam fee may range from $40-100. These application fees may surprise new agents, so check with your state regulatory commission to be clear on what costs you can expect.
After you receive a passing grade for the exam, you’ll need to apply for a state license which can cost you in the range of $80-100.
Of course, you have to retake your exam. In that case, additional fees will be associated with applying and retaking the exam, which is one of the reasons that making an informed decision on your coursework before the exam is so important.
3. Real estate membership dues
Estimated cost: $200+/year
Once you have your license, you’ll need to join the local real estate board, and you may consider joining the National Association of REALTORS® (NAR). These membership dues, while a tax write-off, can be expensive. You aren’t required to join NAR, but it does provide some brand recognition for your services.
On top of the local real estate board, you’ll have to pay for the Multiple Listing Service or MLS. State association fees vary from state to state but are typically a few hundred dollars, as are the membership dues for the National Association of REALTORS®.
To conduct business as a real estate agent, being a member in good standing with your local real estate board and having access to the MLS is crucial to your success.
4. Real estate broker fees
Estimated cost: $25–$500+/month
After you’re certificated and eligible to be a working agent, you’ll need to hang your license at a brokerage.
Brokers will provide various services for their agents and take care of many business expenses associated with day-to-day operations. Costs may include a legal retainer, marketing, photocopies, office supplies, office internet, and insurance.
Whether you pay for these amenities on a monthly service charge or a commission percentage is up to you and the individual brokerage you join.
Some brokers require a monthly “desk fee” for all agents. Still, often if there are desk fees, those are offset by your commission split, and the broker may also extend leads to those agents working the desk on a particular day which would save you money in the marketing department.
5. Insurance
Estimated Costs: $350 to $400/year
One of the best ways to protect you, your business, and your personal assets is to have good umbrella insurance, namely Errors and Omissions Insurance.
E&O, as it’s called, protects companies and their workers or individuals from claims made by clients for inadequate work or negligent actions.
Since home ownership and real estate are significant transactions, even small transactions may have significant ramifications in the housing industry. Because of these factors, it makes sense as an agent to have errors and omissions insurance.
You may need car insurance, fraud protection, and service-oriented insurance to protect you and your assets while working with others.
6. Business Expenses
Estimated cost: varies
As a real estate agent, you’re both an independent contractor and an independent businessperson, meaning you’ll also have a variety of miscellaneous business expenses.
Expenses can include a business license, cell phone, and internet bill, office space and supplies, computer hardware and software, client meetings and lunches, and client closing gifts.
While most of these expenses are tax deductible, you will still need to pay them upfront.
Also, depending on who you choose to hang your license with, your broker may cover some of these expenses but probably won’t cover them all.
Another necessary business expense is that you may want to hire professional services or office help. For example, consider hiring professional development services, like hiring a real estate coach or paying for a transaction coordinator to assist you with closing your transactions.
A coach is a professional who will help you with your business planning. They will assist you in shaping and refining your goals and show you more efficient systems to help you achieve your objectives.
Even more important, a coach is a person that will help you stay accountable to your goals so that you can stay on track in order to accomplish what goals you set for yourself.
Often, a business coach will help you get a much higher return than what you paid for the service, so if you’re a new agent or one whose business is stuck in place, it would be an excellent suggestion to consider hiring a coach.
7. Marketing costs
Estimated cost: $1,000+/year
The single most important part of your business is your marketing and lead generation strategies. Therefore, you should spend a portion of your business revenue on marketing; marketing expenses are the most significant costs associated with starting a real estate career.
The average amount REALTORS® and agents spend for their marketing can range from over $1,000 per year to at least that per month.
For example, building, running, and maintaining a professional real estate website could cost up to $1,500 a year.
Also, you’ll need business cards, signage, pay for advertising, and you might consider creating brochures, flyers, and mailers.
All these types of marketing can add up quickly, but they're necessary expenses at the beginning of your career.
If you pay for leads and spend a ton on marketing efforts, especially starting out, your marketing could quickly become a money pit. You could be spending a lot of money and not getting much in return, like throwing water into a well. It won’t do much for you and will drain your bucket rather quickly.
For example, is a billboard or a park bench a good return on your advertising and marketing dollars? There are much better ways to get results, and cheaper than spending a bunch of money for a vanity ad like a billboard.
The first thing to do is create a marketing plan for your real estate business. Your marketing plan is a roadmap of the necessary steps to grow your brand and raise your profile so that when it comes time for a person to hire a real estate agent, yours is the name that comes to mind.
And, if you’re paying for the services of a professional real estate coach, they can assist you in planning and executing your strategies so that you are best situated to market your services without having to pay a ton.
To save money on marketing, you can consider some creative alternatives.
For example, video is one of the most engaged-with types of content online right now. So you could spend a ton on hiring someone to write, film, and produce a slick-looking video for you to post on your website, YouTube, and email out to your Sphere of Influence.
Or, a more affordable way to create and share a video that will get great returns is to film and send video texts from your phone.
Think about that for a second. You can take your phone out, use the camera that is built into it, film a quick, short video and send it out to people in your contact list within minutes.
Another shoe-string idea is to utilize your personal social media to expand your reach and grow your brand.
Keep in mind that people are on social media mainly for entertainment and to keep in touch with people that may be difficult to stay in contact with, so don’t bombard them.
Instead, use your social media strategically. Post items that show you are engaged in the community and how you help others achieve their goals and don’t just put out a “For Hire” sign on your social media platforms.
As a general rule, for every real estate services post that you make, you should post at least 8-9 others that don’t highlight your business. To be clear, you can have your brand, and your business mentioned, but it should be subtle and as an aside.
Getting started in real estate isn’t that complicated, but if you’re not strategic about starting your career, you could end up paying a bunch of money you may not have.
As a business start-up, you may have a limited amount of money available to spend on the things you need to get your business off the ground.
