12 Unavoidable or Unexpected Costs of Being a Realtor
Ready to jump into a real estate career? Be prepared for these unexpected costs—both in time and money.
You’ve made the leap and decided on a career in real estate. Congratulations! Like any small business, you’ll need a budget to cover your expenses. More than that, you’ll need a financial cushion to manage your expenses.
You know what they say: It takes money to make money. If you prepare for the following unavoidable or unexpected costs, you’ll be in a better position to focus on listing and selling homes.
Create Your Ideal Benefits Package — for Realtors
1. Waiting Until a Home Sells.
Unless you have another full-time job on the side, you’ll need to save a lot of money in case a home takes months to sell. One of the key factors when deciding if the industry is right for you is patience. If you don’t want to wait months until your next paycheck, real estate isn’t for you.
2. Pre-Licensing Courses.
Before you sit in for your real estate licensing exam, you must take a pre-licensing course at a qualified real estate school. Pre-licensing courses cost around $350 in Florida.
3. Examination and Licensing Fees.
Most real estate application fees cost $25 per exam, and you’ll also have to pay for the fingerprinting and background check, which costs $50–$75. State exam fees vary but are usually $20–$50. Finally, agents must pay $150 for the license itself, totaling $300 or more.
4. Real Estate Broker Fees.
Once you’re a licensed agent, you’ll likely partner with a local broker. A broker takes care of some of your business expenses, depending on the brokerage model you choose. However, you’ll pay a percentage of your commission back to the broker or a fee to cover these items.
5. Real Estate Membership Dues.
While your membership dues are a tax write-off, they’re still a notable expense. As a professional, joining your local, state and National Associations of Realtors® is vital. There is a fee attached, but the benefits are well worth the cost.
6. Real Estate Business Expenses.
Running a real estate business comes with various costs, such as your cell phone and internet bill, office space, supplies, client meetings and gifts, lunches, and software. Some brokers cover these expenses or offer a tech platform for a small fee. However, some of these costs may come out of your pocket.
7. Self-Employment and Income Taxes.
Real estate agents are self-employed and subject to filing quarterly estimated taxes. Talk to an accountant who can help you estimate your tax bill and help you file on time. Remember, your employer doesn’t deduct your taxes from your paycheck, so it’s up to you to save money to cover them.
8. Marketing and Advertising Costs.
Marketing costs are one of the biggest expenses to consider when starting your real estate career. It’s estimated that 10% of your gross commission income will go towards marketing spending. Be prepared to set aside $1,000 to $5,000 per year on traditional and online ads.
9. Physical/Mental Health Benefits.
One of the benefits of having a conventional job is complimentary or reduced health insurance premiums. As a real estate agent, you aren’t always afforded this luxury. Whether you have dependents or not, real estate agents should keep a portion of their salary saved for health insurance. Some brokerages offer insurance, so it’s a good idea to check before signing up for a policy.
10. 401(k) and Retirement Savings.
While not all employers offer a pension or 401(k) matching contributions, quite a few of them do. Living in the moment is fine when you’re young, but if you don’t pay into your retirement plan, you may work longer than you choose. Plus, paying into your 401(k), SEP IRA or other retirement account offers tax benefits.
11. Business and Liability Insurance.
As stated, most brokers will pay for your insurance, but that typically only includes errors and omissions insurance (E&O). You’ll still have to fork out money for general liability, workers’ compensation (for hired photographers), cyber liability and business owner’s insurance.
12. Real Estate Continuing Education.
Your real estate education will continue for the rest of your career. You’re required to take continuing education classes to meet ongoing licensing requirements. In addition, you’ll want to earn special designations to determine niche specialty in specific markets.
Being prepared is key to your success as a real estate agent. Hard work pays off and one great sale can cover many of these expenses! #
Jasen Edwards is the chair of the Agent Editorial Board of AgentAdvice.com.