Becoming a Real Estate Business Owner
People often talk about wanting a career in real estate. The reality is that real estate brokers are not in a career; they are actually owners of a business. In Illinois and most states, the bulk of the real estate brokers (broker is the proper term in Illinois, not agent or salesperson) are independent contractors. This makes you as a broker the business owner. You are affiliated with a brokerage but your business is yours to run and profit from, much like a franchise owner. Just like a franchise the brokerage you choose should provide you with training, tools and resources to help you be successful. The good news is that starting a real estate practice in our area is absolutely the cheapest and one of the easiest businesses to get off the ground. The not so good news is that most people that get into real estate don’t last more than a year or two. The industry has a failure rate for new licensees of around 70% by the end of year two. Of those that stick with it the top 25% are the ones that are making a good living to being very high earners.
So what makes some successful while others are not?
#1 Highly motivated to succeed
#2 Having a competent coach holding them accountable for their goals and dreams
#3 The training their chosen office and company provide
#4 The support available to them in their chosen office
#5 The tools, systems, and resources the company provides to make doing business easier
#6 The culture and teamwork of the office and company supporting them
#7 Having or cultivating a business owners mindset
#8 Controlling their schedule and maintaining a work/home life balance
#9 Willing to get out of their comfort zone
#10 Truly caring about their clients and listening to what they say
#11 Creating and implementing a business and marketing plan
#12 Continually learning the trade and improving their ability to serve clients
#13 Knowing that working out, family, vacations, and down time is critical to long term success
#14 Having Real Estate as their only job
#15 Realizing that the product they are selling is them and the knowledge and service they provide
#16 Focusing on listing side business rather than buy side
#17 Possess a positive attitude and solid work ethic
#18 Focusing on the daily marketing efforts
#19 Practice good time management
#20 Know they need help and cannot do everything by themselves
Some reasons you may be thinking about becoming a broker:
Control your own schedule – Yes you can! Within some constraints
Unlimited income potential – True! It is up to how hard and smart you are willing to work
Be your own boss – Yes you are, but most successful agents have a coach for accountability
New challenges and different situations every day – Absolutely
You like houses – Houses are not going to hire you to sell themselves!
You are a people person – Great! People buy and Sell Houses you will do well!!
Easy Money! – Wrong, Wrong, Wrong. Those getting into the business for easy money don’t last long
Why do so many brokers fail?
One of the most common reasons someone becomes a broker is to be their own boss and set their own schedule. This is also the main reason around 70% of new licensees are out of the business within just a few years. Real estate brokers tend fall into two traps.
#1 They cannot hold themselves accountable to take the actions necessary for success and eave the business after wasting a lot of time and money
#2 They become overworked and stressed out from not taking control of their schedule eventually burning out
Both of these are preventable and resolvable by the broker accepting coaching from an outside coach or working with a managing broker that is skilled and knowledgeable in agent coaching at all levels.
How do I decide what office to join?
When deciding on a company and office to affiliate with you should look for a managing broker that has past experience selling at a high level of production, run a team as a broker, managed teams (so they can coach you on setting one up and running it if you decide to do that in the future), and has a track record of success at coaching individual agents and entire offices grow their business and abilities. Ideally you would find a company that does not allow its managers to sell. This is called a non-competing manager. Make sure this is the company policy not just that one managers personal decision. That manager may leave and you could end up in a bad situation. When managers are selling it takes their time and focus away from the needs of the brokers that have placed their plans, hopes, and dreams of success in their hands. Watch out for managers that oversee more than one office for these same reasons.
Important things to know:
Once you get your license and start with a broker it takes most new brokers 6 or more months to earn their first paycheck.
You will need to invest in some marketing before you ever get a paycheck.
Print advertising is expensive and generates little to no return on investment especially for newer agents. This is for brokerage branding not your branding.
Your first deals and most of your future transactions will be with people you know or those referred to you by them – this is also the cheapest source of business so focus on it.
Do not just pick a neighborhood to market to. Do research on it to make sure it has good potential to generate closed business for you.
If you have to pay an outside coach for accountability you could be spending $5,000 or more a year.
If you can fog a mirror most brokerages will hire you. Many brokerages hire anyone and everyone knowing that most will fail. The low cost of getting a license, classes as short as a few weeks, and low startup costs attract many that are in it for the wrong reasons.
Choose the brokerage that gives you the best attention, coaching in the office (at no cost to you), great training, great support, and having a great culture where not everyone is accepted into the team.
This is not an easy business. If set up and run well it can be a highly lucrative, emotionally satisfying, and a rewarding career with you in control of your business and schedule.
Many brokers that will eventually be successful struggle and barely get by to start but by consistently taking the right actions in their business and being held accountable they will find success.
You will be an independent contractor. You will need to pay your own taxes. Be sure to make quarterly payments once you start getting checks.
The real estate market is cyclical certain times of the year and certain years can be greatly impacted by market and economic conditions. Save some of each check as a cushion to help you weather any downturns in the market.
While you are an independent contractor and owner of your own business controlling your schedule you do have to have availability when your clients will want to do business. They typically have 9-5 jobs so some availability in the evenings and on weekends will be necessary
A big part of your job will be to hold your client’s hand during difficult and stressful situations. Residential real estate is a business that creates high emotions in our clients.
You will be an educator for your clients. A big part of our job is making sure the clients know all the information so they can make good financial decisions in spite of the emotions they may be experiencing.
As a new agent you will most likely work with buyers and renters more than sellers. Try to focus your marketing efforts on getting listings. Agents that focus on listings tend to be much more successful than those that work mostly with buyers.
Choosing the wrong office, company, or managing broker to affiliate with can kill your business before it even starts. Many brokerages that do not have a great company and office environment/culture to help you be successful may offer attractive financial incentives to join. Those incentives do you no good if you fail and are out of business. Take a long term approach to choosing the home for your practice and choose the place that will give you the best support to be one of the few that really make it in this business.
Is real estate for you?
Real estate is a wonderful business to be in. We get to help people through the largest financial transaction they will ever make and more importantly help them find homes for their families. It is truly a rewarding career and a noble profession for those that take it seriously.
After reviewing this information take some time to digest it and decide if becoming a broker is something you want to explore further. If so contact me and we can discuss how our company, office, and the coaching I provide can help you get your real estate practice on the road to success.