Getting started in a new industry can be tricky. As a new real estate agent, you may feel like establishing a steady income will take years – but it doesn’t have to be that way. In this post, I’ll detail my experience as a newbie real estate agent and give you practical ideas on how to make $100k your first year in real estate.
McKissock did a survey in 2018 and found that the average first-year real estate agent earns approximately $15,000. This goes up to $38,141 between years one and three. What if I told you that you can earn ten times these averages? Well, you can and I’m living proof!
My journey in real estate began in October 2013, right before the birth of my first child. I was hot off the press from my career in new home sales, and eager to make a name for myself. I had worked in new home sales for five years, and while I gained a great deal of industry knowledge from that position, I knew that general real estate would be a whole new ballgame.
That year I started my brokerage as an LLC under a sponsoring brokerage. Here I was coming from a desk job where people sought me out to buy a home and transitioning to a career that, in essence, was just the opposite. Now I was hustling, hungry for that next lead, and having to do my prospecting to get a name on the board. Check out my post on what makes a real estate agent vs broker to learn more about the differences between the two.
What Did My First Year Look Like?
In that first year, if I wasn’t hitting the streets talking to people and networking, I was at home working systems and mastering the art of marketing. I did my fair share of prospecting by phone and got used to the rejection that comes with cold calling. I mostly worked with buyers, as it typically goes in the early years, except for a few listings I received from the relationships I built, which I’ll talk about more coming up.
I’d say my work/life balance early on was about 75/25, respectively, as I worked to build the foundation of what I’ve come to know as my business today. The hustle was real, but it paid off.
At the close of my first year, I had 28 personal transactions under my belt, totaling $175,000 in gross commission income. To break it down, I had helped twenty-one buyers and represented seven listings.
Where Did I Find Business?
Most people think of sphere of influence – or direct business from family and friends – when they think of starting a business in real estate, and there is merit to this. $58,000 in Gross Commission Income (GCI) came from my sphere of influence in 2013.
However, the bulk of my business that year was from referrals, topping out at $97,000 in GCI. This income included referrals from friends and family, new home builders, other realtors, and even lenders. I did see a few referrals come in from clients I had helped in new home sales, but not nearly as many as I had anticipated.
That is to say, everything I did in that first year is easy to replicate. You can do this with or without previous experience in the industry!
Staying “Top of Mind”
One of the most important things I took away from that first year had nothing to do with cold calls or outward prospecting. Instead, I learned the importance and effectiveness of staying “top of mind” within your current network.
Think of how many people you know. Reach out to them, stay in touch with them. See what they are up to and tell them what is going on with your new career. Some will be interested, some not as much. The important thing here is that you are working to build a relationship that will bounce back into their memory when they – or someone they know – goes to buy or sell.
This network includes everyone from your friends and family, family friends, past coworkers, neighbors, and the list goes on. Staying close and relevant to those who are already on your side is enormous.
Staying top of mind within your network can create a domino effect that impacts your business significantly.
Expanding your Referral Base
While maintaining a strong presence in your network is essential, there are other ways to boost your referral base and build your network.
Make Friends with New Home Builders
One of my favorite ways of expanding my network was to make friends with new home builders. There are so many new home communities out there, which means the opportunity here is vast. I would bounce between several communities each weekend, bringing coffee, offering to bring them lunch, or just popping in to visit for a half-hour here or there.
My primary goal was to build a working relationship and see how we could work together to achieve the common goal of selling houses. Regularly getting in front of them showed them that I was hungry for business, and I was willing to work for it.
Nine of my twenty-eight transactions that first year were listings I obtained through the relationships I built in the new home community. Builders would have a client come in wanting to buy a house but had a house to sell, and I was the man for the job. I would also offer to do open houses on inventory homes, or sit in on their model home as needed.
Over time, I had established such a presence in the different builder communities that I was asked by several managers to speak at their weekly sales meetings. I developed a move-up program called New Home Now. I’d bring tacos or donuts to the sales meeting, and go over my background, my unique marketing plan, what I would do for sellers, and the details of my move-up program.
I wish I would have kept the momentum up with this, as it was a great way to build traction, boost production, and gain confidence in what I had to offer.
As you have certainly gathered by now, real estate is all about relationships. Another great relationship to foster is your network with other real estate agents in the area.
Realtor referrals generally occur when an agent has a buyer or seller interested but cannot help them for one reason or another. The agent may be out of town or focusing their business on listings, for example.
Or, the referral could come from an agent outside of your MLS. Maybe you met an agent at a conference and exchanged numbers. Or you reached out to agents from your hometown.
Here, an agent in Mississippi could have a seller in their area, wanting to buy a home in Texas. That agent will, of course, help the seller in Mississippi, but will reach out to you to help the client find a home they love in Texas, putting money in your pocket.
Working with lenders is an integral part of the real estate process. Typically, I’ll refer two lenders I recommend to my clients. It may be strange to ask your preferred lender to send business your way, but in the end, you are both working toward a common goal.
I didn’t realize the potential until later on in the year, but I did see two transactions came from lender referrals in 2013.
It’s no secret that effective marketing can work wonders for your business.
My marketing consisted primarily of Google Ads, which I used to pinpoint people looking for homes in the surrounding zip codes. This strategy required persistence and effort, as only about 2% (or 1 out of 50) of the leads were qualified buyers. But don’t let that scare you away.
Instead, look at this as an investment, and keep your eye on the overall cost here. For instance, if it costs you $5 to get an online lead and you have to sift through 50 leads to get a deal, that amounts to $250, which is more than worth it when you consider the $6,000+ commission that can follow.
Not sure how to get started? Check out podcasts and youtube videos to see how other agents use Google Ads to market successfully.
In all, I lost money upfront with Google Ads. I invested $22,000 in Google Ads that year, with a return of $19,324. But I’ve stuck with it, using it as a tool to build my database, and now it is paying off.
Real estate agents are notoriously hungry for business, and as a new agent, you may wonder if it’s worth your time and effort to work rental leads. Although rentals weren’t particularly lucrative for my business, I would say there are pros and cons to investing your time here.
That first year I represented seven renters, mostly from Google Ads, totaling $1900 in GCI. That didn’t make a massive drop in the bucket as far as commissions go, but it did get me active and in the game. I was building my confidence as I familiarized myself with the transaction process, using forms, and working with different clientele.
And one of the great things about renters is that they usually turn into buyers at some point or another, and if you keep in touch, you’ve just secured some repeat business for the future.
I would be remiss to talk about earnings without mentioning the incredible tax benefits available to you as a real estate agent. The following section is not formal tax advice, so please be sure to get in touch with your CPA for more information and guidance.
As a real estate agent, maximizing your tax deductions can be very beneficial for your business. Things such as training, continuing education, and client thank you gifts customized with your branding are all tax-deductible.
Another big deduction category comes from office supplies, which can range from your typical paper and pens to a new camera, tv, or even your phone bill. Meals and entertainment that involves a client are tax-deductible at 50% value.
And for one, you may not know – check out section 179 of the tax code for the Depreciation of a Vehicle (SUV) for business purposes. We purchased our SUV under our business account and were able to take advantage of this deduction.
Best Real Estate Agent Coaching Program – Icenhower Coaching
Best Real Estate Agent Book – Millionaire Real Estate Agent – Gary Keller
Best Real Estate Agent School – Real Estate Express
What I Learned
Typically, that first year is all about the buyer, and my business was no different. But toward the end of the year, I learned there are ways to generate more listings early on and transform your business more quickly, to where you don’t have to show houses from 9 to 5 every day.
One way to do this is to pull up expired listings and For Sale by Owner. Call and tell them what you have to offer as a real estate agent, the benefits to them as the seller, and the steps you’ll take to get their house sold. If you’re looking at how to generate expired and FSBO listing leads, check out the post I made on The REDX for Real Estate.
My advice to an agent who is just starting is to take every networking opportunity possible and to keep learning. Go to training and conferences, watch YouTube videos, and network with people who have been where you are now. Learn from them.
Because the truth is, the hustle pays off and will give you the flexibility down the road to do more of the stuff you love and less of the stuff you don’t. My business today looks much different than when I first started. I have a lot more freedom in my day to give back, help agents, and continue building my brand.
And you can get there too!
How Was Your First Year?
How’d you do your first year in real estate? What do you know now that you wish you knew then? Let me know in the comments below!