How Much Does Real Estate Cost?
"How much money do I need in order to get my real estate license?"
I hear this question a lot (it’s a great question). I remember when I first started in real estate and worrying about all the real estate fees I might have to pay.
To be honest, I had no idea what I was supposed to pay, or how much. But I didn’t like the idea of being bogged down with fees especially before I had even started selling anything.
That’s why it’s important to know what to budget for when getting into this business. And this post will help you with that.
But before I get specifically into the fees, we need to talk about and an even bigger topic that I call:
Financial Fitness has to do with: budgeting, being wise with your money and knowing when and what to spend it on.
This is a big topic and I could write a whole series of blogs about it (hmm… maybe I will) but for now, we’re going to stick to how it relates to getting your license.
So in this post, I’m going to cover three things:
- The costs associated with having and maintaining an active real estate license (real estate fees)
- Initial business expenses and how to budget for your first 90 days
- Costs of entry – real estate classes and my take on that
The costs of having an active real estate license
Let me just say this: real estate is an expensive hobby. Now, here at Keller Williams, we of course want everyone who’s interested to get their real estate license.
But I’m going to say something that could be good for you and quite possibly bad for us: if you’re wanting to get your real estate license “just for fun” or “just to have it” or “for access to the MLS” it’s better for you if you didn’t get it at all.
Why would I say that? Because real estate is an expensive hobby. There are ongoing and fixed fees that you will have to pay monthly, quarterly, and annually just to maintain an active license.
Not only that, but every couple of years you will need to take continuing education classes (these can be done online and knocked out in a few hours, quite honestly) to remain in good standing with your state’s licensing authority, and that costs money as well.
“Wow, that sounds like a lot.” How much is it really? Well, depending on where you live it could cost about $2,000/year to have a real estate license. I’m not going to break down everything here of what all that entails. But whenever you sign up for classes and we talk on the phone I can go into a more detailed breakdown of those costs.
Just remember every state is a little bit different BUT If I were you, I’d expect to pay around that much each year.
Now here’s the question – is that a lot? I mean, really?
Answer: it depends
To answer this question, I’ll go back to what I said in the beginning: if you’re doing this as a hobby and getting your license just for fun, then yes, $2,000/year could be a lot of money.
If you are in this camp and still want to get your license, that’s great! I don’t want to discourage you, I just want to give you all the info so you can make better decisions and avoid any surprises.
In all honesty, there are plenty of people who get their license for something to do on the side and are fine with paying the fees.
The other answer to this question is – if you are serious about real estate and are planning on making a career out of this, then No, $2,000/year is NOT a lot. In fact, it’s a very small amount to pay to have the freedom to run your own business.
In most markets, all you have to do is sell 1 house and the commission you earn will pay your entire fees for the year 2X or 3X over. So if you are selling 2-3 houses per month, then your real estate fees will pretty much be an afterthought for you.
In what other business can you make 1 sale and pay for your entire yearly operating expense 2X times over?
Initial business expenses and how to budget for your first 90 days
Secondly, I want to talk about initial business expenses and budgeting for your 1st 90 days.
If you’re not already, start thinking about real estate as a business and not a job. (I actually have a whole separate post about just this one topic.) A real estate agent is self-employed and so their business is real estate.
With that being said, every new business has what you could call, initial startup costs. Fortunately, with real estate, you don’t have to buy an office building, a bunch of inventory, or anything like that.
But things that I Do recommend you buy are:
- For Sale signs
- Business cards
- Any other marketing/business tool you feel you need
(I’m assuming you already have a phone and computer. And if you’re somehow reading this blog without one of those, I’m very impressed….)
Costs for these items vary depending on the vendor but this is something you should budget for. You can most likely pick up a couple of signs and lockboxes and a stack of business cards for a few hundred dollars.
The good news is once you buy a sign or a lockbox you can keep it forever, it’s a 1-time cost. The only time you would need to buy more signs and lockboxes is when you have more homes to sell. That’s a good thing!
The Pre-Sell Period
The 2nd thing you want to budget for initially is what I call the Pre-Sell period. The Pre-Sell period is the first couple of months you get in the business where you’re learning, lead generating, building up your business, and working towards making your first sale.
To be clear – real estate is a commission job. In order to earn a paycheck, you must sell a house. For most new agents, it usually takes a few months before they have their first closing. Once you get your business going, you should be having closings and earning commissions every single month.
But in the beginning, it would be very smart for you to save up a few months of living expenses while you work towards your first commission.
But your first check will be sweet! You can even stick it on the wall like I did. (The check receipt, of course. The actual check I put in the bank.)
Costs of entry
The last thing I wanted to talk about here was the cost of signing up for your real estate classes.
You are probably looking at getting into real estate right now. You might be weighing the options, making a pro-con list, and deciding what you should do. Maybe you really do want to get into real estate but the cost of the classes is stopping you.
First of all, I recommend checking out my page dedicated to helping you find the best online real estate school to help you find the right real estate school for you, sometimes for as little as no cost! Find Your RE School Here
Now I’m going to say something here that might seem a little harsh. But I say it because I care about you and want to give you the best chance to succeed.
If you don’t have a few hundred dollars to spend on real estate classes, then right now is not the best time for you to get into real estate. The reason I say this is because if you think of all the previous expenses we went over. I don’t want you to spend all your money on classes. Then you’ll have nothing left over to get your business off the ground whenever you become active.
If you are in this camp, then the best thing to do is continue to save up money until you are able to pay not just for real estate classes, but also for the costs of your first few months as a real estate agent.
The important thing is to work from a budget and commit to saving as much as you can each month. A little bit of sacrifice now can lead to a lot of benefits later.
So there you have it! Financial Fitness related to getting started in real estate. Now that you know all the facts, I hope you will be better prepared when launching your career in real estate.
And remember; let me know whenever you get started on your classes.
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