Budget beginnings

Both seasoned agents and real estate rookies must begin in the same place when developing a business plan: the budget. For new agents, the first step is figuring out their startup costs. The hard truth is that, like any other business, embarking on a real estate career comes with significant personal investment and financial risk.

“Before any prospective agent even interviews with me, I tell them that they need to consider the costs to get going,” Engel says. “They’re going to put $600 towards the licensing class, and another $150 to the state for the privilege of the actual license; they’re probably going to want to join the association and then get access to the MLS, as well. Right up front, an agent should expect to spend about $2,000 before they even sit down across the table from me and say, ‘I want to sell a house.’”

For a first-year agent, it may seem counterintuitive to sit down and put together a budget with no idea of what one will be earning. But according Dream Town agent Nicole Hajdu without rudimentary projections for what you will be spending during your first year, you will have no idea of what to aim for.

“In my first year, my projected numbers were very different from what they actually ended up being,” Hajdu says. “Creating a personal budget was the first step in creating my business plan. You need to determine how much money you’ll need to be spending on yourself – on things like marketing and travel.”

Those expenses may be considerable.

In 2014, NAR pegged the median yearly business expenses for agents at just over $6,700, with $1,770 of that going to vehicle expenses. Thirty-two percent of agents spent more than $10,000, and 10 percent spent more than $30,000.

Meanwhile, the median income for a first-year Realtor is just $9,100. How can agents plan for those expenses?