How much money do I need in order to get my real estate license and start my business?
We hear this question a lot and rightly so, it’s a great question.
Many agents we speak to have no idea what to budget for when considering a career in real estate and that is why this week’s article will dive deeper into helping you learn what to expect on the financial side of starting your own real estate business.
Before we get specifically into the fees, we need to talk about an even bigger topic that we call financial fitness.
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 we could write a whole series of articles about it but for now, we’re going to stick to how it relates to getting your license.
It’s important for everyone to form good money habits in life. You don’t want to be the agent who can’t pay their taxes or always spends more than they make.
We recommend you start your real estate career with a personal budget. Start tracking how much money you spend each month to live. This will help you be hyper-focused on spending your money wisely. It will also give you a great baseline for understanding how much money you currently have to get started in real estate.
The costs of having an active real estate license.
At Keller Williams, we of course want everyone who’s interested in real estate to get their real estate license.
But we’re 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 we 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 you will need to take continuing education classes 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 $2,500/year to have a real estate license. We will not break these down today, but this is a good rule of thumb.
Just remember every state is a little bit different and any number are used for example purposes. This is why connecting to a local KW office before you finish your pre-licensing courses will help make sure you are equipped with the most accurate numbers for your area.
Now here’s the question – is that a lot? I mean, really?
Answer: it depends
To answer this question, We’ll go back to what we said in the beginning: if you’re doing this as a hobby and getting your license just for fun, then yes, $2,500/year could be a lot of money.
If you are in this camp and still want to get your license, that’s great! We don’t want to discourage you, we just want to give you all the information 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, $2,500/year shouldn’t be a lot. In fact, it’s a very small amount to pay to have the freedom to run your own business. When you look at the costs associated with running businesses in general, real estate is one of the lowest upkeep costs out there which is great news for you!
In many markets, all you have to do is sell 1 house and the commission you earn will likely 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, we want to talk about initial business expenses and budgeting for your first 90 days.
If you’re not already, start thinking about real estate as a business and not a job.
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.
In fact, at Keller Williams, you will walk into the office on day one with amazing resources and tools that are all included in your affiliate to KW.
Here are a number of items we do recommend you buy upfront:
For Sale signs - at least a few so you are ready to take your first few listings
Lockboxes - These will be needed to give buyers access to your listings
Business cards - Something you can use to quickly give out your professional information
Website, CRM, Etc. - Good news here is all of the technology suite you need to run a large or small real estate business is provided with you join KW!
We assume you already have a phone and computer. And if you’re somehow reading this week's article without one of those, then we are very impressed :)
Costs for these items listed above 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 for a long time, it could be 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!
Your First Few Months In The Business
Initially, you will want to budget for your first few months in real estate where you’re learning, lead generating, building up your business, and working towards making your first few sales.
As you know by now, 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.
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 few sales. We recommend 3-6 months of living expense reserves.
Costs of Getting Licensed
Hopefully, you have already started this process, but if you haven’t then you are likely 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, we recommend checking out our page dedicated to helping you find the best online real estate school, sometimes for as little as no cost! As a reminder, you can find out your real estate school options and costs by clicking here.
If you don’t have a few hundred dollars to spend on real estate classes or are not ready to commit, then right now is not the best time for you to get into real estate. The reason we say this is because if you think of all the previous expenses we went over, we don’t want you to spend all your money on classes. If you do, then you’ll have nothing left over to get your business off the ground whenever you become active and you definitely won’t have any living expenses saved up.
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 is related to getting started in real estate. Now that you know all the facts, we hope you will be better prepared when launching your career in real estate.
As always, we are here at Keller Williams excited to partner with you in launching a real estate career you will love!