Every week, I have to spend several (sometimes unpleasant) minutes talking with my editor at Inman News. Each conversation usually starts with me telling the editor what I’ve experienced over the past several days, then we go back-and-forth over which incidents might make the most interesting story for readers.
The editor and I disagree on a lot of things–especially about the topic of this week’s column.
The editor thought it would be a good idea to share the contents of the Schedule C, “Profit or Loss from Business,” that my spouse and I filed when we mailed in our income-tax return earlier this month.
I’m not too keen about sharing such private information, but the editor thinks the figures might help readers get a better understanding of what it really costs to get started in the real estate business.
As usual, the editor won. Here is a run-down of all the money I spent last year to obtain my license, sign-up with a real estate brokerage company and purchase a small amount of marketing materials in an effort to establish a toehold in my local sales area.
Schooling: Like most prospective agents, I needed to attend a real-estate licensing school to prep for the state-licensing exam. Taught over a series of four weekends, it cost $295 to enroll and another $85 for books and other materials. Parking for the class totaled $96, which brought my preliminary total to $376. That didn’t include non-deductible lunches, or the fees the babysitter charged to watch my two kids when my spouse had to work while I was in school.
Testing fees: I spent $60 to sign up to take my state licensing exam last summer. I missed passing the first test (by only two questions, though), so I paid another $60 to re-take it and passed with flying colors. In addition to the $120 in test fees, I paid another $24 to park–for a total of $144 in testing charges.
Licensing: After the state exacted its first pound of flesh through testing fees, it wanted a second helping, namely, a nearly $200 fee for the license itself. No one can get a real estate license in my state without first getting fingerprinted, then having the prints run through the Department of Justice’s tracking system, which the local Police Department did for another $76. After throwing in some other minor charges, my total licensing-related fees came to about $400.
Brokerage fees: While some brokerage firms don’t charge to take on a new agent because they figure getting half of the agent’s future commissions is enough, others charge a lot of money. I paid a pro-rated $1,000 fee to sign up with a firm that is very well known in my area and in other parts of the United States Then I had to pay another $400 or so to attend the firm’s in-house training class. Total charges, including educational materials were $1,700.
Insurance: When I paid all that money for the “privilege” of working for a big real estate firm, I didn’t expect the fee to cover the cost of buying a new laptop computer or other items I would need to succeed in real estate. I did, however, think it would cover the cost of errors-and-omissions insurance to protect me if I screw-up a real estate deal.
I was wrong: On my first day of work, my broker gave me an invoice for nearly $650 for E&O insurance to cover my first four months on the job, despite the fact that I hadn’t even had the opportunity to do my first deal.
Association Fees: An agent can’t be effective without the help of the multiple listing service, and my local MLS costs about $400 a year to be a member. Beyond that, I paid almost $400 more to become a member of my local association of Realtors, the state association of Realtors and the National Association of Realtors. Ka-ching–another $800.
Marketing expenses: After getting my salesperson’s license last fall, I spent about $1,500 on marketing materials to get started. That included the cost of my business cards (my broker doesn’t pay for them) and copying charges for flyers (the broker doesn’t pay for those either). My marketing expenses would have been much higher if a friend who does a lot of freelance writing hadn’t helped to create my advertising handouts and other marketing materials free.
When you add it all up, I have more than $5,600 in receipts to “get started” in the real estate business from the moment I walked into my first realty class last July through the tax year that ended on Dec. 31.
That figure doesn’t include the cost of putting more than 13,000 miles on my car–at about $2 a gallon–in the first six months of my fledgling new real estate career to drive prospective buyers from one house to the next.
And, of course, these figures from the tax return I filed earlier this month don’t include the expenses I’ve incurred in the first four months of 2004.
Oh, I forgot to mention one more figure: “$0.00.”
That’s exactly the amount I’ve made in my first year in the real estate business.
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