There’s a big difference between being the real estate agent next door and representing high-end clients in the luxury real estate market. Although you can make a healthy living in the first capacity, you can make a killing in the latter.
Below, we’ll talk through the advantages of getting into luxury real estate and three tips for breaking into the niche.
The luxury real estate niche
A successful real estate agent might sell a couple million-dollar homes every year but will typically make the majority of his or her money from median-priced home sales in his or her market. And even though the median U.S. home value has risen 6.5 percent year-over-year to an all-time high of $206,300, it still takes a lot of home sales to generate a lucrative income.
At a standard 3 percent commission, you’d need to sell roughly 25 median-priced homes per year to generate a $150,000 annual salary — or one every two weeks. There are definitely a ton of agents doing this, but the problem with consistently trying to generate a high income from lots of small sales is that you’re susceptible to market swings.
When inventory goes down (like it’s expected to this year), or when the market crashes (as it did less than a decade ago), it’s nearly impossible to sustain your same levels.
Have you thought about trying to break into the luxury real estate niche?
Not only is the luxury real estate niche better insulated from market swings, but it’s also highly lucrative. The sale of one $5 million home would net you the same commission as 25 median-priced homes. It’s a lot of work, but it’s a huge chunk of money from a single deal — rather than dealing with two-dozen clients across a multitude of deals.
The luxury real estate niche — which would be defined as the top 1 percent to 5 percent of home sales in your market — isn’t an easy niche to get plugged into. If you operate in a small market, there are probably already a handful of agents who take on the majority of this work; they won’t be keen on relinquishing their grasp.
If you’re in a major market, the sheer volume of agents in this niche will limit your chances to stand out. But it’s possible — and highly lucrative.
3 tips for breaking into luxury real estate
As is the case in any sales-based position, thriving in the high-end real estate market is all about understanding who your audience is and delivering a service they perceive as valuable. Not sure where to start?
Here are some practical tips:
1. Get out there, and mingle
You aren’t going to slip into the luxury real estate niche by sending out emails and purchasing some ad space on Facebook. If you’re serious about getting plugged in, you need to be moving in the same circles as high-end clients. Often, the best place to start is with networking events.
“One of the most popular places to start is BNI International. They host networking events with professionals of all stripes and have chapters throughout the world,” real estate marketer Jason Fox wrote on his blog. Other good places include Rotary Club, Lions Club and your local Chamber of Commerce.
2. Treat clients well
High-end clients expect to be treated like high-end clients. The same approach you use for a newlywed couple buying a $150,000 house won’t work with a CEO buying a $3.5 million estate.
The good news is that the healthy commission you’ll make allows you to pamper your clients. This means you can do things like book private jet charters and fly clients around to quickly and efficiently check out properties over a wide geographical area or wine and dine them at luxury restaurants. The key is to show them they’re special.
3. Be OK with co-listing and co-marketing
According to Andrew Greenwell, a successful luxury real estate agent and former star of Million Dollar Listing San Francisco, you must be willing to co-list and co-market properties at times.
As Greenwell puts it in this RESAAS blog post, “half of a lot is more than a lot of nothing.” In other words, it’s better to split the commission on the sale of a $5 million property than it is to get nothing at all.
Set yourself up to succeed
There are so many variable factors in real estate — and so much of an agent’s success is based on being in the right place at the right time (often by chance) — but there are certainly things you can do to set yourself up to succeed.
By following the thoughts, ideas and strategies laid out in this article, you’ll give yourself a fighting chance.