Real estate is one of the most lucrative sectors of the world economy as the need for both commercial and residential properties keeps skyrocketing by the year. Real estate is one industry you will want to dive into to diversify and grow your income. Real estate continues to grow in relevance as many stock investors turn to hard assets like real estate when the finance stocks plummet.
Little wonder many want to venture into real estate; Of course, everyone wants to make money. But the popular question now is, “How much do I need to get started?” Many feel that they will need a whole fortune to do so. But fortunately, it is not as you think. It is not so cheap to get started, but at the same time, it is not so expensive to get started.
It is very possible to kickstart a profitable real estate business. Let’s see how much you might need.
Getting started in real estate — what are the costs?
Getting started in real estate, there are seven core costs that you need to consider for your first year of start-up and beyond. A balanced and proper evaluation of these seven costs will get you on the right foot, turning your venture into a lucrative one with time and dedication.
Pre-licensing real estate training
Before you kickstart a real estate venture in the United States, you have to qualify through licensing exams. And before you can pass these exams, you have to take lessons, which is why you’ll have to enroll in a qualified and accredited real estate school, online or in-person to put you through the curriculum. The curriculum varies according to different states (there are only a few changes as the major real estate laws and regulations still take precedence). The pricing varies according to the state and particular school, but just prepare an average of $150 and above.
Exam and licensing fees
For this, you’ll need to budget an average of $400 and above as the price varies according to the state. Herein, you are catering for the license application fee, biometrics, and background checks, exam fee, and license fee itself.
Real estate broker fee
After you’ve got your real estate license, you’ll likely start your business under the umbrella of a local broker till you can expand and pitch your broker tent. These brokers will charge daily running and desk fees. These also vary according to the local broker you choose and the particular state. But you are advised to budget between $50 to $500 and above per month, depending on which of the broker services you’ll be needing. For instance, you might not need to pay for desk fees if your office space will not be located on their premises.
Realtors’ membership dues
This is a no-brainer. You are now a registered real estate agent and you now belong to the National Association of Realtors to distinguish you from a non-licensed agent. You will also belong to the state chapter of this association. Membership dues accrue from the national and state levels; these dues will cater to your multiple listing service, insurance, periodic meetings, and other general logistics. For these state and national dues, budget $300 and above per year.
Business logistics and marketing
Just like any other business, you need to cater to logistics and marketing. Your Internet bill, office supplies, client meetings and lunches, software and hardware costs, and all. These logistics do not have a set price range as they vary according to how each realtor runs his or her business. You just have to look at what you want to work with.
Marketing is where you’ll spend quite some money. You should be budgeting $2500 and above to cover this adequately. This will include a standard website which costs around $1500 per year, business cards, online ads, business flyers, brochures, mailers, and all. Just to get you out there and put you in peoples’ minds.
Not all states require this but about half of the states do. Here, you’ll be taught further courses on particular real estate specializations. This is a great step towards qualifying as an expert in a particular real estate designation. Post-licensing education in these states costs an average of around $160. Live in one of the aforementioned states? You might as well include it in your start-off budget since you’ll still have to go through this stage anyway.
What is a reasonable amount to save?
You now have the estimated average costs of the real estate start-off stages. But you are unsure of a reasonable amount to save up to take you through these stages and beyond. You have to be realistic about it; you won’t start making money from the get-go, bar very rare instances.
So, if you want to save up like you won’t make money from your first year, that’s the trick— you are scaling the business up while not allowing it to feed you in the first year.
So, you might want to save up to around $2000 for your pre-licensing and start-off activities and 600$ monthly for your business running expenses. With the trick of not spending off the business for a year, that’s $7200 for your monthly running expenses. That will make a total of $9200 with your pre-licensing and start-off fees.
This is very doable. But you don’t have to save as much if you are not able to. You could work with a six-month “don’t feed off the business” plan if a year will be too tasking. Remember, the trick is to feed the business enough to scale up massively in the second year.
Chris Heller is a best-selling author and currently serves as the Chief Real Estate Officer at Ojo Labs. He also serves as an Advisor and Head of the Editorial Board for AgentAdvice.com. Connect with him on Facebook and LinkedIn.