Becoming a real estate agent is a pathway to entrepreneurial success and financial independence. Once you have your license, you can enjoy years of servicing clients’ needs and harvesting financial rewards for your efforts. But it takes money and effort to launch a real estate career. Here’s what you need to know to get off to a good start.
You don’t need a college degree to become a real estate agent. But your state’s real estate board or commission will require you to complete the curriculum for licensure, which will include real estate basics, finance, contracts, relevant state laws, and the like. The licensing course will cost several hundred dollars to $1,000 or more. Afterward, you must pass a state exam to get a license, for which there may be a fee. Most states limit you to three attempts to pass. If you do not pass after three tries, there may be a waiting period and reentry study requirements to try again.
You also must submit to a background check and be fingerprinted. These procedures will cost approximately $75 to $100. A criminal record does not necessarily disqualify you, but specific concerns may trigger additional questions and verifications by the state real estate commission.
Launching your career
In most states, an agent must join a brokerage under the supervision of a principal agent or broker in charge. Many brokerages require agents to split part of the commission on each sale. Some firms let you keep the commission earned and charge a desk fee for leasing space. Other real estate agent costs may include errors and omissions insurance. Since you are an entrepreneur, these fees are expenses for income tax purposes.
The Multiple Listing Service (MLS) is a database required to market properties in the public domain. This service shares information from agents and brokerages about real estate properties for sale. To access the local MLS, you have to be a REALTOR®. To become one, you’ll need to join the National Association of REALTORS®, one of America’s largest and most prestigious professional organizations. Dues are $150 per member and billed to all active REALTORS® through their primary local association. The local board charges annual dues in addition to the national membership fee.
You’ll need various tools to conduct your business: a computer, smartphone, briefcase, office supplies, a professional wardrobe and a vehicle large enough to transport clients to showings. In addition to these costs, you’ll need to pay for advertising, both online and in hard copy flyers, business cards, signs, and a lockbox account.
When you list a house for sale, you must hire a professional photographer for listing photos and a stager to make the house look its best for showings.
Keep receipts for all expenses related to your business, including business-related car mileage. Submit anything you think could be a legitimate business expense to a tax preparation professional each year at tax time.
Income and taxes
Real estate agents are not paid as W-2 income. Instead, your income will be reported on Internal Revenue Service (IRS) Form 1099. This means that each quarter, you must calculate how much you owe in taxes and submit an estimated payment to the IRS. You should not wait until the end of the year because you will be penalized for underpayment.