How much money can I make in real estate in the first year?

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Or a related question, will this new career pay my bills? Answers that you will give yourself will range from “don’t expect any income in the first year” - during the day, to “I will make more money than I have made in the last 10 years” - in your pre-dawn dreams. To accurately estimate how much money you will make in the first year, pick up a dart and throw it at the board with your eyes closed. You won’t know where it lands. You are better off not closing your eyes, forgetting about the darts, the board and throwing stuff and focusing on the real estate sales process instead. In the meantime, let’s talk about a few things that may help you estimate your income at the end of month 12.

I started in real estate in 2015 with expectations higher than Burj Khalifa and ended up short of the mark. I did set it up to be “sky high” though, not knowing then how to properly the market and my own ability. Specifically, I made 1/3 of of my projected annual income in 6 months, which worked out to be 2/3 of my annual aspirations. The 30% deviation from the plan is suicidal when you are wondering probabilities of your parachute opening when skydiving, but this kind of deviation is ok when you are estimating the likelihood of you ordering desert while eating out at a posh restaurant or  planning your real estate earnings. In this case, realizing 2/3 of my original plan made me happy.

There were several factors that helped me get there:

  1. I made a crucially important decision (not saying you must follow) to join a team. This gave me instant exposure to the way a high volume business is ran and a baseline of what is “normal”.
  2. My team lead then and my now partner Mitra gave the support I wanted and the mentorship I needed to cut the learning curve of a new agent.
  3. Team members gave me understanding as to how different roles within a team are filled and what kind of execution is required for each position.
  4. I had the confidence in myself based on my previous successes and failures in my entrepreneurial ventures - I was mostly and without specific efforts focusing on successes.
  5. The market was unstoppable like a Soyuz rocket bringing prices into orbit and only the lazy would not trade and make money in real estate. This made a lot of agents intoxicated with the success they largely attributed to themselves without seeing the help the market was giving them.

Not having experienced a downturn in my then very short real estate career, my thinking was like this: “Right now the market is great. It is very difficult to get listing, but we are getting them in abundance. And it is very easy to sell them once listed. Once the market shifts, it is going to be a lot easier to get listings, but difficult to sell them. So, it balances out and the net financial result is going to be the same.” What really happened when the market shifted and contrary to my expectations, getting listings got harder - fewer listings for the same pool of competing agents. Once you got a listing, they became very difficult to sell - buyers were endlessly expecting for the market to continue sliding down and not making a move. This part was as expected though. Since getting listings got even harder, coupled with a more difficult sale process, the net financial result was an abrupt and sustained decline in revenue.

It used to take us a week to sell a listing and now the average is 60 to 90 days.

We used to getting multiple offers on properties and the final price on them was nearly always a surprise and delight for the sellers. My lesson here: with everything else being equal, it is easier to make money in the sellers market. People sell based three general considerations: 1. Need: the seller”s circumstances are such that they either sell or face financial turmoil. 2. Greed: the seller sees an opportunity of making money on the transaction and decides to act. 3. Lifestyle change: the seller has decided that their needs will be best met, if they were to live elsewhere. The rising market has a lot more greed motivated sellers, the declining market has a lot more people driven by the need to sell. Sellers operating under the “lifestyle change” category will act regardless of the market.

Back to how much money you can make. See if you recognize yourself in the points that follow: 1. Your skills are superb. 2. You are extremely organized and disciplined in your approach and you have no life drama happening with you or around you. 3. You have a business setup supporting your skills, discipline and commitments. If this is you, you will make as much money as you plan to make in the next 12 months regardless of the market, not only because you have superior ability and setup, but also because you will soberly assess where the market is and make plans based your performance and market conditions. A great agent in a good market working with an assistant and a buyer agent can make $1.5 to $2 million in the Gross Commission Income (GCI). Conversely a bad agent (read someone who has just started) working by herself, will likely make $20,000 to $30,000 over the first 12 months in GCI. In the first year of business you will likely land closer to the “bad agent” performance numbers and how quickly you move up from there is entirely up to you. If your goal is to be making $2 million in GCI in 12 months, good. Just make sure not to have this goal for the first 12 months of your real estate career. Create a roadmap for improving your skills and the money will follow.

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