9 Truths About the First Year of a Real Estate Agent

Published by Brian E Adams on January 11, 2021January 11, 2021

So what is the truth about being a real estate agent?

Below is a popular meme in real estate Facebook groups that partially answer that question.

Being a real estate agent is a full-time, 24/7 job with high highs and low lows. It is no different than owning your own small business. And while it has a high failure rate, it also is very rewarding for those that persevere.

Like any profession, don’t expect a quick buck. In fact, don’t even expect to make minimum wage.

I made the mistake of expecting too much too quickly. Fortunately, I was able to learn and move past my failures with time.

My Personal Experience – 6 Deals in 12 months

I got my license in 2013.

By 2017, I was doing over $200,000 a year in GCI (gross commission income). Not too bad! I am proud of that number.

But holy moly the 4 years in between were something else.

Year 1: I was still in the Army when I got my license. I did real estate part time my first year, which was very difficult with an Army schedule. In those first 12 months I did 6 deals before finally leaving the Army to do real estate full time.

Year 2: I shouldn’t have left so soon. In year 2, I did 12 deals. One a month. It was not enough to pay our bills and we had to dive into savings and inheritance money and were miserable. I didn’t plan ahead well enough. I was trying everything – door knocking, Facebook ads, Google ads, open houses, direct mail, paying for leads from Market Leader, networking with investors, buying FSBO lists, and more. It wasn’t working.

Year 3: In year 3 I did 24 deals. I finally got focused, lead generating from my blog and networking with investors on flips and multi-families. It was enough that I felt confident I would make it past the 2-year drop out milestone that many agents fail to pass. It was still well short of my goal, however.

Year 4: In year 4, I did 36 deals and over $200,000 in GCI (before expenses and taxes). It was enough to pay our healthcare and expenses for my growing family. Even then, I did almost all of my deals in the first six months of the year before going a dry spell with not a single paycheck for more than 90 days.

Entirely coincidentally, 12 is my favorite number.

The Truth About Being a Real Estate Agent: What You Should Expect

Your Time Will be Wasted A Lot

This was my #1 biggest surprise when becoming a real estate agent.

I wasted a lot of time.

I’m not talking about the time I wasted on unsuccessful lead generation strategies like open houses and door knocking.

I am talking about working with actual potential clients, listing homes, etc. At least 50% of the people whose homes I listed or who I showed homes never closed a deal.

They’re called “tire kickers”. Folks who are interested in selling….for the right price. Or, more common, buyers who explore buying but, for whatever reason, decide against it.

It’s not a simple fix, either, like doing better buyer consultations and screenings. Some of the buyers I thought weren’t serious about buying not only bought but became repeat customers! And some buyers I had high hopes for ended up deciding against purchasing altogether at the 11th hour.

My very first listing ever went under contract … and then the sellers decided they wanted to move back in and we canceled the contract. I earned $0.

In fact, worse than $0, I spend money on lockboxes, signs, Facebook ads, and a photographer. I actually lose money on these listings!

A majority of your buyer and seller time will earn you nothing or less. It’s just how it works.

You Are Starting a Small Business

You’re not a real estate agent.

You are a small business owner.

If you aren’t willing to think about your path as a business, then you are setting yourself up for failure.

Your broker isn’t running your business. Brokers are usually paid on commission. If you flake out of the business, it won’t cost them that much. It happens all the time! Obviously they want you to succeed, but it’s a numbers game for them.

Don’t expect that someone is going to help you run your business for you. You have to do that as your own CEO, CMO, CFO, and COO.

Go into this with the mentality of starting a business. Do profit and loss statements. Make a business plan. Business projections. A mission. A strategy. A value proposition.

There’s No Such Thing as a “Normal” Deal

Most agents can do about a maximum of 50 deals a year without an assistant. That’s just a few every month.

And every deal will be different.

There is no such thing as a typical deal.

A recent deal I did was with a seller-buyer. We listed her home. Got a backup offer. Almost walked away during the inspection only to have the backup offer change their mind. Then the appraisal was low. And we closed.

Then when we bought a home, our first home had foundation issues that we tried to make work with the lender unsuccessfully, writing three different offers over the span of two months. The next home we did find we got lucky with, avoided multiple offers despite it being on the market less than 24 hours, and it also appraised low.

And we were closing during the COVID pandemic, and had to delay closing because half the title company staff was out sick with the virus.

What an adventure! For a single client!

If a new adventure with every client appeals to you, real estate may be for you!

It Takes a Long Time: Extremely Long Sales Cycles

Selling other goods can be as simple as a few clicks. If you have a product you’re selling on Amazon or Ebay, for example, you can advertise it on social media or Google. Once you get a customer, they buy it. Boom. The money hits your account. Your funnel might be just a few minutes.

That is not true of real estate where the real estate transaction by itself usually takes at least three or four weeks. That doesn’t include the listing period or home search, or the months of preparation you spent with your contact before they actually buy.

Most beginning agents do not plan for how long the real estate sales cycle is.

My longest client in my short career went three years between our first conversation and when we closed. Three years!

Is your CRM set up to keep on top of these folks?

Mine wasn’t. I was terrible at follow up.

I paid the price. More than once, I learned that a client I had been working with ended up buying or selling a home with another agent, a year or more after I had first interacted with them.

Man, that hurts. And it was completely avoidable if I had been more diligent staying in touch.

Plan on a years long relationship with every prospect you interact with.

Most experienced agents get most of their business from repeat and referrals. How do you get repeat business or word of mouth advertising if you don’t have any past clients?

It takes a few years to really get a critical mass of relationships to build your business.

You Have a Lot of Competition

1085 agents did a transaction in my local market in the past year.

There were 4200 transactions.

That is less than 4 transactions per agent. And a lot of agents!

How do you differentiate yourself from the 1084 other agents competing for your same business? What makes you better than the other agents in your same office attending Wednesday meetings?

The answer is to choose a niche and/or a unique value proposition.

But don’t imagine that “being good” will somehow help you stand out from the competition. You will need to go above and beyond what 95% of agents in your market are doing if you are going to go all the way.

I finally figured out to focus on my blog. I also leveraged the fact that I owned local rental properties to connect with investors on Bigger Pockets. It was then that I started scaling my business to a sustainable level.

What will set you apart?

You Will Be Unhappy

Sorry to be a Debbie Downer.

Real estate sales has high highs and low lows.

When even just a few transactions are the difference between making and flaking, transactions can be an emotional roller coaster.

Some times I was at my unhappiest:

getting a call from a neighbor to my listing that water was spilling out from the house. A freeze had burst the pipes, costing my seller $5000+
talking a seller into considering other options only to have her original, preferred option go off the market. She then fired me.
working with an investor on what I thought was a slam dunk price in a good neighborhood only to have it sit for 2 months before being fired
after an amazing June with 8 closings and 30 deals in the first 6 months, I went over 90 days without a single closing or paycheck, closing only 6 more deals the rest of the year
a big apartment deal, my biggest ever, falling out of contract because the seller changed their mind (my buyer declined to sue for specific performance)

But there were good times! A few highlights I remember:

A FSBO contacted me on a direct mailing after their home sat on the market a month. I recommended they list with me and raise the price. We sold two weeks later for the $10,000 higher price.
I worked with a lot of fourplex investors whose buildings, just a few years later, are worth 40% more than what they paid while cash flowing the whole time.
I recommended a buyer consider foreclosures for their situation. They bought one for $88k, put almost nothing into it, and sold with me just two years later for $150k.
A client fired her previous agent and hired me with very specific home criteria. After a long search in which I advised patience, we finally found the perfect home. Then, two years later, we sold it for 50% more and did the same, patient search for an amazing home we got below market.

You will need some emotional maturity to survive the ups and downs in this business, and be able to deal with the down times.

Your Real Estate License Courses Did Not Prepare You

The Real Estate license exam is not nearly as useful as it should be.

Yes, it’s not easy. I almost failed my first try and I consider myself a pretty good test-taker.

But it is exclusively about the minutiae of real estate license laws and regulations. It says absolutely nothing about running a real estate business. Zilch.

The pre-licensing doesn’t even teach you how to write a contract!

Ironically, the continuing education (CE) required to maintain your license is often a lot more useful. It includes mandatory legal updates, but also usually has flexibility on what approved courses you take. And there are a lot that speaks more specifically to running your business.

GO TO SITE

LEARN MORE

The CE Shop

$446.25+. The CE Shop is an online real estate school that offers CE and exam prep in all 50 states as well as pre-licensing courses in 40 states. They also partner with local real estate school instructors to provide educational content.

The most useful post-license instruction I ever got was the Graduate Realtor Institute (GRI) designation. It is broken into three parts: marketing, brokerage, and contracts.

It’s another chunky investment into your education, but did so much for my own competency. I felt more knowledgeable than some 20 year veterans on transactions after the course.

Though some of that may have been to do with my Texas instructor, the renowned Candy Cooke.

You Will Not Make A Lot of Money

It is no small feat, getting to the closing table.

Lots of podcasts and video channels feature guest agents who made $100,000 in their first year, or did 60 deals in their first year, or whatever.

Those are exceptions that prove the rule.

There is no reason not to work toward those kinds of results in your first year. There are particular lead generation strategies that are better suited for making money quickly, like prospecting FSBOs and expireds.

But don’t expect that.

Refer back the long sales funnel. Most homebuyers and sellers start thinking about buying and selling years out. Even if you’re amazing at lead generation, many of your leads won’t actually buy or sell until more than six months or even years from now.

I wish I had gone in with 2 years of savings – not needing a single paycheck for 2 years.

I recommend you do the same. And if you crush it sooner than then, great!

It’s Very Rewarding for Those Who Make It

I know several agents, myself included, who started real estate part-time. Some did not have a lot of planning and saw it as just some side income. Some were parents whose kids were grown and they were looking for something to do.

And they’re making $100,000s.

It’s okay to make mistakes if you have a long runway and don’t need to provide for your family any time soon. So there is little harm in giving it a go to see if it’s the right fit for you.

What made those folks successful was commitment. We simply outlasted the two year “failure zone”. We were completely committed to making it work despite our mistakes and eventually found what worked for us and had the time to build the relationships that can sustain a business through referrals and repeat customers.

I’ve seen all different sorts of personalities successful in the business.

If you have a passion for people, it is hard to fail in this business. It is a people business.

If you are more introverted like me, you will want a prospecting niche that suits you: content marketing, investors, or even going commercial. But you need to make up for your lack of people skills by really knowing your stuff.