“If you want to get rich in real estate, sell stuff to Realtors”.

Overspending on shiny objects is the bane of real estate agents.

It’s not a victimless crime, either. That stuff adds up and, before long, can add up to enough to tank your business. Wait until you’re closing 5 homes a month and still wondering why you’re struggling to pay yourself at the end of the month. It’s because you’re spending too much.

It’s even worse when you’re a new agent, and normal expenses can easily swamp your meager income. It’s very possible to be working for negative month your first few months or even year in real estate.

Unless you can keep your outgoings under control! Spend nothing you don’t absolutely have to. Here are a few ideas for what to cut (or, even better, don’t start). There is no reason you can’t bootstrap your way to closings spending $0. I firmly believe that.

As you get established, perfect your conversion funnel, and learn more about youself and your style, then you can start spending money you are actually making to perfect your business.

In the meantime, you should have a draconian view on spending. Because you can spend yourself right out of business.

Buying Leads

This is the first one because it is the most important, and probably where you would otherwise waste the most money.

If you don’t get this one under control, you’ll just join the thousands of Realtors on the Lab Coat Agents Facebook page complaining about how Zillow leads are terrible.

Meanwhile, successful agents are getting 5-10x ROI on those leads because they know how to follow up.

When you’re new to real estate, your follow-up is untested. You haven’t built out your CRM to your style and strengths yet. You haven’t seen and plugged holes where potential clients are falling through the cracks. You haven’t seen the amazing results of what it actually looks like to nurture a lead not for days but a whole year or more before they finally close.

It’s that kind of long sighted persistence that will make paid leads worthwhile. But don’t bother until you’re there.

Facebook and Google Ads

Back when I started, I could boost a listing ad on Facebook for $20 and get several thousand views in my targeted market. I got attention to my blog that way, and at least a few customers on the cheap.

That was in 2015. Facebook Ads have become a lot more competitive and expensive.

Same with Google. There are finely tuned sharks out there in the search-engine marketing world who split test their ads to oblivion to eek out another 0.1% conversion. You don’t have time for that!

Don’t throw money away playing around on Facebook and Google! Work on organic items – earning social shares, SEO for your content, etc. But, just like paid leads, don’t spend money here until your funnel is airtight and you’ve mastered follow-up.

An Office

As I write this, the world is social distancing and working from home is very much in vogue. That makes skipping on the office space even more practical.

The brick-and-mortar business of brokerages and walk-in traffic is almost completely dead. You don’t need to be in the office to get leads.

If your broker has a general meeting area, use that to meet with clients. Or meet at Starbucks. There are plenty of scrappy things you can do to save on paying your broker $100s/mo for the vanity of an office space.

Yard Signs

“Wut? You gotta have yard signs, right?”

Not if you don’t have a listing you don’t.

Piling up yard signs is bad for a couple reasons.

One is that they are expensive!

Two is it is easy to overspend and buy 5 or 10 signs when you only need 1 or 2. And most importantly, the yard sign information doesn’t always stay in date. I had a different website when I first started than I have now. All 10 of my signs – about $1000 worth, have the old website. I’d have to spend another $1000 to update my signs. Even in a good year that is still as much as 1% of my total take-home earnings! Not chump change!

Moving brokerages is another common reason that yard signs instantly become obsolete. So buy as few as necessary!

I won’t put it in a separate category, but, of course, the same logic applies to your lockboxes if you pay for them in your market. Buy them only when necessary.

Business Cards

I got my first batch of business cards for free from my broker. I think it was about 500 cards and I never ran out of them.

I’ve read a lot of stuff saying that was a mistake. I should have been handing out business cards left and right. That I’ve left business on the table by not being more aggressive.

I’m not sure I agree. I know how I treat business cards. I stick them in my car drink holder until I have time to throw them away.

Everything I need is in my phone. If someone matters, get their phone number, not their business card. If you want to matter to someone else, get their phone number, don’t give them a business card.

You can work if you have their phone number. Handing them a business card gives you the false sense that you’ve done what you were supposed to even though the odds of hearing from them again have to be less than 1%.

Postcards

I spent a lot of money early on postcards.

I used Quantum Digital (which is a good service!) and dropped about $600/mo as a new agent trying to blanket the neighborhood I wanted to farm.

If I could turn that into just one listing a month ….

I did get one listing from it! It ultimately expired (they were underwater on their mortgage and needed over fair market value). I didn’t get the $1000s I had spent back.

Obviously that shouldn’t sour me on direct mail. But I know, like spending on other leads, it was way too early to be spending that kind of money. I didn’t have enough to actually do it consistently, meaning I wasn’t reaping the rewards of actually getting top of mind with anyone. Sometimes it can take years of marketing to a neighborhood before you become identified as a neighborhood expert.

And there are a lot cheaper ways to become that expert. Engage in the neighborhood Facebook group. Write informational blog posts about the neighborhood and its market activity and share it with neighbors. Much cheaper and more effective, in my opinion.

A Website

I didn’t get my website until I was in the business almost two years already. I had piddly websites before then, but didn’t really take it very seriously. I was still finding my identity as an agent and didn’t know what my brand and strategy would be.

Finally I alighted on content marketing and blogging. I took it seriously and got my website. But the stuff I had before then was mostly a waste of my time.

A website is good and there are lots of reasons to build your brand on your own site instead of your broker’s site. But give it a hard think and consider what you really need from a website.

Maybe you even discover that you don’t need one at all!

Predictive Analytics

Predictive analytics was (is?) all the rage.

I read The Power of Habit which talks about how Target uses predictive analytics to predict when women are pregnant even before they know themselves! That’s incredible! If we could just do the same to predict who is about to buy or sell a home….!!!

While I’m sure Target has some neat machine learning toys, I’m a little bit skeptical. Firstly, they probably have much better data on consumer choices than what exists in the real estate world.

But I also think machine learning and predictive analytics are overblown. No offense to data scientists, but, in my experience, they are more enamored with the data science than the actual application and usefulness of that data science.

At best, predictive analytics serves to optimize your existing processes. It’s useless if you are not following up and converting and doing old fashioned good operations. Focus on that. It will get you what you need for the foreseeable future. Playing with predictive analytics is a guilty pleasure you can’t yet afford.

Open Houses

Open houses can be a great opportunity for a newer agent to drum up business.

Just don’t spend money on it!

They’re great for newer agents because they tend to be cheap activities and it’s easy to partner with established agents or new construction builders’ listings.

And be mindful of your time, too. If you are losing an entire day between setting up, hosting, and breaking down an open house, the ROI on that is questionable.

Expired / FSBO Lists

Working expireds and FSBOs is great! There are a lot of successful agents who got a quick start in the business by rocking these out!

I’m not convinced you need to go buy a dialer and a bunch of lists just yet. Depending on the MLS, you may already have expired contact information for free. Similar with FSBOs if you are pulling them from Zillow.

While still experimenting with Expireds and FSBO marketing, it might be a good idea to do it on the cheap and test this lead generation strategy and how it works for you first. Be mindful that it could take a whole week of calling to get a single appointment. But even if just one a week you are in business and have demonstrated you have the guts to see it through.

Then it might be the time to make life a little easier and dig in for a dialer and lists. But don’t waste money if you can’t demonstrate that kind of persistence first.

Commissionectomies

One of my articles for Inman was about commissionectomies, and I think it still holds up.

These are the times when you give up a piece of your commission to get a listing, or make up for a mistake, or make a buyer or seller happy at closing.

They’re often avoidable, either by standing firm on your value proposition or creating strong processes that ensure few mistakes to come bite your wallet at the end of a transaction.

Commission Splits

Accepting a low commission split is an example of money down the drain.

There are lots of times it might be wise to accept a lopsidedly low commission splits. Buyers agents for the top teams often accept less than half the commission. But the opportunity to learn from the best while maintaining a very consistent flow of business more than makes up for it.

For other agents, though, brokers may be

Coaching

I’m a little conflicted about this one.

On one hand, a good coach can absolutely spare you some trial and error when it comes to building habits and good processes for your business.

But on the other hand, from my own experience, I think a coach is best when you’ve already achieved the fundamentals.

The reality is there are no secrets in this business. The business is lead generation and follow up. If you can follow up and get leads, you will succeed.

I turned to coaching as a way to escape this reality, looking for a shortcut and magic wand. There is none.

My personal recommendation is to get good at the fundamentals. They aren’t secrets. And then consider a coach to take you from good to great.

Obviously this doesn’t apply to a mentor, who is free. Hopefully you have someone you respect with a similar business model to your own that you can learn from, perhaps trading some of your time helping them in exchange for guidance.

Books

I’m not saying don’t buy books. There are a lot of books I think are worth your time.

But there is a lot of junk, too.

It’s easier and easier to write a book and stick it on Amazon these days. Be mindful about what books you are getting and read the reviews. Don’t sink a ton of money into books that aren’t going to move the ball for your business needs.

There is also so much free content in the form of podcasts, YouTube training, and industry magazines that I feel you have plenty to feast on before sinking too much on Amazon Kindle.

Designations and Accreditations

The GRI Designation is totally worth it. I learned a lot and became much more confident in my craft. It is everything that the real estate license courses should have taught you.

The other alphabet soup designations and accrediations? Hold off.

Many of them can’t be earned until you’ve been in the business a minute anyway. Others are might be appropriate depending on your niche, if you are confident in what niche you are going to focus on.

Billboards

I have no idea why agents buy billboard advertising.

As if it wasn’t hard enough already to track attribution for normal lead sources, you want to track the brand awareness from a billboard?

Just don’t.

Meals

Eating out is part of being an agent.

Whether going out to eat with a favorite lender, eating at the local monthly new homebuyer meetup, or headed to the favorite lunchtime spot after Wednesday training, it’s easy to end up spending a lot on meals.

Perhaps it’s not all avoidable and I’m not suggesting bringing a brown bag lunch to the investor lunch at Applebees. But be mindful of these expenses early on and decide what your budget is going to be.

And of course be mindful to track these as legitimate business expenses with receipts so that you are IRS proof.

Cameras and Drones

New cameras for listing photography (hire someone instead), a $4000 Matterport, 360 cameras, a drone – these are awesome pieces of technology that can really make your business stand out!

You also don’t need them if you are just starting out.

Firstly, you are a Realtor, not a photographer. If you want to be a photographer, be a photographer and go sign up on the other side of a site like Stilio.

It is far more cost effective to pay someone who knows what they are doing and already has the equipment when you get that sweet first listing.

Video marketing is a bit different, but to get started, you have everything you need on your phone. Once you get some momentum, you can consider adding toys like a 360 camera. Leave the Matterport, drones, and professional equipment until you at least have a team with a full-time marketing specialist.

Automatic Renewal

I think at one point I was paying for 3 different CRMs.

I had switched between them at various points in my real estate time, and they don’t make them easy to cancel! Because of automatic renewal, I just had simply continued renewing subscriptions to software I no longer even used, losing money because of my inattention.

Obviously being more conscientious about your expenses and monitoring them closely would help avoid this problem. But just in case, I recommend opting out of automatic renewal whenever possible. Make sure you need to affirmatively say “yes” every once and a while to your ongoing expenses.

Magnets – Refrigerators or Cars

You don’t need refrigerator or car magnets yet.

I’d say refrigerator magnets are too cheesy, but my dad had his agent’s refrigerator calendar on his fridge all the time, right at eye level, and I can still see her face. So maybe it’s okay eventually. But you need to do deals first. You can send a magnet on your homeowner’s homeiversary in a year.

And car magnets have their purpose, though I think they can look tacky compared to an actual wrap. And wraps like that are definitely the kind of expenses you should only be incurring after you’ve made it, not before.

Too Many MLSs

Obviously, you’re going to join an MLS if you are a Realtor. And you might need to join several MLSs, unfortunately, if there are several in your market area.

But don’t join stuff you don’t need. For example, I work in Killeen, TX. Waco is close. I have some folks who ask me about Waco from time to time. I sorta want to see the Waco MLS. But there isn’t enough business there to justify the expense, plus it is not a market with which I am familiar. So if I were to try to serve sellers and buyers in Waco market, I would be driving two hours round trip to do a bad job for my clients.

It’s tempting to want to hop on all the MLSs in your area, but it is expensive. Stick to the ones in your market until your business requires expanding (likely only when you are operating at a team level). Or start building relationships and referral business with agents in those other markets and with those MLSs!

A New Car

When I started as an agent, I had a white Ford Ranger. Just two and a half seats. It was my first car. And it was all I needed for a while.

Eventually, I persuaded myself that I would need to take people around in my car. I’m a Realtor! Driving people from house to house is part of the gig!

I traded it in for a white Ford Fusion in 2015. In the years since then, I have used it exactly three times to take clients around. Maybe it is just me? Maybe it is my market? But the vast majority of the time, when showing buyers, we are caravaning. Not carpooling.

I would caution a new agent against using their new profession to justify a new car. You are likely going to have lean days ahead while you get established. Try to make whatever transportation you have now work in the beginning.

I still miss having a truck bed.

New Clothes

I think I was a bit of an exception to this rule. I was in the Army, where we wore the same Army-issued uniform every day. When I became a Realtor, I literally had no professional clothes. I bought four suits over the course of the first two years and that is basically all I have.

For most folks, you probably don’t need to even do that much.

If you have professional clothes, then you’re good to go. Treat yourself to a wardrobe upgrade from your commission checks, not before.

Taxes

I guess since your taxes go to the government, and the government is also “the taxpayers”, and the taxpayers are you, then you aren’t really losing any money when you pay more in taxes than you owe!

But, if you don’t see it that way, I would understand.

It’s easy to lose money in taxes through missed business deductions and filing mistakes.

As an independent contractor, your taxes are going to get complicated quickly. I recommend some decent accounting software, a mileage tracker, and an accountant.

Get an accountant before you even feel you need one. April 15th is prime time on the real estate calendar and a bad time to suddenly need to be scrambling to sort out your taxes.

Stuff You Should Be Spending Money On

I talk about these elsewhere in my site, but just a quick list of things that are either very, very important when just starting out, or simply things that you will need so early in your new career that you may as well get them now:

• CRM
• Accountant
• Correct Insurance (car, E&O, liability, etc)
• eSignature Software
• Cloud-based Document Storage

Conclusion

I’m not initiated into the FIRE movement – financial independence retire early. But I am on board with what I know of it.

Profligacy will undo a small business. Unlike, say, restaurants or construction companies, Realtors have extremely little necessary overhead. They can afford to be extremely frugal. And I recommend doing exactly that.

Lead with revenue!