How Much Money Do Real Estate Agents Make? Is Six Figures Common?

Who would want to work with the wealthy?

Well, you should, if you want to get rich in real estate. There’s no doubt that people with money can be more exacting. They’re careful how they spend their money — which in many cases, is how they got rich in the first place.

They’re spending a lot of money on this home, so they should get what they’re paying for, and they can be short with their words because their time is valuable.

But, frankly, I don’t agree with the New York Magazine or the research behind its article. I’ve found that most wealthy people are great folks.

Yes, they have their quirks, just like everyone else.

The rich like to work with people who conduct themselves with class, competence and confidence. If you don’t have these, you might have a reason for your fear — but all of this is fixable with coaching.

If you’re interested in selling luxury real estate, there are a few things you can do today to get started.

1. Make sure people know that you broker luxury real estate

If people don’t know you handle large accounts, they won’t hire you for the job.

2. Market yourself to the luxury market

Marketing can include sponsoring or attending targeted events. For instance, host a cocktail reception showcasing a flatware collection. One agency did this and generated several sales more than $5 million.

3. You have to overcome your fear

This comes with training and coaching. These are just a few of the many secrets I use to sell luxury real estate.

Remember, though selling one $300,000 home is easier than selling one $3 million home, selling one $3 million home is much easier than selling 10 $300,000 homes.

In fact, some luxury home deals are not nearly as hard as you might imagine. I’ve sold some luxury homes in only a few days.

Just don’t let the fear of working with people who are wealthy and smart (and kinder than you might imagine), keep you from getting rich in real estate.

Kevin M. Leonard is the founder of Luxury Agent and Valore Group. You can follow him on Twitter or LinkedIn.

Email Kevin Leonard.

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Marketing

It’s no secret that effective marketing can work wonders for your business. 

My marketing consisted primarily of Google Ads for real estate, which I used to pinpoint people looking for homes in the surrounding zip codes. This strategy required persistence and effort, as only about 2% (or 1 out of 50) of the leads were qualified buyers. But don’t let that scare you away. 

Instead, look at this as an investment, and keep your eye on the overall cost here. For instance, if it costs you $5 to get an online lead and you have to sift through 50 leads to get a deal, that amounts to $250, which is more than worth it when you consider the $6,000+ commission that can follow. 

Not sure how to get started? Check out podcasts an

Not sure how to get started? Check out podcasts and youtube videos to see how other agents use Google Ads to market successfully. 

In all, I lost money upfront with Google Ads. I invested $22,000 in Google Ads that year, with a return of $19,324. But I’ve stuck with it, using it as a tool to build my database, and now it is paying off.

What Does A Real Estate Agent Make On Average?

The question we all want to know, just how much does the average real estate agents make per year? Based purely on average commissions, about $36,000 – $40,000 per year. The better agents annually earn more than $100,000 – especially in a thriving market. It’s very unlikely that you begin anywhere near the 6 figures per year you’re hoping for. If you put in the right time and effort you can increase your potential for a higher salary pretty quickly.

FEATURED VIDEO: How Much Do Real Estate Agents ACTUALLY Make?

Why a real estate agent is worth the commission

Having a real estate agent on your side as a buyer can make home shopping less stressful — and you may find better properties, or get a better deal, than you would have on your own.

For sellers, it’s a better way to list your home and bring in more prospective buyers.

And for both sellers and buyers, it helps to have a professional on your side who can help navigate the complexities of such a big real estate transaction.

Also, “buyer’s agents work much harder for their money,” says Buttner. “They often work with a particular buyer for months. They show them multiple houses and make many offers before something sticks.”

For this reason, the buyer’s agent sometimes makes a bit more than the seller’s agent.

“A lot of brokerages that charge less than 6% will still offer the buyer’s agent a full 3%,” Buttner says.

Remember that an agent’s hard work is not rewarded with every client. Those national average salary statistics collected by the BLS and other sources don’t show this unpaid effort.

“Not all transactions result in them getting a commission,” says Ailion. “So the costs associated with transactions that don’t close must be factored into those that do.”

Ailion understands that 6% may seem high. But, he adds, you really get what you pay for.

“Like a good doctor or lawyer, I believe a good agent is worth their fee,” Ailion says. “You’re dealing with likely the most significant asset in your life. So choosing the best representation makes sense.”

Residential Real Estate: Paths to Profits

Here is a closer look at some of the many ways that you can earn income from residential properties.

Buy and hold

This is one of the more traditional ways of earning income from real estate. There are a number of ways to accomplish this: You can buy a single-family home and rent it out; buy a multi-family home and live in one of the units while renting the others—ideally to cover the mortgage and your own housing expenses; or purchase a multi-family home and rent all of the units—either managing the property yourself or hiring a management company to handle renting units, collecting rent, addressing needed repairs, and so on.

Flipping

Property flippers specialize in adding high-return fixes to houses in a short time and then selling them. Flipping can be lucrative if you know how to find properties to fix up, you have the necessary skills to do the renovations yourself or oversee a crew to carry them out, and you have a sense of a property’s underlying costs and potential value.

Airbnb and vacation rentals

The demand for home-away-from-home rentals had taken off in recent years as many travelers preferred this option to staying in a hotel. Homeowners could earn income by renting out a house or even just a room on a short-term basis, especially if the property is in area that's a well-known tourist destination. It's unclear when that market will return. But should it reappear, keep in mind that short-term rentals are regulated and sometimes even banned in certain cities. Check your city's bylaws before listing a property on a website such as Airbnb, VRBO, or HomeAway. And also figure in what additional deep cleaning and sanitizing between guests will add to the costs.

How Many Houses Do You Have to Sell to Make 6 Figures?

Now that you’ve read some outstanding examples of real estate agent income, let’s break it down a bit more. How many houses are agents selling to pull in 6 figures a year? 

In general, most agents earn a 3% commission on each house they sell. This is half of the usual 6% commission paid by the seller. Half goes to the listing agent, and half goes to the selling agent.

So if the home in question sells for $250,000, each agent involved could earn $7,500. At that rate, an agent would have to sell about 14 houses in a year to earn $100,000.

That’s more than a house per month. It’s certainly doable, but most agents don’t earn their 6-figure income this way. The average Realtor completes about 12 transactions per year.

High-Value Real Estate

Instead of scrambling to sell 14 homes in a calendar year to earn $100,000 or more, the most successful agents focus on high-dollar luxury real estate. 

If an agent sells a $750,000 home, they stand to earn about $22,500 from the transaction. Sell four more houses in that price range, and you’re making more than $100,000/year. 

Of course, these examples don’t take additional costs of operation into account. Some agents split their portion of each commission with their broker.

Some are required to cover the costs of their marketing, desk fees, professional association dues, administrative employees, and other expenses out of pocket. 

So the actual amount an agent takes home once all is said and done may be considerably less than the initial 3% commission amount. 

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4. Sell Wholesale

A fourth way to make money in Real Estate actually can require the investor to have cash, although it is not required. 

This technique is by far the best and easiest way for new, inexperienced investors to make “quick” money in Real Estate. In fact, this is by far the best and easiest way for veteran and seasoned investors to make “quick” money in Real Estate.

Wholesaling is the art, and I use that word on purpose, of being able to accurately appraise the potential value of a property and buy it so low, you can quickly sell it for cash to another rehabber or end user who will make it their dream home, without EVER fixing a thing, regardless of how good or poor the condition of the property.

Now, you may say, I do not need cash for this strategy.  I can simply Option the property for a wholesale price and then sell it to a rehabber or end-user. You are absolutely correct, but getting an owner to accept a wholesale price is rare. 

You will make 100 wholesale offers to owners before one is accepted. 

Where you will have much better luck is buying foreclosures from banks.

While a majority of your initial offers will still be rejected by banks, they are much more likely to accept a wholesale offer. They also will never allow you to Option the property. They only accept cash and will even require you to have Proof of Funds before they even look at your offer. 

How Many Homes Do Agents Sell?

Ideally, a real estate agent would want to sell as many homes per year as they can to earn the best salary. However, they may only sell a handful per year—it all depends on their clients, their region, and the broader market.

The saying is that "20% of the agents do 80% of the business." Agents don't generally go into the business wanting to be part of the 80% who achieve only 20% of sales, but that's often the stark reality.

Staying “Top of Mind”

One of the most important things I took away from that first year had nothing to do with cold calls or outward prospecting. Instead, I learned the importance and effectiveness of staying “top of mind” within your current network. 

Think of how many people you know. Reach out to them, stay in touch with them. See what they are up to and tell them what is going on with your new career. Some will be interested, some not as much. The important thing here is that you are working to build a relationship that will bounce back into their memory when they – or someone they know – goes to buy or sell.

This network includes everyone from your friends a

This network includes everyone from your friends and family, family friends, past coworkers, neighbors, and the list goes on. Staying close and relevant to those who are already on your side is enormous.

Staying top of mind within your network can create a domino effect that impacts your business significantly. 

1. Online Real Estate Investing Sites

Online investing sites have changed the game in recent years. With these sites, you can own fractional shares of real estate projects. What this means is that you can get exposure to real estate, but you don’t need to come up with huge sums of capital or deal with tenants. This is a strictly passive income strategy.

Fundrise is my top pick in this category because you can start with very little money and you do not need to be an accredited investor. Here’s a link to our full Fundrise Review.

For other sites, you must certify that you have a net worth over a certain amount or make a certain amount of money per year.

How It Works

With Fundrise, you can start with as little as $500. You open an account and select from a number of portfolio options. Fundrise charges a management fee of around 1% per year, which is fairly low compared with other options, and its 2021 annualized return was 22.99%! You can see how my Fundrise account has performed here.

What You Gain

Investing this way, you gain a ton of freedom and you gain exposure to the real estate asset class with very little money or effort. 

What You Risk

You don’t get to really use any local expertise you may have, and you don’t necessarily get the pride that comes from visiting a real estate project that you wholly own, improve, and can see easily. For some people, that’s a big draw to investing the old-fashioned way!

Get Started With Fundrise

Who pays the real estate agent commission?

Here’s some good news for home buyers: The seller typically pays the real estate agent commissions.

If you’re selling, the news isn’t so great.

Smart buyers will often have their own “buyer’s agent.” This can be great because it gives you a skilled professional (if you choose yours carefully) who is 100% on your side and who comes with skills, expertise and knowledge.

Usually, sellers pay for their own agent and the buyer’s agent, too.

Of course, you could argue that the seller pays commissions using money from the buyer. So the question of “who pays the total commission” is open to interpretation.

No matter how you look at it, buyers won’t pay extra to hire their own agent. If you don’t have a buyer’s agent, the seller’s agent will keep the entire commission without offering you any representation.

Also note that the average real estate agent charges “commissions” rather than “fees.” That means they get paid for success rather than by the hour or for services rendered.

So, if a deal doesn’t go through, they’re unlikely to make any money at all on it. This sometimes results in an agent getting lucky and making a pile of money on a quick and easy transaction. But, at least as often, it sees him or her getting no reward for a lot of effort.

How to make more money as a real estate investor

As you can see, your estimated salary as a real estate investor can vary greatly. Fortunately, investors have a lot of control in their careers. That means if you're not making what you want or just want to scale up, there are plenty of steps you can take to do so.

Here are just a few ways you can improve your earnings as an investor:

What is a fair commission for a real estate agent?

Commissions are typically around 5% to 6% of the home's sales price. It does vary a bit by area and by the agent. If you're buying a home, you typically won't pay your real estate agent's commissions. Home sellers typically cover that. None of this is set in stone, however, and could be negotiated.

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