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The Real Cost of Starting a Real Estate Business

Birds Eye View Of Houses

With property values on the rise across the country, many Americans are
looking to the real estate industry as a lucrative and fulfilling career
option. However, exactly how easy is this transition and how much will it
cost?

If you are one of those planning to start get into San Antonio TX Real Estate business, then you this post is for you.

There is a common misconception that professionals interested in starting
their own real estate business incur few start-up costs when launching
their enterprise. It’s easy to think that starting a real estate business
only requires a high level of motivation.; However, this simply isn’t
true. In fact, the real cost of starting a real estate business is riddled
 with administrative dues, licensing fees, general business operation
 expenses, and other not-so-obvious costs.

 Here are a few of the “hidden” costs associated with starting your own
 real estate business. It’s important to note that the exact dollar-amount
 will vary depending on your particular business as well as the state (or
 county) it’s located in. Therefore, it’s wise to speak to a real estate
 commission before making such an important career decision. Jumping into the world of real estate without a clear understanding of the financial
 and legal requirements can spell disaster.

Incorporation, Licensing, and Membership Fees

Perhaps the most overlooked expenditure associated with new real estate
businesses are the collection of mandatory administrative fees imposed by
states, real estate boards, and even the federal government. 
Firstly, anytime a new business is created, that business should be
incorporated and registered with the state. Incorporating your business
involves choosing a suitable legal entity (ie. S Corp, LLP, LLC) and
paying the state-fee for business incorporation. Although incorporation
may be optional for smaller businesses, the designation ultimately
protects your assets and allows you more freedom come tax-season. Thus
it’s strongly advised that you meet with an experienced attorney or
accountant to draft an operating agreement, and file the correct paperwork
with the state’s office.

Once your business is incorporated, the next step is to obtain a real
estate license. Most real estate professionals are required to complete a
short (usually around 75 hours) course and pass an exam, both of which
will cost a small fee. Of course, the fees don’t stop there.; You will
also be charged for the licensing application, the mandatory background
check (in some states), and for the license itself.

Once you have a license you’ll need to find a Broker that will allow you
to do business.  Monthly or yearly membership dues are also worth
mentioning here. In addition, once you are legally able to sell real
estate in your respective state, you will likely join local and state-wide
real estate boards, regional committees, and perhaps the National
Association of Realtors. Fees associated with membership can vary,
although they are certainly in the hundreds of dollars per year.

Business Operation and Marketing Costs

Like any business, Your real estate enterprise will incur typically
marketing and general businesses-related expenses. For instance, things
like office space, internet bills, work supplies, stationery, computer
software/hardware and other miscellaneous costs tend to go unaccounted
for by aspiring business owners. These kinds of expenses can really
add-up, especially as your business starts to grow.  Joining a Broker
can help offset these costs, but usually, that comes out as a slice of your
commission check.

Also worth noting are marketing costs; For most new real estate
businesses, marketing is absolutely instrumental. However, quality
advertising undoubtedly costs money, and there’s no real guarantee of its
effectiveness. Likewise, successful real estate businesses usually have an
online presence, starting with a professionally-created website. A
the functional and intuitive website can cost thousands of dollars, as can a
professionally maintained social media account manager.

Commissions
You may have noticed that thus far, there’s been little mention of
perhaps the “center-piece” of the real estate industry: the properties or
more correctly, the commission. This is for a few reasons.  The first
and the most important reason is that you need to have a client that will
allow you to help them sell a home or buy a home for there to be a commission to be earned.  Assuming you can accomplish this feat, you’ll have to market the property.   Fees such as listing fees, photography fees, videos, staging will all come out of the prospective agent pocket upfront.  While home buyers require less out of pocket expense, they require time, a lot of time.   Expect to spend 4 to 5 times the amount of time with a home buyer that you do a home seller. 
Once a sale is complete you finally get your commission check… well
what’s left.  Most brokers impose a “split” where they take 10, 20
and sometimes up to 50% of you hard earned commission.  They justify this “split” by offering value added services such as an office space or
plug in play marketing, websites, etc.

Hidden Costs

The biggest hidden cost is the wait.  A typical transaction can
usually take 60 to 90 days.  If you are extremely lucky enough to
start your career off with a client, you’re still 60 to 90 days away from
receiving any sort of payment!  This means that the average real
the estate agent will have to wait for 3 to 6 months for fund.  If you do the
research the average real estate agent only sales a few homes a year and
makes less than $50,000 a year. Most agents fail in the first 2 years like
all small businesses.

The Bottom Line

Regardless of the number of properties you own, it’s important to keep
in mind that starting a real estate business comes with a number of
not-so-obvious costs. Most of these expenses come in the form of
administrative and licensing fees.; Likewise, monthly or annual membership dues will undoubtedly add-up. Typical business-related costs must be considered as well, such as costs associated with marketing—which is especially important for newer or lesser-known businesses—and other normal office and building expenses.

Truthfully, there are a number of “hidden” costs associated with starting
a real estate business and although they aren’t terribly exorbitant, they
must be accounted for prior to making such an important career decision.