Everybody knows there’s a huge potential to make lots of money in real estate. But if you’re working with a brokerage, the pressure to close a sale can be killer. And if you’re the individual running the brokerage, you take home a larger sum of money with each sale, but the nonstop work of acquiring properties, finding referrals and closing sales is enough to make even a seasoned professional’s head spin.
It’s important to educate yourself about the basics of how to make money in this potentially volatile, exciting field.
Read on to learn some basic tips on how maximize the amount of money you make in real estate.
Remember: You Work on Commission
Some brokerages work differently, it’s true. But if you’re like most realtors, you only get paid when you sell a house. Never lose sight of that. Your goal is always to close a sale.
Most jurisdictions require that, as a realtor, you learn the basics of real estate law and ethics.
They won’t teach you how to close a sale or make a property look most enticing. It’s up to you (and your brokerage) to teach you that, so grab a book (or find an experienced broker to tutor you) and start educating yourself.
Don’t Be Afraid: Network!
Early on, when you’re just breaking into the business, it can be very difficult to make the connections you need to make a sale.
That’s why networking is so vital.
It’s easy to conceive of your relationships with other realtors as strictly competitive, especially if you’re working in the same area.
And to be fair, an element of that does exist.
But don’t forget about referrals.
Houses aren’t identical commodities. If someone knows they can’t close a sale with a potential customer, and they know you have a property that’s more in line with the customer’s needs, they may very well send the customer your way — so long as you’ve forged a positive relationship with them, and are willing to pay a portion of the resultant commission.
Likewise, if you can’t meet a client’s needs, reach out to someone else in the area and offer to hook them up in exchange for a portion of the commission.
The going rate may depend on your area, but many brokers charge up to 30 percent for a referral.
Reach Out to FSBOs
People who try to sell their home themselves are typically trying to avoid having to pay a brokerage like yours to do the legwork for them.
But the fact is that the legwork is exhausting, and is often best left to the professionals.
If you’re aware that a for-sale-by-owner house has been on the market for a while, you may want to reach out to the owner and see if they’re interested in switching things up and going through your brokerage.
Make it clear what you have to offer and why it’s to their benefit.
If you succeed in convincing them, you’ll make a percentage of the money they get from the sale – how much, exactly, is something for the two of you to negotiate.
Consider Becoming a Broker or Branching Out
While laws vary from place to place (and the precise names used to refer to each profession may vary), many jurisdictions draw a distinction between real estate agents (who work for a brokerage) and real estate brokers (who are able to run their own brokerage, and have greater independence in general).
If you’re serious about making it in the field, and have the time and money to spend on the additional education required, you should think seriously about taking steps to become a real estate broker as soon as you can.
By starting your own real estate brokerage, you’ll be able to work independently and make decisions about what properties you acquire, and how much money goes into your pocket. There’s more potential for risk here, and you’ll have to learn how to make wise investment decisions, but the rewards can be great.
Investigate the laws in your area, but be aware that if your brokerage is holding on to properties you can’t sell, it may be better to try to rent them out instead.
And if you’re having a really hard time finding clients, in a lot of jurisdictions you can take your talents — and your real estate license — and work as a property manager instead or on the side.
There’s a stereotype that real estate brokers make a ton of money.
While many of them do, many of them don’t.
It takes time to find your sea legs as a broker, and it’s all about building connections, refining the art of closing deals and figuring out exactly what each customer needs.
You may not make a lot of money for your first year (or your first several!) in the industry.
And if you’re operating your own brokerage, you’ll swiftly find that finding properties to sell (or acquire) can be far more taxing and expensive than you’d estimated. If you’re actually acquiring the properties, you run the distinct chance of actually losing money.
But be patient.
Stick with your work, network, research and continue to educate yourself.
You’re getting better, and success will come over time. Good luck!