How to become a real estate agent: Everything you need to know

If you’ve been considering a new career or starting a side hustle to earn some extra money, you may have thought about becoming a real estate agent.

Being a realtor is great if you like houses and enjoy working with people, but it’s not always the dream job some imagine it to be. It’s a common misconception that real estate agents earn a ton of money for doing practically nothing.

Selling real estate is more work than you might imagine and although there are some very successful real estate agents, there are many who struggle just to make ends meet.

From somebody in the business, here’s what it takes to become a real estate agent — and what you should consider before starting down the path to selling homes.

• Median salary (as of 2021): $48,770
• Projected job growth: 4%
• Education required: Real estate courses and licensing exam — hours of study and licensing requirements vary by state
• Duties: Help clients buy, sell, and rent properties
• Work environment: Often irregular hours — may be self-employed or work under a brokerage

Source: U.S. Bureau of Labor Statistics

A real estate agent is somebody who is licensed by their state to help people buy and sell property. To become an agent, you must complete a certain number of real estate courses and pass an exam. The requirements vary by state, but they usually include taking a few classes on real estate law, real estate math, and real estate principles.

A real estate broker is somebody who has taken their education a step further and has also passed a broker’s exam. In most states, real estate brokers can own their own businesses, hire real estate agents to work for them, and manage properties. Brokers usually have more experience than agents and may charge higher fees as a result.

Here’s what’s involved in becoming a real estate agent — and what factors you’ll need to consider as you go through the process.

1. Budget the Cash and Time You’ll Need to Get Licensed

The first thing you have to do if you want to sell houses is get your real estate license. Go to the website for your state’s Department of Real Estate or Bureau of Real Estate and find a list of approved online or in-person real estate courses. Some people prefer the flexibility of online classes while others focus better out of the house in a classroom. Either way, you can count on studying for at least several months and up to year.

Once you’ve finished the classes, you can take the state’s official test to become a licensed real estate salesperson. The test isn’t cheap, so be sure to study hard before signing up (in California, for example, it’s $60 for the test and $245 for the license).

Before you invest significant time and money on a Realtor course, you might want to take an introductory course on Udemy on selling or investing in real estate. Courses range from free to about $35. They won’t count towards licensure, but are an inexpensive way to test the waters.

2. Determine Where You Want to Work

New real estate agents almost always work under the supervision of a broker. Real estate brokers offer agents marketing support and legal protections. When deciding where to hang your hat, interview at least three different brokerages in order to get a feeling for how they work.

Some agents prefer big brokerages because the well-known company names help give them credibility. Other agents like the mom-and-pop shops because they’re more flexible about working from home and choosing your own vendors.

3. Calculate the Start-Up Expenses

Even though you’ll be working under the umbrella of a broker, real estate agents are independent contractors. You may put Coldwell Banker or RE/Max on your business card, but you have to buy those business cards yourselves. Other common expenses include sale signs, open house signs, and a basic website.

Budget about $1,000 for these advertising start-up expenses. As you grow in business, you can advertise more. Plan for annual real estate association and board dues as well as membership fees to be part of the local Multiple Listing Service (MLS).

Most new agents start working with buyers rather than taking listings. All that house-hunting will mean a lot of gas burned driving across town.

4. Set Your Boundaries

It can be tough to manage time as a new real estate agent, especially if you have another job or small children.

Showing houses is largely done in the evenings and on weekends, so unusual hours go with the territory. That makes real estate appealing as a side hustle or for working parents, but remember that it’s not uncommon for buyers to call up asking to see a property on a few hours’ notice.

I recommend setting boundaries. You can record an answering message on your cellphone that says something like:

“Hi, This is Sarah Davis. If you’re calling on a Monday through Saturday from 8am to 6pm, I’m on the other line and will call you back as soon as possible. If you’re calling on a Sunday or an evening I will return your call the next business day.”

Even then, you may have to make exceptions during negotiations. Be prepared.

Real estate is a commission-only business. And commission-based jobs are feast or famine.

You can — and will — go months without getting a paycheck. You’ll need to learn how to budget on an irregular income.

But unlike W-2 jobs, a commission-based job like real estate agent or broker has limitless income potential. Some agents make over a million dollars a year. You get back in income what you put into it in effort and time.

So, how much can you really make? Commissions are typically paid by the property sellers and are negotiable by law. Some listing agents get 2.5% of the contract purchase price and offer out the same to buyers’ agents, but it varies.

For example purposes, we’ll use 2.5%.

If you sell a $300,000 home, 2.5% of the purchase price is $7,500.

Then you’ll have your brokerage split (this is how the broker makes their money for letting you use their offices and branding). New agents typically have to give more to their brokers because they require more training. Let’s say you have a 70/30 split with your brokerage. That leaves you with $5,250.

So, $5,250 for one house. Not bad, you might be thinking. But don’t forget how long it took to earn that money. Escrows are typically 30 days and, assuming you represent the buyer, you may have spent weeks driving them around all day to look at properties.

If you want to earn a modest $60,000 a year, you’ll need to sell an average of one $300,000 house every month.

Yes. In fact, I recommend everyone start this way.

The hardest part of building your real estate business is developing clients. It takes a long time. If you dive into real estate full-time — putting up all the money for training and start-up necessities — you may find it takes six months to sell your first house.

Being a real estate salesperson can also be a great career for mothers of young children because it’s somewhat flexible. You can work from home part of the time (doing emails, making calls, performing online marketing, and other tasks), then have your spouse or a babysitter watch the kids while you go out to showings.

Finally, some people maintain their real estate agent’s license simply so they can buy and sell their own properties and represent a family member every now and then.

Like with any career, real estate has its ups and downs. Here are some of the pros and cons to becoming a real estate agent.

Pros:

• Flexible hours. If you have a family or other responsibilities, you can adjust your schedule to suit your needs.
• You’re helping people fulfill their dreams. Buying a new home is one of the most exciting things to happen in people’s lives — and you get to be part of that! Helping people to meet their homeownership dreams can feel pretty darn rewarding.
• No two days are alike. You’ll get to meet new people, see different houses, and learn about new neighborhoods every day.
• You can make a lot of money. If you’re in a high-value area and you’re good at what you do, real estate can be a very lucrative career. The median annual income for real estate agents and brokers was $48,770 in 2021, according to the Bureau of Labor Statistics — but the top 10% of real estate agents earned more than $102,170 while the top 10% of real estate brokers earned $176,080.

Cons:

• You have to spend money before you make money. To become a real estate agent, you’ll have to take courses and get licensed, both of which will cost you upfront. You’ll also need to invest in start-up costs such as business cards, sale signs, and a website.
• You’re always on call. A flexible schedule can be great… until you start getting phone calls when you’re out at dinner with friends, or putting your kids to bed. If your clients are locked in a bidding war, you’ll be expected to jump to their side.
• It’s a feast or famine business. When the housing market is good, it can be really good. But when it’s slow, your income could suffer.
• You need to handle rejection. Not every lead will turn into a sale, and not every offer will be accepted. If you’re not prepared for some rejection, this job may not be for you.

Real estate can be a great career for the right person. If you’re interested in real estate and think you might have what it takes to succeed, your best bet is to start off part-time while keeping your day job. That way, you can see if real estate is really for you before quitting your job and going all-in.

If you do decide to become a real estate agent, remember that it’s important to have a solid business plan. You’ll need to set some goals and develop a marketing strategy. You should also have a good understanding of your local real estate market and the neighborhoods where you’ll be working. And, of course, make sure you’re always learning and staying up-to-date on the latest real estate news and trends.

Becoming a real estate agent can be a great way to achieve your financial goals — but it’s not for everyone. Be sure to do your research and talk to other real estate agents before making the decision to jump into this career.