What It Takes To Make $100K A Year As A Real Estate Agent

Now, before we start this piece, I need you to understand that I am in no way a Real Estate Guru, Mentor, or seasoned professional. Hell, I'm not even a licensed agent yet. These blog posts are simply memoirs of the knowledge and wisdom I've encountered during my current pursuit of becoming a successful licensed agent. We've all seen stories and posts on social media of newly licensed agents frustrated with the lack of mentorship and resources that are available to them.

So, in the spirit of abundance, I'm sharing with you the key lessons I'm learning during our common pursuit of an exciting new career, a fat bank account, and a gratifying lifestyle.

Let's begin.

As an employee, our work typically involves following policies and procedures which somebody else has developed and we tend to largely ignore any other aspect of the business that we aren’t directly responsible for. It’s rarely essential for us as employees to understand the numbers side of owning and maintaining a profitable business. Yet if we want to adjust to the work of Real Estate Sales, we need to understand the math involved in earning our paychecks.

Ask any new agent what their income goal is or was their first year, and the grand majority will answer 100k dollars. There’s just something appealing about that number. This amount is a realistic number to achieve our first year, but how difficult it will be to obtain depends greatly on the average price of homes in your area.

Let’s break down the math to 100k dollars a year.

Annual Commission Cap = $15K

Annual Expenses = $35K

Total Gross Expenses = $50K

Let’s assume the average price for a home in your area is 250K dollars, and that you will have at minimum 1 Buyer closing and 1 Seller closing each month.

Average Seller Closing = 3% or $7,500

Total Commission from 12 Seller Closings = $90K

Average Buyer Closing = 2.5% or $6,250

Total Commission from 12 Buyer Closing = $75K

Total Commissions for 12 months = $165K

Total Annual Expenses = $50K

Total Annual Profit = $115K

Now let’s work backwards towards a system to make $115K.

According to The Millionaire Real Estate Agent by Gary Keller, for every 12 people in your database who you contact 3 times per month, you can expect to receive 2 referrals a year. We’re going to assume it’s your first year and your skills aren’t as good as you’d like them to be where it will take you twice as many people in your database to get the same results. Meaning it will take 24 contacts in your database which you will have to contact 3 times per month for 2 referrals a year consisting of 1 buyer and 1 seller.

Assuming a 50% success rate, it should look like this:

12 closed sellers a year = 24 appointments a year.

24 appointments a year= 288 contacts in your database.

12 closed buyers a year = 24 appointments a year.

24 appointments a year= 288 contacts in your database.

To sum it up, if we combine buyer and seller closing with an assumed 50% success rate, we can see that 1 buyer & 1 seller closing per month will require 288 contacts in our database who we meet and communicate with 3 times per month or 36 times per year.

As you can see building and maintaining a solid database is the most important thing you can do to ensure a steady stream of client referrals.

Top producing agents excel at this.