Before you get into real estate as a realtor, or even if you are already one, you might be interested in knowing more about making money as a realtor.
This article will get into the nitty and gritty and discuss…
- How much you will make as a real estate agent
- How long it takes to sell your first home
- How you can make 100k as a realtor
- How many houses you need to sell to make 100k
- How much money you make on a $100,000 sale
- Whether a real estate agent can make millions
- And where you can earn most as a real estate agent
Keep reading, and you will get all the answers to these questions.
How Much Will I Make as a Real Estate Agent?
I searched through numerous sources to get a perspective on how you can answer this question.
I think it’s essential to first know the reality, which means knowing what happens to the average real estate agent.
Why?
Because as you will soon see, you will discover that you need to be above average to make 100k a year either as a beginning agent or already someone with some miles on.
According to Zip Recruiter, the average yearly income of a real estate agent is $82,898 in the U.S. (as of January 2022).
The slightly outdated data from the U.S. The Bureau of Labor Statistics states that the average yearly income of real estate agents was $66,890.
Interestingly the average income for realtors was $43,586, according to salary.com.
According to the National Association of Realtors, real estate agents with more than 16 years or more of experience had a median gross income of $75,000 per year in 2020.
As you can see, one can’t find consistent numbers. But making 100k per year as a real estate agent is definitely not the average.
On a side note: I also found an interesting statistic from Real Estate Express.
It’s one of the larger schools for real estate agents to prepare for license exams in different states.
The data is slightly outdated from 2018.
But according to an infographic from this article, a yearly income of 100k (to be exact, $123,024) and more was found in realtors working 60 hours and more per week.
On average, the ones working between 41 and 59 hours per week made $99,378.
At first glance, the first group makes more yearly but not in relative income.
Let’s calculate what the first group makes per hour, assuming a humane 5-day work week (I know many realtors often work at least some hours on weekends).
It would be 2880 hours per year (60 hours x 4 weeks x 12 months).
When we divide $123,024 by 14,400 hours, the result is $42.71 per hour.
Now let’s calculate the relative hourly income of the second group considering a 41-hour workweek.
It’s $99,378 divided by 1968 (41 hours x 4 weeks x 12 months), which is $50.49.
Although working fewer hours per week, their relative hourly income is higher.
So to reach 100k per year as a realtor, you will likely work more weekly hours at a lower relative hourly income.
How Long Does it Take to Sell Your First House As a Real Estate Agent?
Before diving into how to reach 100k or higher income goals, you may also want to consider how long it takes, on average, to sell your first house as a real estate agent.
Suppose the unlikely situation is that you get an accepted real estate deal on the same day you get your real estate license.
Still, it will take between 30 and 45 days until the deal closes and you get your commission (source).
The next more likely situation is when you use your “sphere of influence” to get your first real estate listing contract.
According to Dumbar’s Number, the maximum number of relationships a person can maintain is 150.
In 2021 6.29 million homes were sold in the U.S. (source).
The total population of the U.S. is 329.5 million.
The ratio between homes sold and the U.S. population is 1.9% (6.29 million homes sold divided by 329.5 million).
Why did I do this calculation?
Now we can determine how many people in your sphere of influence may agree to sign a property listing contract. It’s a calculated estimation.
Applying 1.9% to the maximum number of relationships a person can maintain (150) results in 2.85 property listings.
We need another variable: some constraints to calculate the time you need to get your first commission via your sphere of influence.
It’s when most houses go on the market.
Let’s say you found about three people that want to sell.
I am sure they want to put their home on the market when they have the best odds to sell at top dollar.
This usually happens when there is the highest demand. Your potential seller might already know when the best month is.
Luckily I analyzed this already in this article.
It was March, April, June, July, November, or December for the last ten years.
So, if you get your license in January, you likely have to wait two months, and getting it in February would mean a waiting time of one month.
In the worst case, you can play this further with the other months and will find that you wait two months until you can put a property on the market.
To further calculate the time frame for your first home sale, let’s add the following:
- Two-month waiting time until you can put a property on the market
- It takes an average of 25 days to get it sold (source)
- Between 30 and 45 days until closing, you get paid.
So we are talking roughly four months from the day you get your real estate license until you can expect to sell roughly three houses from your sphere of influence.
That is, provided you are a master networker managing to maintain the maximum number of relationships of 150 (Dumbar’s Number).
Suppose you stay within the averages, meaning you sell at the average sales price of 2021. In that case, you will earn an average gross commission of $22,443 per sale (source).
After the cut with the broker you work with, you will be leftover with $11,221.50
So what you will likely make with your sphere of influence in commission would be $33,665.50.
How Can a Realtor Make 100k [Crunching More Numbers Still]?
Making 100k as a realtor requires making 200k if you consider a 50/50 cut with your real estate broker.
And to reach 200k just with your sphere of influence would require more than six times the maximum amount of people a human being can maintain a relationship with.
In other words, this is impossible according to Dumbar’s Number from above.
What can we do?
You will need other real estate marketing channels besides using the low-hanging fruits of your sphere of influence.
Let’s first establish the numbers you need to reach.
To make 200k in gross commission per year, you must have roughly nine transactions per year ($200,000 divided by $22,443 average commission, source).
That’s 0.75 transactions/ sales per month.
If we remove the three transactions, you can get out of your sphere of influence, and it’s six transactions per year or one transaction every two months.
The following data is based on the average sales closing rate of 27%. I discussed this in this article and how it translates into reaching the goal of 200k in gross commission per year.
Generally, you will need 22.2 qualified leads for sales appointments to close 6 of them.
If you focus on only one of the following marketing channels to get the 6 remaining transactions, you will need…
- $1,685 per year for Google Search Ads ($75.94 cost per lead x 22.2 qualified leads)
- $1,033 per year for Social Media Ads, including Facebook, Instagram, LinkedIn, and YouTube ($46.53 per lead x 22.2 qualified leads)
- To call 2,220 expired listings or FSBOs per year (185 per month, 6.1 per day) due to a conversion rate of less than 1% (source)
- To knock on 157 doors per year (14% conversion rate, source)
Please remember that the paid advertising budgets you saw above are already working campaigns.
If you do it yourself, you must consider the testing period until you get to a winning campaign.
This can take 1-6 months, depending on your monthly budget and skills in this area.
There are also services on the market that can give you a shortcut to a winning PPC campaign for real estate.
Remember that the calculation was done, ignoring the taxes you must pay.
If you want to get the number after taxes, you need to add on top of the 200k per year the respective tax rate you would have to pay.
How Many Homes Do You Need to Sell to Make 100k?
From the above, we can also answer how many homes you need to sell to make 100k. This is if you stay on the average of the 2021 numbers.
As a listing agent with an average commission of 5.49% in 2021 to make 200k, remember the 50/50 cut with your broker; you will need to sell:
- Nine houses at the average sales price of 2021 of $408,800 (source)
- 18 houses at the below-average sales price of 2021 of $204,400
- 36 houses at the below-average sales price of 2021 of 102,200
As a buyer’s agent with an average commission of 2.69% in 2021, to make 200k, you will need to sell $10,996.72):
- 18 houses at the average sales price of 2021 of $408,800
- 36 homes at the below-average sales price of 2021 of $204,400
- 72 homes at the below-average sales price of 2021 of $102,200
In both cases (listing agent or buyer’s agent), this quantity will need to be even higher if you factor in taxes you will have to pay on your commissions.
For the marketing costs, you can see at a glance that it’s more lucrative to be a listing agent.
But being a listing agent is more challenging for starting realtors.
How Much Money Does a Realtor Make on a $100 000 Sale?
From the above data, we can now toggle what a realtor makes on a $100,000 sale.
Suppose you are a listing agent and are within the national average. In that case, you make $5,490 in gross commissions ($100,000 x 5.49%) and $2,745 after a 50/50 commission split with your brokerage.
If you are a buyer’s agent, you make, on average, $2,690 in gross commissions ($100,000 x 2.69%) and $1.345 after a 50/50 commission split with your brokerage.
Again, you can see that a listing agent can make more money on a $100,000 sale due to a higher commission percentage.
Can You Make Six Figures as a Real Estate Agent?
If you know the numbers you need to aim for in your different marketing channels, making six figures or more as a real estate agent is possible.
Based on the statistics-powered calculations above, you will need to do constant marketing.
Depending on the marketing budget, your rejection tolerance, and time, you will need at least $1,685 per year for Google Search Ads and/or $1,033 for social media ads.
And/or you need to call 2,220 expired leads or FSBOs and/or knock on 157 doors per year.
Can Real Estate Agents Make Millions?
Real estate agents can make millions. Some are doing it already.
For example, Aaron Kirman, featured in this article, sells multi-million dollar properties regularly in the LA area.
From the calculations I discussed previously, you might have learned that if the sales amount of the respective home falls below the 2021 average of $408,800, making 200k a year in gross commissions will require a lot of sales per year (e.g., 36 houses at $102,200 as a listing agent, or 72 houses at $102,200 as a buyer’s agent).
But suppose you manage to sell a $5,000,000 mansion as a listing agent (5.49% commission). In that case, we are already talking about $274,500 in gross commissions and $137,250 after the broker’s split.
If you do this ten times a year, you already earn more than one million dollars annually.
But doing marketing to break into the high-end market is another beast. Read this article to understand this better.
When you compare this with the numbers above, to reach 100k in commissions per year, you would only need to sell one $5,000,000 mansion to get the 100k per year goal.
Where Do Realtors Make the Most Money?
By deductive logic, and as a general rule, realtors make the most money in areas where you find the highest average home sales prices.
Why? Because, as a realtor, you are paid based on the transactional value.
To answer this question, we just need to look at the most recent median home price statistics ordered per state.
You will find the complete list on Wikipedia, and I picked the top 10 from there.
Here they come:
- Hawaii: $635,451
- District of Columbia: $626,911
- California: $554, 886
- Massachusetts: $422,856
- Washington: $409,228
- Colorado: $397,820
- Oregon: $361,970
- Utah: $348,376
- New Jersey: $335,607
- New York: $321,934
- Maryland: $308,041
But just looking at the median home price is not the best way to determine where realtors make the most money, and it might only serve as a hint.
Why?
You will have to consider other conditions, such as the respective states’ tax rates and how many hours realtors work on average in these states.
It’s quite ridiculous. If you research the states with the highest tax burden, the list is almost identical to those with the highest median home prices.
Take a look at this one.
Hawaii is also at the top.
So should you use this as a basis for where you want to work as a realtor, you might want to calculate your potential gross commission income and your relative hourly income (discussed at the beginning of this article), factoring in your tax rate.
This article has been reviewed by our editorial team. It has been approved for publication in accordance with our editorial policy.
