Well, here we go! I am officially jumping into the real estate game. Sure, Denver is booming right now and a record number of people are deciding that now is the time to launch. Last I heard there are 25,000 registered realtors in the Denver metro area - that’s roughly 6.25 realtors per home on the market! However, real estate has been in the back of my mind for years. The draw here isn’t a hot market and a quick buck, but rather to build a business that serves the community and lasts (hopefully) beyond my lifetime. A business that thrives when the market is up and survives when the market is down.
How the job is structured.
The #1 question I’ve been getting so far from friends is, “how does it work?” For starters, realtors work on 100% commission. You are an independent contractor. That means no small base salary, no retirement plan, no health insurance, no nothin’. You have to account for deducting taxes from each paycheck. If you don’t plan ahead for tax time, you will find yourself in a real pickle when that bill comes due.
On the flipside, the way you structure your business is completely up to you. Many people decide to become a realtor because they want a flexible schedule and unlimited financial upside. Granted, that is appealing. But you won’t have the financial upside if you indulge in a flexible schedule. One of the first things I was told about this business is that your time is not yours - your time belongs to your clients. If they want to meet at 8pm on a Thursday, you meet at 8pm on a Thursday. If they want back to back open houses over the weekend, your weekend is dedicated to that open house.
The brokerage relationship.
So, am I employed by the firm I work for? No. Brokerage firms (think REMAX, Keller Williams, Coldwell Banker, Sotheby's, Douglas Elliman, etc.) enter into agreements with the agents whereby the brokerage provides a certain amount of resources (marketing materials, IT infrastructure, training courses) and the agent grants them a split of their commissions in return. Most firms have a cap on their commission splits, so if you earn over X in commission income (for ex. $18,000) in a year, anything else earned belongs entirely to you (...and the IRS).
Each brokerage is different in terms of what resources they provide and how much they take in exchange. Some places just give the agent a desk and say good luck. Others, such as Keller Williams, have very robust training programs. The brokerage does not typically provide a computer or even a desk (unless you pay to rent one monthly). It’s BYO...just about everything.
How do you get business?
I’ve been asked this a lot. Prior to researching the industry, I had no clue myself.
Another thing brokerage firms don’t tend to provide is business leads. If I asked how you might go about finding a realtor, what would you say? The answer is likely that you know someone (a friend, friend of a friend) or maybe you saw someone’s name on a bus stop or some other crazy place. Perhaps you just know the name of a brokerage such as REMAX and give them a call. Perhaps you Google “top realtor in (your town here).”
All of these avenues are pursued, but the “knowing someone” is what agents prioritize. The first rule of real estate is that your database is absolutely the most important thing. To get business, you must constantly engage with your existing database and also add new people to it. This is most often done by being out and about - you know, shaking hands and kissing babies. Being top of mind is crucial when someone decides they want to buy or sell. I assume most of the people reading this post have been directed to this site because they are friends of mine and therefore in my database. (Hi guys, flattered your read this far!)
From there, every agent finds their preferred niche when it comes to lead generation. It could be cold calling expired listings or For Sale By Owner properties, it could be knocking on doors in a particular area, it could be buying Facebook and Google ads. Changing the industry is the formation of teams, whereby a top tier agent has other agents working with him and handling lead overflow. The team model is often structured more like a formal business (with designated roles in front office and back office, a cohesive brand, etc) and is rapidly gaining in popularity.
So what’s the plan here?
Well, I’ve always envisioned having a small portfolio of rental properties and I’ve always loved homes with a bold, painted door (and homes in general for that matter). After researching the ins and outs of being an agent and obtaining my license, a theme for a business, named Painted Door Properties, was born.
Starting from the ground up, I intend to become a trusted real estate advisor and also manage that aforementioned portfolio of single-family rentals (all with a painted door, of course). There’s lots to do in order to get to that point, and I am excited to share the journey with you. As I continue to learn about this industry, you will too.
But first, I must survive my first year as a real estate agent. Stay tuned to see how it goes - should be an interesting ride!