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Real Estate Business is NOT for Broke People

I've said it like it is. Have I offended anyone yet? If I have, well - I would be lying if I said I didn't mean to hurt your feelings at least one bit, but I mean to say it just the way I think it will bring enough attention to at least forewarn you.

My dear friend Anna Banana of Phoenix Arizona brought awareness about the cost of getting into the Real Estate business. She listed all the initial costs of getting into the business as well as on-going costs to stay in business. It's not funny, people - when you start adding up.

Here's what I learnt about my tenure in real estate:

A large reserve prior to getting into the business

I started in the business part time because I didn't know if I would make it and whether it was for me. So, when I first became a Realtor(R), all my paycheck went into paying off my last consumer debts (my cars) and then, I built a large cash reserve for when I do get into the business full time.

I saved 12-months of monthly expenses and built a 12-month reserve before I felt comfortable to do this full time.
I kept my business expenses low, real LOW

When I first went into the business, I bought a laptop because it was easier to carry my "office" everywhere I went (I still had a full-time job at work but I didn't feel comfortable doing other work on my corporate computer. I worked on my real estate business at my lunch hour).
I already had a cell phone and I didn't increase my cell phone minutes.
I paid the dues I need to do and that was it.
I did business with my friends, family and referrals. My marketing dollars were ZERO for the first 3 years and it kept me fed. All my friends used me to purchase their first home.

My only marketing was my website, designed and hosted by LinkUSystems. It cost me $29.99 per month and $29.95 per month for my IDX solution from 1parkplace. My website has evolved to what it is today because I work on it everyday. It has been a consistent source of business for me.
I hired a coach when I went into the business full-time.

My coach was Ms. Jennifer Allan. I started the business with some bad habits to have to un-learn. Jennifer helped me do that.
I paid Jennifer through my transactions. It was not an upfront fee which I truly appreciate.
When I got paid, she got paid.
Then I joined Active Rain in November 2006.

Since I have been grandfathered, I do not pay for my Rainmaker membership. I paid for my outside blog though which costs $19 per month.
Thus far, it's the only marketing effort that has produce TREMENDOUS Rain POURING Effort for my business.

If you are a new member now, you have to pay $30 for a Rainmaker membership - and you do this because you want the public to be able to find you on Google. Otherwise, your posts are only made public. All your hyper-local posts will be wasted effort if you are not a Rainmaker.

Total $360 per year, paid monthly. Where can you up?
Click on this promotion code to start your Rainmaker membership at $5 the first month.

Try it for 6 months. If it doesn't work out after you tried everything about Blogging Active Rain, you only had $180 to lose.

If you do sign up, or are a new Rainmaker, read Your First Days on Active Rain.

Tip: I make my blog and website as a combined effort of my Internet marketing efforts. One is not complete without the other.
I signed up for Katerina Gasset's SEO to the TOP WEBINAR.

$300. One of the best education dollars I spent.
Read how I turned 400K points into $122K by simply tweaking what I already know with what Katerina Gasset taught in her classes.
I hired a NEW COACH

Many coaches constantly talk about Tiger Woods and how he's already an awesome golf player. But he still had a coach. Guess what? I do what EXCELLENT PEOPLE DO AT THEIR JOB. I mimic them. I hired a coach to keep in tact.

I recently signed up with a new coach to push me even further. Kathy Eppley. In just 4 weeks of coaching, it looks like I will end 2009 with a BANG and to raise the bar even higher for 2010.

I do have other expenses that I spend on. But these are the ones that I know made SIGNIFICANT enhancements for my business.

Now, are you convinced that the Real estate business is NOT for BROKE people?

Quote of the Day:
We are What we do repeatedly. Therefore EXCELLENCE is NOT an act but a Habit
by Aristotle.

What have you done to ensure your longevity for this business?

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All contents are original. Consider subscribing to my blog for more real estate commentaries.

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Contact:

Loreena Yeo
Realtor®/ Broker of 3:16 team REALTY
(214) 783-2210
loreena@loreenayeo.com

Super-serving Frisco, Plano, Dallas, McKinney, Allen, Little Elm, Prosper, Celina, Richardson, Dallas M-Streets, Dallas White Rock Lake area communities and other surrounding areas.

Posted by Loreena Yeo - Broker|Realtor(R) of www.Frisco-TX-Homes.com (214) 783-2210 on 11/07/2009 07:12 AM

Comments (58)

Real Estate Business Is NOT for Broke People in the ActiveRain Channel

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58 Comments on Real Estate Business is NOT for Broke People

NOV

Excellent points, all. I have found the key is selecting where to invest your time and money, something you obviously have done well!

The thing that most Realtors fail to realize though is that you have to spend money to make money. If I was starting all over again I would take out a loan to be able to spend money on marketing the heck out of myself and my business. The most successful people in realize that you have to take your hand out of your pocket to be one of the best.

Hey Loreena, All the agents we have had that have not made it didn't make it because they did not have the money to stay in and build their business. This is by the way why most businesses fail. It is not the idea it is the money to bring the idea to market that most folks are lacking. Nice post

I look back at some of the money I spent and wish I knew what I did now. I'm spending much smarter, but it still is not cheap!

Bill - Yes, I agree that you have to spend money to make money. However, there is a fine line between simply spending versus really putting the money to work. By far, for me at least has been my Active Rain membership.

However, I don't believe in borrowing. I believe in funding it with cash. Many companies fail today because they borrowed too much. If you didn't have monthly payments to make on top of generating a business, I think that's one less stress in life you remove.

Loreena: You are so right, real estate is a very expensive endeavor and so many agents who jumped in thinking they would get rich quick, jumped out after a year or so. Bill is right about spending money to make money but the trick is to really research and read posts like yours. Active Rain is a great place to get good advice and guidance. Agents need to be very careful about what they spend those marketing dollars on and be able to track the progress. If you are not getting more than your money's worth, you need to find a different marketing tool.

Well said. Thanks for the information and resources. Very useful.

Loreena, under capitalization is the main reason why businesses fail. Too many people come into this business thinking they can start on a shoestring. When I was teaching classes, my students were often surprised at how much it cost just to get started.

I see that you have hired a different coach as you continue to increase ones skills. True-a wise man/woman has many advisers

Harry - I never believed in that. I've always thought that was an expenditure I didn't need. But without them, I wouldn't have pushed my envelope even greater. So, I definitely recommend that.

However, I will caution. Not everyone is fit for every coach. A coach must share the same philosophy, or has the philosophy you want to go. Otherwise, you would just be forcing yourself into doing things you don't want.

Loreena - I SO love your blogs where you thank everyone who has been instrumental in your career. Way to spread the love...

And yes, having money to begin a new career seems kind of obvious, but so many don't think it's important in a real estate career for some reason. I'm always amazed at comments on real estate forums about how someone can't afford $30/month or $500 for a website or whatever. Not that I think anyone ought to throw their money away, but if they're on that tight of a budget, this is NOT the time to get into real estate!!

With as many buyers and sellers looking online now, I see the yellow pages expense now, basically a waste of money. Our area had two books, then added a third phone book, then a couple of years ago added a fourth phone book, for the same area. In addition, if you don't live in the area, then you don't even have physical access to the books to look for a product or service provider. I've steadily been terminating yellow page ads over the last couple of years, as though it doesn't justify satisfactory results. I am increasing some (paid) online advertising. In addition, always save back as much income commission as possible, as the next closing may not be as soon as is financially needed!

Loreena - Looks like you got started for pennies compared to what you could have spent. You are right this is a business and it costs money to operate and promote any business.

I tell new recruits if you treat your business like a business it will reward you like a business. Hoverer if you treat it like a hobby it will cost you like a hobby.

Jennifer - You're always in my mind, thoughts and prayers.

I suspect that the reason so many new agents don't make it is solely because of under capitalization. Just because it only takes x hours and $x to get a license doesn't mean you can start a business that way. And make no mistake, this is an entrepreneurial enterprise.

Loreena - You are so right about the coach. All of the best in every industry have someone that they are accountable to, and a coach that knows the business is the best.

It definately is not cheap. However, as you stated, success breeds success.

Great recap of typical expenses Loreena and congratulations on pursuing coaches for yourself!!

You are right, the Real Estate Business can get expensive. I, myself have started out part time. This is mainly so that I can "build" my business, before I try to make it on my own. Additionally, I need the cash to run my business and pay my bills. Great post!

Wow really great post. I flagged this for a feature. One of the biggest things in business is capital. It allows you to invest in your business. Most important though it is ease of stress. I started with six months reserves as well as access to a line of credit like @Bill Gassett suggested.

I haven't made a list of my ten most influential bloggers. You and your first two coaches would certainly be in my top 10. I've used the services of Bruce Gardner in Denver. He is freaking awesome.

There is that old saying in sales that clients can smell desperation. If you need this deal to close to pay your next months mortgage you might be desperate. It is also a tremendous state of mind to be a peace, having cash reserves takes a huge weight off your shoulders.

This is great advice for a rookie.

Curious as to why you switched coaches, because of a niche or what. Also do you do print at all.

NOV

Joyce - I hired Jennifer Allan 3 years ago for 1 year. That relationship went well. We worked on so much stuff, customized to my needs in my business. Then I was "coachless" for 2 yrs before I just recently hired Kathy Eppley. Both are different and both are hired in the right stages of my life.

Loreena, you are so correct in costs and getting coached properly. Most agents are broke or going broke!

I have spent a lot of $$ on things that did not work, but I learned valuable lessons form them. I love your energy and focus, it makes me feel more energized too! Thanks!

Loreena,

I agree with you! I've met with 3 people in the last 6 months who are thinking about "going into real estate" and I spelled out for them all of the expenses to get started, especially for the first 6 months. But the current market is also a concern. Someone said at REbarcamp RDU this week that several years ago he'd stop at a red light and buyers would fall into his car. Our businesses do require much work & excellent service/knowledge along with funding.

Hi Loreena, Love reading your posts! Congrats on feature post. I have learned much from your blogs, thanks for sharing

Interesting subject! I just had a very promising new agent flare and burn up in only 5 months. She was disappointed that it was actual "work" and that she didn't have as high a sales percentage as I did....what she didn't understand is that I'm responding to those seeking me out now....I've done the legwork. She added up some of the costs you mentioned with gas and time and decided she just couldn't do it....I was really surprised, but better to know now.

Well, It is a business, and I am not sure how many businesses start-up with no capital and no reserve, but i will say, you can get into this business with very little money. I mean, compare opening a real estate business to opening a restuarant, or buying a franchise. For around $2500 in most areas, you can go to school get licensed, join a board, MLS and get started. If you join the right company, you will have website, email, phones, etc. provided for you at a minimal yearly or monthly cost and that is enough to get started in this business. Then you take a portion of each check, lead with revenue, and put it towards your business. You simply need a plan to work from, which most agents do not have. That plan should include education, training, coaching, marketing, and all other business expenses. Please real the Miilionaire Real Estate Agent if you are looking for a sample budget to follow - it can be done as I am coaching agents in my own office to do it on little or no start-up money.

To make a small fortune in real estate you need to start with a large one.

As Karen said, some people figure it's easy money and have no actual business plans beforehand or once they get into the business. Throwing money around doesn't necessarily make you money obviously as you've pointed out.

As a fairly new agent, I am thankful for all the imput from the experienced ones...Thanks for the post, Loreena.

This is an excellent post with some good advice. Real estate is a costly business, but it is a profitable one as well.

We have a mentorship program in our company. I try to tell those that I mentor that there are a wealth of free internet resources out there, and they need to take advantage of them while still in the early stages of their business when money is really tight and they are not as busy as they will be later on.

Your web site is the cornerstone of all your marketing efforts, and everything should point clients back to it. Its content must be sufficient to engage and hold the client there. As closings begin to occur, a portion can be used for further marketing efforts.

Write a good profile. You will tweak it and use it repeatedly.

Some listen, and some don't. Those that don't, struggle more. I almost always find "nuggets" I can use from articles and presentations of other agents.

Great post to show the building of your business, it is not easy and expensive. I really try to watch and analyize where I spend. I have never hired a coach but it has entered my mind. Wish I would have read this a year ago(grinning).

Been there, done that, struggled some and now getting my second wind. Self discipline is also needed, something I struggle with daily from my own bad habits and so I recently hired my first coach also. Thanks for the post.

Loreena

It is your honesty, combined with your experience that all people in real estate should listen to. Whether we are new to the business, or in it for 20+ years, we should pay attention to what you have just shared.

Nicely written!

Loreena- Thank you so much for talking about how my SEO coaching helped you in your business. I know I paid a lot more than $300 to learn all that I now can help others with. I wasted a lot of money too paying people who did not know what they they were talking about. I love to coach. It is a passion for me to see the passion ignite when someone I am coaching gets it and follows their dream.

All great business people have coaches and many of them have more than one coach. Coaching is not for everyone because you have to want to be accountable and a self starter. Coaching is not babysitting and can not be used as a crutch. I have always had a coach. When I first was licensed in Merril Lynch Realty in California- you had to have a mentor your first year. That was the best rule ever. I have been coached in every business style and adventure I have started and continue to do.

My next session starts on January 13th- so if anyone wants to get started do so soon as the spaces get filled up and the more sessions I have, the more the word spreads and the more popular the webinar becomes. I promise you that you will learn a lot! Just ask Loreena!

Maybe the government will give broke agents money....

Your article is stocked full of valuable information and resources. Fortunately, I was also grandfathered into the Rainmaker status but I did invest in the outside blog as well.

Now, after bookmarking this, I'm going to check out some of your links. Thanks!

This is geat stuff. Thanks for sharing how you went about it.

Sounds like Coaching has played a key role--- Good to hear! Kathy

Seldom do we see the costs layed out. Not only is it costly to start up a real estate business, it is expensive to keep up the business with effective marketing.

I love it, but no one listens everyday the schools spit out agents by the dozens because with $400. and a little gas you can be in this business in 10 days or less.

I first bristled at your heading but realized that the sentiment applies to most occupations. Its a generalization though. I started in the biz in 1980 on a very tiny shoestring as a newbie agent and ended up owning the franchise by the second year. I didnt spend much to do it.

There are many exceptions to your heading which almost sounds eletist instead of helpful so I almost didnt read it. There are many people who have had hard times but cant still rebuild if they work hard. Not being well funded may have nothing to do with their professionalism or abilities. Perhaps they were/are victims of events outside their control.

I realize that more people in our industry means a thinner piece of the pie but would ENCOURAGE people who want o do it instead of making it sound like they are worthless and should not attempt to enter or stay in the business. This isnt an adversarial post , Im just a grumpy old 'devils advocate' kinda guy.

Bottom line is almost no business is for broke people yet many broke people have the drive/talent to succeed anyway.

Must say that its hard to decide whether or not your thread is all helpful advice or ADVERTISING for others, which would make the words a bit hollow. Again not trying to be a jerk. I would have put more stock into what you said if you had not mentioned names. Actually, the post is a bit confusing. You start off saying 'not for broke people' then show very inexpensive ways of doing it. Id say that if someone is under funded enough so that some of your inexpensive methods are not an option---they have REALLY BIG problems in general and are probably near food stamps!

Perhaps the heading and first paragraphs should have been more informational than aggresive/sensational. How about something like 'Being an agent is running your own business. Its a results based income, not a base pay. Do you have enough holdover money to make it? Here are some helpful hints on how to succeed.'

I wouldnt cut anyone off if they have a dream but you are quite correct about expectations and costs. At first real estate office for which I worked, the manager talked a guy who was a full Safeway store manager into quitting to devote his attentuion to sales. He had 2 years left to retirement. He did, failed, lost everything from Safeway and ended up a candy vending machine driver. Sad.

Marvin - I appreciate your feedback and taking the time to read its entirety despite the title not interest you. As you know, I am a Realtor(R), and I write for my real estate readership. I dont believe that "more" agents mean a smaller pie for everyone. I dont believe in that mentality and this post is not written to deter others from joining the business.

Real estate has made my family prosperous. And if I can in any ways help others or inspire others to do the same, I will do that. My readership knows that.

It didn't matter if you felt that it was advertising for others. I am giving credit where credit is due. I will NOT forget those who are a part of my success. I also believe that if I can share my blueprint for success, telling them exactly how they can do it, you betcha I will.

People can decide what they want to do. I have had people read my posts about my coaches, hired them and in their own ways, achieve their very own successes. I will not stop assisting others if I have the answer.

Blogging is a style. I could only do it my way. And I'm sure if you are, your style would be perfectly awesome too.

More good advice Loreena. I will read the links you provided. Thanks.

Loreena, how many people have we all seen who have dollar signs in their eyes when they get in this business - and they have not been properly prepared for the expenses and the possibility of waiting months between pay checks. There are rare individuals such as Marvin, but they are the exception. For every Marvin, there are 50 other people who are out of the business in the first two to five years. The last statistic I heard was that 80% left the business within 5 years. Anna's post was excellent and so is yours. Thanks for sharing some of what has made you so successful!

Amen!!! I thought I would never see the end of the money I was putting out. The first year was the worst as there was always a fee that had to be paid. Prior planning prevents (skipped a word) poor performance. Thanks for the great post.

NOV

Thank you, I have never seriously considered a coach but have never seen such a glowing recommendations. That is now something I will check into. I have not yet committed to an active rain account but I intend to this coming spring, I appreciate the blueprint and suggestions.

thank you

Figures. ; ) I was doing searches on ActiveRain for examples of business plans and guess what I came across. Your blog that I'm a subscriber too and I must admit need to catch up on. You started out much like I am. I hadn't even thought about hiring a coach but that might be a good idea. Thanks Loreena for a wonderful post! I always enjoy reading your blog!

In order to make money in any business, you have to invest time and money. Obviously, if you want to speed up the process, some experienced person coaching you is helpful. You laid out a good plan for starting any business.

Just in case anyone is thinking of doing foreclosures, they need money. It'a amazing how much money I have to advance to pay utility bills for foreclosures, cash-for-keys, clean-up and trash-out fees, etc. It is very expensive. You eventually get it back but it's still advanced from your cash reserves.

NOV

Great post Loreena. What were you doing before you started working in RE?

Mark - I was a structural engineer for an aluminum framing company. If you imagine the high rise buildings with glass, my company manufactures the aluminum that holds the glass in place. My job is to design the frames to meet the structural design requirements, to make sure they stand up when wind blows or the earth shakes.

While I was there (3 years into the company), I completed my Masters degree education in IT Management and Consulting. My boss wanted to keep me, so he created a Business Development department for me. There, I really got to explore the sales and marketing side of the business and became very good at it.

The last project I helped complete for my company was to win the Dallas Cowboys stadium. I created the marketing materials and power point presentation as to why Jerry Jones needs to select my company. That was my crowning achievement.

Thanks for asking.

NOV

Okay, I'm still on the fact that you saved of 12 months of expenses and reserves. YOU GO! That alone is a business plan in action. I don't even know what to say to that. All in all, too many of us make the mistake of not treating this as a full-time business and it comes back and haunts you again and again.

NOV

Wow....you had a plan in place that really worked for you! Congrats!

NOV

There are very few businesses that you can get into for free. Try to think of one.

Entry into the real estate sale business is very low cost compared to many others. No inventory cost. No manufacturing cost. No office lease, in most cases. Start up education and license fees are not that high.

The catch is that you have to produce. Expenses may not be high, and can be controlled by the agent, but if there is no income there will be a problem.

A sound business plan includes budgeting for start-up expenses, budgeting for on-going expenses until income covers expenses and a start-up reserve to cover same. But, at some point, there needs to be income or...

John Juarez, REALTOR

Winderemere Properties of the East Bay

John@CarlMedford.com

510-673-0686

NOV

Thank you great article!!

Statistics state most buyers shop online! If you are computer savvy, you can make it, now days you have to work financially smarter and harder... in this real estate market.

If you know how to manipulate the online world you can achieve much success without spending all that money online to advertise... Pays to be computer literate in this business

I remember doing my first farm and an agent who sat next to me was an agent in the height of the market basically buyers just came to the agency the agent only had to answer the phone, and then the market conditions changed I had to laugh when he had been in real estate for several years and said Ive never done a farm package... he learned quick as market conditions fell...

Work smart and hard and you can suceed in this business.

Truly believes if you are computer savvy you can succed in real estate.

Elaine:)

NOV

Ahhh thank you for this fantastic post. I have bookmarked it for future reference. Excellence is habit! Carpe Diem!

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