Kristen Merlino, a New York City real estate agent, is no rookie. She’s been in the real estate business for nearly five years, which means she’s learned a few things about the industry but still remembers what it was like to get started.
We interviewed her about the hurdles of starting out in real estate, and she offered some valuable advice for those seeking to establish themselves as real estate professionals.
How to know if real estate is the right career for you
Conduct an honest self-evaluation of your skills and ambition. To be a good real estate agent, you have to be passionate about real estate, suggests Kristen. Also, are you someone who can set and organize your schedule without needing direction? Organization skills are essential since you’ll have to track the details and deadlines of specific contracts, manage client meetings and follow up on leads. The more self-motivated and goal-oriented you are, the more likely you will succeed in the real estate business.
Part-time or full-time agent
Can I do real estate part time? Of course you can. However, Kristen says, “If you really want to do well in it and you want to make a mark, you definitely have to go at it full time.”
When she first started, she juggled building her business while continuing to work a freelance job in public relations. She encourages those diving in to “give it your all, even if you have to also work a side job in order to make ends meet. Put all your eggs in the basket.”
Working full time helps manage the ups and downs of a commission-only business. It takes time in your first year to build a client base and there is cost outlay the first year. It’s not a career you want to test drive for a few months because many agents don’t see the fruits of their efforts right away.
It takes time to build trust with clients. But with trust comes referrals, which have ultimately fueled Kristen’s success.
Last, if you aren’t putting in a full effort, the times without a commission might make the financial aspect of the business difficult to weather.
According to the National Association of Realtors, the median gross income of Realtors was $39,200 in 2015, down from $45,800 in 2014. This average includes both new and experienced agents.
Perseverance and patience
Realtor.com reports the average real estate agent incurs between $1,500-$2,000 in first-year startup expenses. These expenses include purchasing signs, MLS and association fees, desk fees charged by the brokerage, advertising on top of what (if anything) the brokerage provides, business cards, marketing materials, exam and course fees, fingerprinting fees and more. That’s a lot of investment if you’re not certain real estate is the career for you. So first, be sure you’re all in.
Then be persevering and patient. The first year is hard because you don’t have a client base yet; mostly you’re meeting a lot of strangers, Kristen says, but those strangers turn into your network.
“I wish I had the confidence I feel now earlier in my career, but you only gain that confidence with experience and time.”
How to find a brokerage
If you are just starting out, the idea of establishing a business can be daunting. As a real estate agent, you may work for yourself under the umbrella of a brokerage. The brokerage company often provides:
- Some transaction coordination
- An established brand
- Marketing and advertising materials for you to customize
- Access to technology
- Guidance and legal assistance on contracts.
The managing broker acts as oversight and mentor versus boss or employer. When you launch a real estate business, it’s like starting any other small business in that you’re responsible for securing clients, developing your personal brand, creating marketing materials, determining your market niche and managing your cash flow. “Pick your brokerage based on the tools they (the brokerage) provide you,” Kristen advises. “There are a lot of tools you can use to grow your business–it’s just whether you utilize them.”
How to manage expenses
When starting out, Kristen faced managing expenses the “old way” and quickly figured out how technology could help. Until she hired an accountant and incorporated her business, she describes managing the flurry of receipts as a headache.
“For the first few years I was collecting these receipts and every quarter putting them into categories and adding them together on my phone and then deleting them by accident and having to start over,” she lamented. Using technology, in her case a simple corporation-only credit card, changed her financial management significantly. “It’s way easier having one account online.” She also maintains a separate business-only checking account.
Sometimes, the overzealous new agent overspends on advertising before enough commissions have come in to cover the expenses, putting their business in the red. It’s best to ask around and set a budget in your first year based on commission projections. Since many brokerages take a split on your earnings, make sure you know how much of each commission is your take before you go into it. This makes planning easier. Kristen says it’s easy to overspend on advertising. But she also says “the more you put in, the more you do get out, and you do get appointments and referrals.”
Hiring an accountant
Real estate professionals — particularly the full-time, high-earning ones — are often unaware of cash flow because they don’t personally manage their books. Or if they use an accountant or tax pro, they can be surprised by how low their profits are or surprised by a large tax bill.
In Kristen’s case, after the first year, she switched to using an accountant who specializes in self-employed professionals, specifically real estate agents. She keeps in regular touch with him, asking for advice on individual receipts as needed. “I have created a corporation for my business and he has advised me a lot on that. He’s the one who files and I sign off on everything.”
For those starting out, QuickBooks Self-Employed is an easy way to manage receipts and budgets, even file quarterly taxes, if the cost of an accountant isn’t in the budget.
Four years in, Kristen has learned a lot. Moving all her documentation for expenses to online platforms versus keeping paper receipts is just one part. Living and working in NYC, she often gets to appointments via Uber or cabs. She says it’s something she wishes she spent less on, preferring to spend more on marketing.
Her advice to new agents: “Just keep going. Keep getting your name out there. It’ll work out as long as you keep working hard.”