Great question and, the answer may be a bit different for everyone.
Lots of people come into the business thinking they “want to try real estate.” The truth is that the current failure rate is running between 80% and 85%, meaning, this percentage who come into the business are also out of the business by the end of their first year. Why is the failure rate so high?
The fail rate is so high because most people coming into industry don’t have a realistic understanding of the “work” associated with building a successful real estate business. Most come in believing the work and discipline required to succeed are trivial and that it’s a simple, easy business, get a license and make a fortune!
If you were investing $300,000 into opening a new business, you likely have an understanding it could take several years to return your original investment and several more years to get into significant profits. While most people seem to understand this basic concept about business, many believe they can invest $2,500 to $3,000 into obtaining their real estate license and, for some reason, expect to be making a $100,000 overnight? The problem is, when they have not selected the right real estate company and didn’t clearly understand the business, they lose enthusiasm and belief, then decide they cannot afford to be in business any longer. Most of the time, they point to a bad market, a shift, interest rates or some other economic-related situation to justify why their timing was bad for getting into the business.
Here’s what we know for sure, if a person is looking to get into the business and sell 1 to 5 homes per year, they can go almost anywhere. If, on the other hand, they are looking to build a business, and sell 30 homes, or more, per year, selecting the right real estate company to associate with is a must. Selling 30 homes per year will generally equate to bringing in a gross of between $100,000 and $250,000 per year depending on location and market price. From this figure, we’ve got to deduct our costs of operation and related expenses. We can figure that to be between 25% and 40%.
So, the question is: What do I look for in a real estate company?
The number one answer is education and training. Find out who has the most powerful and robust training in your area and be sure to interview with them. Do some research. Go to training magazine and see if any of the real estate companies in your area are listed in training magazine as one of the top 125 in the world. You’re going to pay for your education one way or another, so you may as well give yourself the best chance for early success and select a company with good training and a coaching program.
The number two answer is the leadership in the office, market center or company you are considering making a move to. Meet the individuals and do a gut check on whether you’ll feel good about working with these individuals. You should feel good about them and ask about their credentials and standing in the real estate community. These are the people you will be associated with for months and/or years so attempt to choose wisely.
Lastly is the companies economic model. While it may be the least important of the key points, it still needs to be clearly understood. How do the finances break down on a per transaction basis and more importantly, on a per year basis? You should be asking yourself the question: If I spend three years with this company, how much money will I be taking home per year? Just know, it’s about your net take-home pay and not about the company split. You could have a huge split with one company, meaning that you get almost all the money, however, the question is how many units will you close in year number three and beyond? The short answer to this question is refer back to one and two. Go where the training and leadership are, and you’ll be at the right place for the biggest take-home pay. You’ll also have built a business for your family and your future.