Pros And Cons Of Starting Your Own Real Estate Business

real estate agent

Many people are wondering what the real estate business is all about. If you’ve been a real estate agent for years, you may start thinking about stepping out of your own business. Having that full commission can be very tempting for many agents; it can often feel like you already do all the work anyway. But what are the real pros and cons of starting your own real estate business? Did you know that 87% of real estate agents fail within the first five years? This isn’t to scare you off, but to underline the importance of preparation and strategy.

The Evolution of Real Estate Trends

Over the past decade, the real estate realm has embarked on a remarkable journey of transformation, reshaping the very fabric of conducting business and how properties are unveiled for admiration. The digital revolution has played a pivotal role in orchestrating this metamorphosis. No longer are the days when potential buyers would solely rely on physical visits to formulate their purchase decisions. Nowadays, the rise of virtual tours and three-dimensional property visualizations bestows buyers the opportunity to explore properties from the cozy confines of their abodes, rendering the buying process exceptionally efficient and user-friendly.

This paradigm shift was further accelerated by global occurrences, most notably the pandemic, which underscored the paramount significance of virtual interactions during an era of mandated social distancing. A reputable report by the esteemed National Association of Realtors posits that over 90% of home buyers have now embraced the vast expanse of the internet in their fervent quest for their ideal dwelling.

However, the evolution within the industry extends beyond the realm of technology. Recent global events, particularly the pandemic, have indelibly imprinted their influence on the prevailing trends in real estate. The burgeoning demand for homes replete with dedicated office spaces has surged in the wake of remote work adopting the mantle of the new norm. Simultaneously, there has been a discernible shift towards suburban enclaves, with multitudes seeking more expansive living spaces, seeking respite from the bustling and populous urban centers.

This undeniable trend was vividly illuminated in a meticulously conducted study by none other than the eminent Zillow, laying bare a substantial surge in the clamor for suburban housing during the fateful year of 2020. As we gaze into the future, assimilating these seismic shifts becomes an imperious imperative for anyone contemplating foraying into the world of the real estate business, ensuring their arsenal is suitably armed to navigate the ever-evolving and treacherous landscape.

Connections and Communication Skills

Before we jump into the pros and cons of the real estate business, let’s look at what it takes to achieve this success. Connections and communications skills are an integral part of the real estate business. The number of loan programs was greatly reduced after the 2007 mortgage collapse, but over the past few years, they have started to come back.

Do you have what it takes to help your clients with financing from a traditional source such as a large bank or credit union? Usually, it is always more difficult to obtain real estate financing as a first-time buyer from traditional lenders. If your client’s credit score is not in the good or higher range, it may be time to turn to alternative lending.  Can you help them with a construction loan as a large line of credit or other loan made for the purposes of developing the real property?

The Role of Technology in Modern Real Estate

The realm of real estate has undergone a fascinating and transformative metamorphosis, driven by the marvels of technology. Gone are the quaint days of neighborhood strolls, spotting those ubiquitous ‘For Sale’ signs. Now, in a digital age, potential buyers can effortlessly embark on virtual property explorations, all from the cozy confines of their couch, courtesy of cutting-edge innovations like Virtual Reality (VR).

But the allure of virtual tours is merely the tip of the iceberg. Enter the stage of AI-powered platforms like the illustrious Zillow and Redfin, reshaping the very fabric of property transactions, offering bespoke recommendations based on user preferences and browsing history.

Yet, like any dawning era of innovation, a duality persists. Blockchain technology stands tall, heralding promises of transparency and security in transactions. Alas, it still finds itself in infancy within the real estate domain, grappling with its own array of challenges. For many, the nascent understanding and trust in this technology prove to be a formidable barrier. Nevertheless, resolute and visionary real estate enterprises refuse to shy away.

The intrepid likes of Propy ingeniously harness blockchain for seamless cross-border real estate dealings, bestowing upon both buyers and sellers the coveted treasures of security and ease. The trajectory is clear – an understanding of and adaptation to these tech-driven shifts shall metamorphose from option to necessity for any daring soul stepping into the illustrious world of real estate.

The Local vs. Global Dilemma

Local Legends: There’s something cozy about being a hometown hero. When you know your local market like the back of your hand, you’re the person everyone turns to. You know that overlooked neighborhood that’s a goldmine, and you can outsmart your rivals by wielding your intimate, local know-how. But keep this in mind—small ponds can fill up fast, and if the local economy tanks, you’re going down with it.

The Global Gamble: Now picture this—your office isn’t just your city; it’s the entire globe. Intriguing, right? You’re not merely a real estate agent; you’re an international opportunist. But hold your horses; going global is a jungle of complexities, from bewildering legalities to subtle cultural cues. The upside? The payoff could be sky-high. You’re not just trading in real estate; you’re marketing dreams on an international stage.

So, what’s your pick? The snug safety of hometown turf or the high-stakes excitement of a global playground? Choose wisely, because whether you’re local or global, in real estate and in life, the audacious are the ones who hit pay dirt.

Pro: Be Your Own Boss

One of the best parts of running your own business is being your own boss. You are the person who determines how your time is best spent, and you get to set your own priorities and your own agendas. This can create a lot of freedom and flexibility, which can be incredibly beneficial. Having the ability to set your own schedule can be especially beneficial to young families.

Con: Be Everyone Else’s Boss

The downside of being your own boss is that you also need to be the boss of anyone working under you. If you have more agents operating under you, you need to handle all the paperwork that relates to that. If you have a receptionist, secretary, accountant, or cleaning service at your physical office, you will need to manage salaries, payroll, and benefits for each of these people.

The flexibility of business ownership can also be more elusive than it looks from the outside. You are what keeps details from slipping through the cracks, so when no one else can do it, it falls to you.

The Art of Delegation

Recognizing the Right Time to Delegate

Hey, you’re a go-getter, I get it. But even superheroes need a sidekick. When you find yourself drowning in paperwork while juggling client meetings, it’s time to delegate. Don’t wait for burnout to be your wake-up call.

Identifying Tasks to Offload

Start by jotting down your daily tasks. Which of these are crucial for you to handle? Negotiating deals? Absolutely. Filing paperwork? Maybe not. Create a list of tasks that can be handed off. This isn’t just about lightening your load; it’s about freeing you up for tasks that really need your expertise.

Building a Complementary Team

You’re not just hiring employees; you’re assembling a dream team. Look for people whose skills fill in your gaps. If you’re a whiz at sales but cringe at the thought of social media, find someone who lives and breathes hashtags and retweets.

Effective Communication: The Glue That Holds It All Together

Open lines of communication are vital. Hold regular team meetings, but also make room for one-on-ones. A group chat on Slack or WhatsApp can keep everyone in the loop without clogging up email inboxes.

The Big Reveal: The Power of Trust

Here’s the kicker: Delegation isn’t just about offloading tasks; it’s about entrusting your vision to others. When you find the right people and communicate effectively, you’re not just building a team; you’re creating ambassadors for your brand.

Actionable Takeaways

  • Start with a self-audit of your tasks.
  • Identify the skills you lack and hire accordingly.
  • Keep the lines of communication open and transparent.
  • Trust is the ultimate endgame.

Pro: Choose Your Own Messaging

As a real estate agent, you may hate the brokerage’s messaging, logo, design, marketing approach, and more. When you run your own business, you get to choose how you will be represented in the community, how your signs will look, and how you will work to get referrals. You can design your website and create your own social media messaging.

Con: Pay Marketing Costs

When you run your own business, you also need to pay all the costs associated with marketing. Getting the website you want may require hiring a graphic designer; getting the right social media presence may require hiring an online marketing expert.

The average real estate agent spends about $1,200 per year on marketing alone, not including additional costs like staging and open houses. You need to decide which marketing channels are getting the right return on investment for you to continue to use them. It would help if you also made all those exciting decisions – which are suddenly more overwhelming when you realize the wealth of options available to modern businesses.

Building a Brand in Real Estate

In the bustling realm of real estate, where every agent and firm fiercely vie for a slice of the market pie, the question arises: How can you stand out amidst the crowd? The answer lies not merely in the properties you sell but in the compelling story, you weave. Branding in real estate mirrors the art of crafting a captivating novel, with each chapter resonating deeply with your audience. It transcends the mere brick and mortar, delving into the very dreams and aspirations of potential homeowners.

Take, for example, the resounding success of Zillow. Their brand extends far beyond mere listings; it embraces an intimate understanding of the heartbeat of every aspiring homeowner. They have mastered the enchanting skill of storytelling, skillfully weaving testimonials and success stories into the very fabric of their brand, elevating them to the status of a household name.

Now, if you find yourself pondering how to etch your brand indelibly into the minds of your audience, commence with the crafting of a compelling brand identity. Picture it as the enchanting book cover that beckons readers to embark on an unforgettable journey. It must be memorable, reflecting the true essence of what you offer. Plunge into the depths of your target audience’s emotions. What are their deepest fears, desires, and aspirations when it comes to discovering their dream home? Address these heartfelt longings within your narrative.

And let us not underestimate the profound impact of testimonials. In an era where the power of word-of-mouth can shape the destiny of a brand, authentic customer stories hold the potential to become your golden ticket. They not only engender trust but also paint a vivid and alluring picture of the enchanting experiences your brand has to offer. In the vast ocean of real estate, your brand shall serve as your unwavering anchor. Make every moment count, and let your brand shine like a guiding star amidst the vast celestial expanse.

Pro: Collect the Entire Commission

This may be one of the most common reasons that real estate agents consider opening their own brokerage; the idea of collecting the entire commission instead of just a share of it can be incredibly enticing.

Con: Operating Expenses

The problem with collecting the entire commission is that you are also responsible for all the operating expenses. A non-exhaustive list of what that can entail:

  • Rent
  • Utilities
  • Tax liabilities
  • Benefit costs
  • Marketing costs
  • Accounting
  • Office Supplies

If you have several agents under you who are consistently making sales, their commissions may be enough to cover your overhead, in which case you can keep your entire commission. If their commissions aren’t enough, the operating expenses are ultimately your own responsibility.

In many ways, the concept of business ownership can be more intriguing than the actual reality of the work. Not everyone is cut out for business ownership, and that’s fine. How do you know if you are?

  • Are you organized? Business owners need to juggle multiple roles within their business, especially as they’re just starting out. There’s not a lot of safety net in those first few months and years, so if something gets missed, the cost to the business can be huge.
  • Are you willing to work two jobs? As a business owner, there’s the job you want to do – sell homes, in this case – and the job of running a business. Running a business requires a very different skill set, which may not be ideal.
  • Are you willing to constantly learn? The world of online marketing is rapidly evolving. A website design that hasn’t been updated in three years can be painfully dated and turn away customers; a social media profile that hasn’t been updated in a month is dead to customers. Marketing a business is a full-time job on its own, to say nothing of accounting, human resources, and more.

To thrive in the ever-changing landscape of real estate, it’s crucial to learn about marketing and branding, as these skills can significantly influence your ability to attract and retain clients. Not everyone is cut out to own a business, especially a real estate business. If what you want more than anything is to operate your own brokerage and design a business from the ground up, make sure you have a realistic business plan and budget before you begin.

The Emotional Rollercoaster

Nailing a property deal feels like hitting the lottery, right? But don’t kid yourself—the real estate game is one emotional ride you didn’t buy a ticket for. One second, you’re flying high with a deal in the bag, and the next, you’re knee-deep in the stress of a volatile market. Think of it as emotional Russian roulette, where your mental well-being is what’s at stake. So how do you stay sane in this storm?

Firstly, don’t overlook the goldmine that is your support network. Turn to friends, family, or mentors when times are rocky. They’re like your emotional GPS, guiding you when your own judgment gets cloudy. Networking isn’t just about shaking hands; it’s about building a community. Consider joining local business chambers or real estate investment groups. These are goldmines for referrals and partnerships that most newbies overlook.

But hold on, let’s dig deeper. Managing stress isn’t just about blowing off steam or getting a “you’ll be fine” from your best friend. Nope, it’s about taking action. Ever dabble in mindfulness or meditation? They’re not just trendy lingo; they’re science-backed chill pills. Don’t sleep on a good old-fashioned run, either—a half-hour jog could be just the mental tune-up you need.

Here’s the kicker: Taking care of your emotional health isn’t just a nice-to-have; it’s a must-have, as vital as any business strategy you’ve got up your sleeve. Ignore it, and you’re basically asking for trouble. So, next time you find yourself teetering on the emotional high wire, remember—you’re the ringmaster of this circus.

The Hidden Costs

You’re enticed by the dream of calling the shots and taking home all the commission, aren’t you? But pump the brakes—there’s more to this picture than meets the eye. Let’s dig into the overlooked expenses that nobody likes to chat about. For starters, you’ll need a business license, and that could cost you anywhere from a modest $50 to a whopping $400, depending on your locale.

Eager to ace the real estate game? It’s not just about instinct; you’ll need some good old education to keep up with shifting laws and market trends. These courses have a price tag, and it’s not pretty—think along the lines of $200 each. Networking’s another hidden sucker punch to your wallet. Ever attended a real estate pow-wow? Just stepping through the door could set you back at least $500, and that’s before we talk to travel and stay-over costs.

Let’s not forget the warm fuzzies—those little client gifts that add a personalized touch. Whether it’s a bottle of primo wine or a chic housewarming trinket, you’re looking at dropping $25 to $100 per client. Add it all up and you’ve got a pretty penny of hidden costs.

Still with me? Good, because we haven’t even scratched the surface on other essentials like professional photography for your killer listings, or the software to manage your clients and nail that marketing strategy. Bundle these in, and you’re talking an extra $1,000 to $2,000 on your yearly tab. So, before you leap into this adventure, pad that budget for these hush-hush outlays. Believe me, your future self will be high-fiving you.

But remember: there’s nothing wrong with being content as a real estate agent and letting someone else do all the business running work for you. You may find sharing that commission to be worth it.

The Ethical Quandaries

Navigating the ethical twists and turns of real estate is like balancing on a high wire above quicksand. One false move, and you’re sinking into murky ethical dilemmas that can smudge your good name. Let’s be honest—you’re not just pushing properties, you’re peddling dreams and sometimes even family legacies. So what do you do when you’re stuck between doing what’s right and making a quick buck? For instance, a client wants to sweep a property’s flaws under the rug to speed up a sale.

Do you play along for the fast commission or stand your ground ethically? It’s a tough call, but here’s some solid advice: always let your moral compass guide you. It’s your reliable GPS through this unpredictable territory. Stay up to date with ethical standards like those from the National Association of Realtors, and don’t hesitate to consult with industry veterans. Believe it or not, your integrity is your golden ticket.

Let’s dig a bit further. Ever heard of “dual agency”? Think of it as playing both sides of the dating game, only here you’re repping both buyer and seller. Sounds like easy money, right? Well, not so fast. It’s an ethical minefield. Balancing both parties’ interests is like walking on eggshells, and it can lead you into sticky situations. The secret sauce? Be as transparent as a pane of glass.

Spell out your role and any potential conflicts of interest from the get-go. Keep everyone in the loop and document each stage of the deal. If you’re straight-up and meticulous, you can find your way through this ethical maze without losing your bearings—or your client’s trust.

Navigating the Startup Hurdles in the Real Estate Biz

Obstacle 1: Legal Labyrinth
Let’s face it, diving headfirst into the real estate business without a well-thought-out legal strategy is arguably the worst way to start your business. From zoning laws to property disclosures, the legal intricacies can quickly become a tangled web, ensnaring the unprepared entrepreneur. Let’s face it, the web of real estate laws feels like a legal jungle, from zoning issues to property taxes. Plus, it’s a moving target that keeps changing.

How to Tackle It: Keep a finger on the pulse of the latest regulations. Better yet, think about bringing a real estate-savvy legal advisor on board. Attending seminars and workshops will also keep your expertise fresh and current.

Obstacle 2: Client Juggling Act
In this business, losing a big client is like a gut punch, especially when you’re new and learning the ropes. You might find your business leaning a lot on just a handful of clients.

How to Tackle It: Spread your eggs among multiple baskets. Invest in relationships that can go the distance and employ CRM software to tailor your approach based on client needs and past interactions.

Obstacle 3: Standing Out in a Crowded Field
In certain markets, real estate agents are as common as houseflies, making it tough to break through the noise.

How to Tackle It: Own a niche and become its leading authority. Whether it’s ritzy estates or business properties, find your groove and dominate it.

Obstacle 4: Economic Roller Coaster
The property game is like a weather vane for economic winds, and let’s be real, a downturn could smack your business upside the head.

How to Tackle It: Sock away some cash reserves and diversify your investments. That’ll give you a cushion for the lean times and a smoother ride through economic turbulence.

Obstacle 5: Tech Curveballs
The digital age is reshaping the real estate scene with online platforms and virtual walkthroughs, and not everyone’s up to speed.

How to Tackle It: Invest in the latest tech and don’t skimp on training. Whether it’s getting the hang of 3D virtual tours or making sure your website’s SEO is on point, staying tech-forward is a must.

The Hidden Layers of Starting Your Own Real Estate Business

  • The Emotional Toll:
    • Most people think real estate is just about numbers and properties. But what about the emotional toll? The stress of managing multiple properties, clients, and employees can lead to burnout, affecting your mental health. This is a side of real estate entrepreneurship that’s often swept under the rug.
  • The “Green” Factor:
    • Sustainability is the buzzword these days, but did you know it’s slowly creeping into real estate too? If you’re starting your own business, consider the impact of eco-friendly homes on your portfolio. Not only does it attract a niche market, but it also adds a layer of social responsibility to your brand.
  • The Hidden Costs of Technology:
    • Sure, tech makes things easier. But what about the hidden costs? We’re talking about data security, the cost of keeping up with rapidly evolving tech, and even potential legal issues related to online client data. It’s not all smooth sailing in the digital world.
  • The “Uberization” of Real Estate:
    • Imagine a world where you can “rent” a real estate agent or property manager just like you’d call an Uber. Sounds far-fetched? It’s closer than you think and could disrupt traditional real estate business models. Are you ready for it?
  • The Regulatory Maze:
    • You might be aware of the basic legal requirements, but what about the ever-changing landscape of real estate laws and regulations? From zoning laws to fair housing regulations, the legal intricacies can be a minefield that’s not often talked about.
  • The Power of Community Involvement:
    • Being a local hero is one thing, but have you considered the business benefits of active community involvement? Sponsor a local event or offer free home-buying seminars. It’s not just good PR; it’s a long-term investment that can pay off in referrals and goodwill.
  • The Art of Crisis Management:
    • Real estate isn’t just about selling properties; it’s about solving problems. From natural disasters affecting properties to economic downturns impacting sales, how you handle crises can make or break your business.
  • The “Experience” Business:
    • Real estate is slowly morphing into an “experience” business. It’s not just about the property but the lifestyle it offers. This shift requires a different marketing strategy, focusing on storytelling and customer journeys, not just square footage and price tags.

Facts & Stats

  1. Real Estate Agents Earn Big but Spend Big Too: According to the National Association of Realtors, the median gross income for real estate agents was about $49,700 in 2019. However, agents also spend an average of $6,290 on business expenses. This paints a more nuanced picture of the “collect the entire commission” pro mentioned in the article.
  2. High Emotional Toll: A study by CareerCast ranked real estate agents among the top 10 most stressful jobs, which aligns with the article’s point on the emotional rollercoaster. The stress often comes from income instability and high client expectations.
  3. Rising Operating Costs: A report by IBISWorld noted that operating costs for real estate businesses have been steadily increasing, with a 2.2% annual growth rate. This adds another layer to the “operating expenses” con discussed in the article.
  4. The Importance of Online Marketing: According to the National Association of Realtors, 76% of home buyers found their home on a mobile device. This emphasizes the article’s point about the need for constant learning, especially in online marketing.
  5. Client Gifts Add Up: A survey by Inman found that 67% of real estate agents spend up to $500 annually on client gifts, which wasn’t covered in the article but adds to the “hidden costs” section.


Are There Hidden Costs I Should Know About?

Answer: Absolutely, and they can sneak up on you. Beyond the obvious expenses, you’ll need to budget for things like business licenses, educational courses, and networking events. These can add up to a significant amount, so plan wisely.

How Much Time Should I Dedicate to Marketing?

Answer: Marketing is a full-time job in itself. The digital landscape is ever-changing, and an outdated website or social media profile can be detrimental. Dedicate time to keep up with trends and update your marketing strategies regularly.

Is Business Ownership for Everyone?

Answer: No, it’s not a one-size-fits-all scenario. You’ll need to juggle multiple roles, especially in the beginning. If you’re not organized or willing to constantly learn, business ownership might not be your cup of tea.

Can I Rely Solely on My Agents for Revenue?

Answer: It’s risky. If your agents are consistently making sales, their commissions may cover your overhead. However, if they’re not, the operating expenses fall squarely on your shoulders.


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