In 1990
after my first 9 months as a real estate agent I was awarded my first
multi-million dollar production plaque (2 million). The next
year I would be awarded a plaque for 4 1/2 million dollars in
production and was
one of the top 7 producers in this area. All this is to preface
the
following on income. At the time I received my plaque for 4.5
million, I was one of 750 local agents in 1991. Of the 750 agents
approximately 150 received an award for production of a million dollars
or more. This meant that 600 agents had production of less then
one million. An update to 2005 shows the same relationship.
The 150 top agents now average above 2 million dollars in sales while
600 agents sell less then 2 million dollars.
So if we were to analyze what a person who
sells 2 million dollars in production, can expect, here are the numbers.
A sale is defined as one side of a deal
which on the average pays a commission of 3% Therefore $2,000,000
times 3 % would equal
$60,000 total commissions. But, this has to be split with the
agent's
company. Split agents generally work for 55% to 70% of
their commissions. If we take an average of 60% we now have
a
total income of $36,000. If we forget about costs* for the moment the
next major deduction is for taxes.
If your income is in the low 15% tax
bracket and you contribute 12.4% for Social Security tax since you are
now
self employed (you must pay yours and your employer's side of
the tax) plus
Medicare tax (both sides) of 2.9%. Then throw in some State income tax (remember nothing has been
withheld) it would be reasonable to figure over 1/3 of your
income would be required
to pay your tax obligations unless you were in a higher tax
bracket. If we had no other costs*
then the maximum
income one could expect from $2,000,000 in sales would be $24,000
annual
or approximately $460 per week. Now remember only the top150
agents had 2 million dollars or more in sales meaning the greater
number of agents (600 out of 750) work for far less. And the
benefits are those determined by your employer - self employed means
you are the employer so medical coverage, time off, vacations etc. are at your expense.
"To
consider real estate to be a money making occupation you must determine
to be one of the top agents to even make
it a go."
*Now
about those "other costs"
figure in a cell phone or at least a
pager (not for a top agent though) car expenses including lease
payments, gas
and auto insurance, Errors and Omissions Insurance (for real estate law suite protection), dues and fees
which vary from $150 to $650 annually each, Multiple Listing Service
fee, annual business license fees and state license fees, and the major
cost of monthly advertising, business cards, name promotion and
possibly even the cost for a good web site. One good thing
though, these cost reduce your tax exposure so a $1 spent is a dollar
that is not taxed as income. I call that - "savings!"
Faced with taxes and costs the real estate
profession affords only the top
agents with a "good" income. And although the commission check
may
look nice when leaving a closing it is quickly realized that the money
is
anything but the agents.
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