My First Year In Real Estate – Avoid The 90% Failure Rate
My first year in real estate was both good and bad. The good came, when I really developed my foundation and systems for success. The bad was I was kind of lost. Therefore in my first year, lost momentum and time due to inaction and minimal direction.
I’m sure you have heard it many times that 9 out of 10 businesses fail. But why? And is real estate any different than owning your own business? Sure, it sounds like the dream job. Go and show homes to buyers. Market homes for sellers. Make hundreds if not millions of dollars are year doing so. Easy right?
Well, you absolutely can. However, a false sense of the necessary effort will likely be the downfall of any real estate agent’s future.
Real Estate Is A Business
Every new real estate agent has to understand that this is a real business. Even though you are under a broker, you are still in business for yourself. It is a must to treat it exactly as if you were going to open a car dealership or a Restaurant.
Your real estate business is a living, breathing thing. It must be nurtured and cared for like any kind of newborn. These beginning stages are fundamental to its growth and should be taken very serious.
Don’t Wing It
I must say this is what I did in my first year selling real estate. I kind of just threw darts at a wall to see where they would fall. A lot of struggle followed and it was simply because of the lack of my foundation and direction.
So, before jumping head first in the real estate industry, take a couple steps back. Now, I don’t mean lost momentum… I am talking about diving head first into structuring your real estate business first and then building from then on.
Also, keep in mind to keep it simple. Everything we are talking about below is fairly simple to do and can be done in a very short period of time.
Incorporate an LLC
I found it extremely difficult to cut the IRS a check for almost $25,000 in my first year of real estate because I didn’t set this up correctly (Actually not at all). It wasn’t until my 3rd or 4th year where I cut the IRS a check for around $60,000. Which I barely had.
I fired my accountant right away. I reached out to him several times saying we needed to figure out how to minimize my taxation and he provided little guidance.
Hire A Good Accountant
Do this from the beginning. Ask other veteran real estate agents and business people in your area who they use. Go and interview with them. Try to avoid tax season as they are usually extremely busy. Once I hired on a new accountant everything changed for the better.
We actually created a very cool infrastructure that really helped two-fold. ** Caution – Be sure to hire an accountant that is familiar with small business. Preferably has a decent share of small business clients as well. The traditional W2 client does not compare to our taxation so we want an accountant who really knows how to take advantage of all tax law for small businesses.
- What percentage of your clients are small business owners?
- Do you have any clients who are real estate agents or brokers?
- What services do you provide all together?
- Will you be able to meet quarterly with me to ensure we are aligned to pay the least amount of taxes.
- Will you be by my side and represent me if I were to get audited by the IRS?
- What are you tax philosophies?
- How much do you charge?
Yes, my partner (Jennifer) and I brainstormed with our new accountant. We actually decided to put ourselves on a payroll which really set us up for success. This outsourced company cut us checks every two weeks and took care of paying out the appropriate entities for social security, medicare, etc.
It worked out extremely well as we actually began to get refund checks back each year.
Also, it kept us on personal budgets and the remaining funds either sat in reserve business accounts or went toward our marketing campaigns, office overhead, etc.
It is EXTREMELY easy to have a $10,000 check deposited into your personal checking account only to see it dwindle away quickly. When you are paid a certain amount each month you tend to stay within your spending limits (hopefully).
Out of sight, out of mind. These additional commission dollars went to work for us.
We paid a very conservative salary. I think this is mandatory as it will help keep you on track to keep your personal overhead low. You will be more inclined to reinvest into your business this way.
However, we kept it exciting and motivating by introducing bonuses on performance. We would review our books each quarter and if we hit a certain number then we would pay ourselves bonuses of anything over our set goal.
We were treating this like a traditional business. Again we were feeding the business in its infancy stages which allowed for future growth and even the development of our own income real estate portfolio.
This bonus scenario gave us the motivation to crush our goals as well. So we would work harder toward our goals if we wanted some extra spending cash to buy whatever we wanted.
This is why this infrastructure is imperative to set up from the beginning. Trust me, it is easy to get a $15,000 check and go blow it on bullshit. When you treat that money as if it isn’t yours the entire mind shift changes.
We would always joke around and say Maxim (our real estate company) is so greedy… Yes she was. But she has paid us very well over the years.
Set Business Bank Accounts
You would never put the revenue of say a Subway sandwich shop directly into your personal checking account would you? Your real estate business is no different.
I was young and didn’t know any different. So when I got into real estate in my first year, all I was concentrating on was making sales and nothing else. Quickly blowing commissions and not watching the dollar.
Once we got our shit together, things worked out way more calculated and predictable. We set up 3 business bank accounts. One account was our primary account for marketing and overhead. The second account was our reserve account that we kept stacking funds. The third account would move frequently with whatever bank was giving a deal at the time.
We would normally take $50k from our reserve account and put into an account like Chase where for every $15k left in there for 90 days we would get $300. Doesn’t sound like much but better than earning .0001% on our money. And it was always liquid if we needed it.
Find A Great Real Estate Broker
I wrote an article 7 Strong Tips On How To Choose A Real Estate Broker. If you just got your license or in the process and haven’t chosen one, then be sure to review this article in detail. Choosing the wrong broker could be the difference between a successful long term career or a complete failure.
Go on your hunch. In that article, I also provided a free interview questionnaire that you can bring along with you to all your broker interviews. Again the last thing you want to do in this infancy state is delay your growth with any setbacks.
As I write this, I am 37 years old. I’ve had a handful of setbacks in my real estate career. If I would have taken more time and research in even choosing a better brokerage, I could have likely had my goal of financial freedom at least 5 years prior.
I talk about this a lot throughout this website. I believe if you follow certain instructions on this site, you too will achieve financial freedom. I thought this is going to be a long road when I was down and out living in the upstairs of my office (picture here). It only had a half bathroom so I had to shower at my local gym.
I knew something had to give and change. It was actually very simple strategies that I implemented that took me from that down place to financially free in less than 7 years. Sacrifice. Hard work. And relearning about money.
These days, when I make a real estate commission, I just stack it away, waiting to use it for the next flip I will do. As opposed to living off of it. When you don’t need that $7,000 check that just came in to pay your bills, you can reinvest right back into your real estate career, real estate investments and any other assets to continue your growth.
The infrastructure above will contribute to a highly successful career in real estate. In your first year, in your first 30 days of real estate, I’d rather you spend your time putting this infrastructure and mindset together. The sales will come but if you have a shaky financial foundation, the bricks can all come crumbling down.
Trust me, I have seen it first hand with thousands of real estate professionals. I encourage you to read other articles on this site such as Real Estate Income And Expenses Survival Guide. I’ve seen real estate agents lose everything. I’ve seen entire real estate brokerages shut down their doors. I have seen real estate agents desperate to make a commission that they were willing to do whatever it took and are still in prison until this day.
This can all be avoided if you set up your financial foundation correct from the beginning.
Get your money right!
If you remember, anything from this website, remember this: An Asset Puts Money In Your Pocket. A Liability Takes Money Out of Your Pocket.
I encourage you to write this down, post it and look at it every day. Then post pictures of assets. Simple rule – Keep your personal overhead as low as possible. You will stack chips. Invest those chips back into your real estate business, income property or any other assets that kick off dividends or cash flow.
An incredible game that I still play until this day is the Cash Flow game. We play it with the kids, family members and other Realtors. Everyone who is in my life and plays this with me on a consistent basis has no mortgage and are financially free. Check out the link below for current pricing on Amazon. An inexpensive product that is worth millions to me.
Just Picture This
You have no mortgage payment, car payment or credit card debt. It costs you and your family less than $2,500 a month to live. You have 5 income properties paying you $6,250 a month. Any left over cash flow or commissions go to buy more assets or a vacation in Fiji.
Most of America do not think like this or do this. It is a fairly simple process once you get it. But I can tell you, it needs reinforcement which is why we play the cashflow game. There are just too many distractions like buying a Lamborghini that just gets in the way of true wealth.
Attend At Least 2-3 Large Sales Events
I think this is so extremely important. My sister and I made it a priority to keep our motivation levels at an all time high. When you are your first year in real estate, it is imperative to be motivated by others. We didn’t start this until I believe our third year in. However, I wish we started from year one.
I truly think self motivation can take you only so far. Jen and I mainly attended Grant Cardone, Mike Ferry Organization and Tony Robbins.
Grant Cardone is just overall well rounded in sales in general. I have been following this guy for years now and his sales resources and events are incredible. Below you can find a lot of resources that he provides to build your business. I have seen him multiple times and have purchased probably half his resources, book and training packages thus far.
Mike Ferry is mainly revolved around real estate and aggressively going out and getting business. They provide coaching as well with accountability on aggressive cold call and door knock techniques. Jen and I had coaching through them for a couple years. It was a good learning lesson, but I prefer the type of coaching that is more well rounded sales like above.
Tony Robbins is huge on mindset, motivation and creating small shifts in your life that become big game changers. His events are phenomenal! They really speak to you on a different level than a traditional seminar. Even when we went to Texas, a few thousand of us walked over fire around 12:30am. I felt like I was in a damn cult. But what a cool experience.
Either way, you need to invest into yourself. That is one things that no one can take away from you. Jen and I usually would attend 2-3 day events in a handful of states including Florida, California, Las Vegas, NV and Texas. Take a spouse or a fellow real estate agent with you! It will be worth it.
Sphere Of Influence
Ok! Now that we have our foundation built, let’s make money!! My first year in real estate was really dedicated to building my Sphere Of Influence as yours should be as well. I highly encourage you to also read How To Build Your Sphere Of Influence. This is a step by step guide on what to do to get a 10% annual return on this valuable group of people.
This group, if effectively worked on will provide you endless warm leads. The more people you know the better. You main goal should be to constantly work on building this list. Go through your phone, email, old jobs, social media, etc. Anyone you know needs to be added to this list except of course a bad Ex. This should be the only person not on this list.
100 people at 10% = 10 transactions per year. If your average commission is $5,000 you would make $50,000 a year off of this group. Simple as that!
Just think if you got this list to 200 people or 500 people. Where would your business be?
Figure Your Niche Market
Next up is where else are we going to market to? There are dozens of markets to go after which we go into detail at 52 Niche Markets for Real Estate Agents.
Now, this is the tricky part. You have your foundation built, your sphere of influence is now systemized and now to add another income producing market. The biggest piece advice I have to give here is to choose one and go all in. Choose a market that you think you will really enjoy working with. Maybe pick and choose 3-4 and then write down pros and cons of each market.
Once you are set and aggressively marketing, you may not see any results in 30, 60, 90 days. However, if you stay FOCUSED and consistent, big money will follow.
Many real estate agents in their first year are running after anything and everything they can get their hands on. I am not saying that you should not seek every opportunity.
What I am saying is to allocate a certain amount of time each day at the same time on your niche target market.
It is the athlete who practices an extra 2 hours each day who blows away the competition. Remember, consistent actions = consistent results.
Always Think of Leveraged Growth
I want you to start working on figuring out how to leverage others in order to expedite the growth of your business.
Successful business people know they cannot do it alone. You will stay small bite sized this way. So think way bigger than you are thinking right now.
Even if it isn’t something that will happen right away, your mind will begin to evolve into believing that you have an administrative assistant and 2 buyer’s agents. Take a look at the article on Growing A Real Estate Team.
Picture this… You have 25 active listings. The phones are ringing off the hook. You have an assistant who is keeping you on schedule and handling the admin items that you hate or are not good at. Your buyer’s agent just calls you up and says we got another one in contract!!
You find out it is $620,000 purchase price. You are going to get 50% of that commission = $9,300 without doing much besides keeping your buyer agents busy.
Do you see the power of leveraging people? Oh yeah, you are helping people as well! Your assistant makes $20 an hour and both of your buyer’s agents made six figures last year all while paying you half!!
Believe In Yourself
Kind of cool right?! So why can’t this be you? It can. You just have to start thinking like this right now while your real estate business is an infant! Think about it daily. Dream about it. Say your morning affirmations – “I will have a real estate team in the next 6 months!”
It will be inevitable that it will happen. It has to. Call it a Universal Law. PS – I always thought this was kind of hokey after reading several books about it. But I just asked myself, can it hurt?
I kept telling myself – What one can believe one will achieve. Then “things” started to happen. The next deal came together. A person here and there come into my life business and personal. Making money is getting way easier and my happiness levels are increasing..
Your first year in real estate is very fragile. So it is important that our minds remain very strong, motivated and disciplined.
Stay away from anyone who has anything negative to say about what you are doing. They are losers and only bring others down around them. You may have them in your life right now. They may even be related to you.
You have to distance yourself from these people regardless of how hard it is. This can be one of the biggest deciding factors between huge success and failure due to outside noise.
Many times they are not aware of what they are doing. And something they are “protecting” you. For example, your best friend says “Geez.. Real estate huh? Do you think you can really be your own boss? I mean I have seen you quit a few different things in the past. I’m just looking out for you..”
They truly may be looking out for you. But your mindset can always be trained to greatness. So keeping those words and noise out of your head this first 12 months is vital. Only fill it with Grant and Tony…
A Quick Buck
One last note. Do not get into this for a quick buck. Look at this as a long term, lucrative career. This is why setting your foundation above is imperative. You are putting the time, money and resources into it in the beginning in order to achieve long term growth.
Most agents will not do this and because they do not have enough into the game, they walk away.
So, do no get discouraged if you are not making the kind of money you want to make right away. It will come. It will take time. All great things do.
Your First Year In Real Estate Is Going To Be Incredible!
Yes it will. If you follow these simple steps above, you should have nothing to worry about.
Be sure you create a plan and stick to it. Become obsessed with your schedule and the idea that you are going to be a huge success.
It doesn’t matter your background or what you have experienced in the past. Get your mind right! Build your foundation. Stick to a specific schedule and plan. Stay trained and motivated!!