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Every Real Estate Agent's Guide to Building a Profitable Business

David M Greene

• Publisher: BiggerPockets
• Year: 2021
• ISBN:
  9781947200388
• Topic: Business
• Subtopic: Real Estate
• Index: Business

Only 13 percent of real estate agents make it past five years in the industry. Set yourself apart with the skills experts use to succeed!

Real estate sales can be a lucrative and flexible way to earn a great living—but it's not as straightforward as a W-2 job. Most agents lack the necessary mentorship, guidance, and training to succeed in the competitive and independent world of real estate.

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provides a much-needed look at how successful real estate agents build their business, close deals, and generate commissions. Bestselling author and expert real estate agent David Greene shares everything he wishes someone had shared with him—including the exact processes he used to become rookie of the year and top agent in his office.

Whether you're a newcomer to the real estate world or a seasoned agent that never got mentorship, this is the book you've been waiting for. Learn from the best, refine your business, and become a top-producing real estate agent in record time!

Inside, you'll learn:

• Why most agents don't succeed and how to overcome those common hurdles
• How to approach lead generation with confidence and authority
• The steps to building a sales funnel to keep a steady stream of clients
• Methods to maintain your business by building and managing a database
• Negotiation tips to hold your own against other agents
• How mindset and mentorship can supercharge your growth
• The best ways to work with clients and stand apart from other agents in your market
• All the fundamentals you need—like showing homes, writing offers, the financing and escrow process, using your MLS, and more!

ONE

INTRODUCTION

Statistics show that nearly 87 percent of new real estate agents quit within their first year. What a number! Why do so many agents fail or quit so quickly? My aim in writing this book is to help you answer that question and help you not become just another statistic. Well, I do want you to become a statistic, but just the kind that wins—that precious 13 percent of new agents.

First rule? It’s all about your mindset. Since most of us had other jobs before becoming licensed agents, we may carry preconceived beliefs into the profession based on our earlier experiences. While it makes sense to assume what we learned at previous jobs would be applicable to this new field, that’s not always the case.

Agents need to be many things all at once. At times you will wear the hats of legal counsel, therapist, financial advisor, friend, organizer, market expert, and salesperson. Odds are the hats you are most comfortable wearing are the same hats you wore in previous occupations. We tend to build upon our past success, using those previous experiences as building blocks to help us achieve new heights.

However, our previous experiences can also hold us back. Self-limiting beliefs, unreasonable expectations, or a reluctance to accept and adapt to our new environment can hurt our chances for success. Having worked with dozens of new agents on my own team, coached dozens more, and trained hundreds, I believe the No. 1 reason most do not find real estate as exciting or lucrative as they hoped is because they try to apply their past experiences to their new environment. I believe this is a problem throughout our society.

Consider our public school system. Children are told when to arrive for class, where to sit, what to study, and when they will be tested. Their daily schedule is orchestrated by a bell that rings at predetermined times. Their performance is graded on a five-point system, and they are allowed to progress through the school system as long as they meet the minimum standards. They are evaluated based on tests that primarily measure their ability to recall information based on memorization. Unfortunately, students are not taught how to learn, and do not develop the skills required to navigate life outside of school. As a result, students are not prepared to succeed in today’s workforce.

The public school system and the model it follows are not evil. They were created during the Industrial Revolution, when factories needed employees who could stand on an assembly line or operate a piece of machinery for significant periods of time without losing focus. Today’s workplace requires a different set of skills, which the students’ education has not provided. Problems arise when those students are then dropped into a work environment for which they have not been properly prepared. Those who take longer to adapt to this new environment may find themselves out of a job. Those who do adapt may find the process difficult and confusing.

As an agent who is entering the world of real estate sales, you are being dropped into an environment that is completely different from anything else you’ve ever experienced. If you aren’t prepared for what to expect and don’t adapt quickly, you will find yourself frustrated, discouraged, and ultimately hopeless. The faster you can adapt, the faster you can start generating revenue.

What No One Tells New Agents

A new agent needs to understand that no one will be sending them clients. In general, real estate agents are required to find their own. Even those who join a team will still be expected to make a huge effort to find their own clients. This effort is referred to as lead generation, the single most important thing an agent can do to generate revenue.

However, most agents hate lead generation and will do anything to avoid it. If you happen to be one of the few who enjoy it, count your lucky stars as you’re already at a huge advantage over your competition. Many agents say they hate lead generation due to fear of rejection and discomfort with asking people directly for their business. It can feel pushy, selfish, and greedy. I don’t believe these are the real reasons agents don’t like lead generation. I’ve seen enough agents ask for business in a completely natural way to understand that it doesn’t have to feel awkward.

I believe the real reason new agents don’t like lead generation is because they’ve never done it before, and nobody has told them it is essential to success in real estate sales. When you get your real estate license, you are essentially receiving nothing more than the right to earn a commission by representing a buyer or a seller on the purchase or sale of a house. This right is valuable to you only if you find a way to put it to use. New agents often mistakenly believe that getting their license is the functional equivalent of getting a job. It’s not! Jobs pay you for showing up. Owning a business pays only when you find customers. The real estate agents who figure this out the quickest tend to get off to a fast start in the industry.

The Math to $100,000

Working as an employee typically involves following policies and procedures someone else has already developed, and largely ignoring any aspect of the business you aren’t directly responsible for. It is rarely essential that an employee understand the numbers side of running a profitable business. But if you want to adjust to the world of sales, you should understand the math involved in earning a paycheck.

When I interview agents who want to join my team, I always ask them how much money they would like to make in their first year. Almost all of them say the same thing: $100,000. Something about that number just appeals to people.

It is entirely possible to make $100,000 in your first year (though how difficult it will be depends on the price of homes in your area). I’m going to break down the math to show you how. I assume you will follow the advice in this book, and average one seller closing and one buyer closing each month. Below are the assumptions I’ve used to run the numbers.

Expenses:

• Annual commission cap (money paid to the broker): $15,000

• Annual expenses: $35,000

• Gross expenses: $50,000 ($35,000 expenses + $15,000 cap)

Seller closings:

• Average purchase price: $250,000

• Average commission: 3% ($7,500)

• Twelve sellers = $90,000 ($7,500 × 12)

Buyer closings:

• Average price: $250,000

• Average commission: 2.5% ($6,250)

• Twelve buyers = $75,000 ($6,250 × 12)

If you complete twelve buyer closings a year, you can expect to make $75,000 in gross commission. If you add twelve seller closings a year, you can expect to make an additional $90,000. That equals $165,000 a year. After subtracting annual expenses of $50,000, you are left with a net profit of $115,000.

Now let’s work backward to come up with a system that will lead to this $115,000. According to The Millionaire Real Estate Agent by Gary Keller (with Dave Jenks and Jay Papasan), for every twelve people in your database whom you contact thirty-three times in a year, you can expect to receive two referrals a year. We are going to assume it is your first year and your skills are lacking, so it will take twice as many people in your database to get the same result (twenty-four people to receive two referrals). We will also assume those two referrals consist of one buyer and one seller. From a very general perspective, your simplified system will look like this:

• Assuming a 50 percent success rate, twelve closed sellers a year will require twenty-four seller appointments per year

• Twenty-four appointments per year will require 288 people in your database (288 ÷ 12 = 24 appointments)

• Twenty-four appointments per year = two appointments per month

• Two appointments per month at a 50 percent success rate = one closed seller per month

Now let’s look at the math for buyers:

• Assuming a 50 percent success rate, twelve closed buyers a year will require twenty-four buyer appointments per year

• Twenty-four appointments per year will require 288 people in your database (288 ÷ 12 = 24 appointments)

• Twenty-four appointments per year = two appointments per month

• Two appointments per month at a 50 percent success rate = one closed buyer per month

To sum up: If we combine buyer and seller closings and assume a 50 percent success rate, we can see that closing one buyer and one seller per month will require 288 people in our database whom we meet and communicate with approximately three times per month (thirty-three times per year).

As you can see, building and maintaining a solid database is the most important thing you can do to ensure a steady stream of client referrals. Top-producing agents excel at this. Not only can you make more than $100,000 a year by locking in one seller and one buyer closing a month, but if you then add in the new lead-generation strategies I will share with you, you could even make more than $200,000 a year as a real estate agent.

Why Most Agents Don’t Succeed

As a licensed real estate agent, you don’t work a job—you own a business. There is a big difference between the two. If you bring a job mentality to a owning a business, you will find yourself confused and frustrated.

JOB	BUSINESS
Requires you to show up and work a set schedule	Requires you to work whenever there is work that needs to be done
Provides steady income that is often unrelated to your performance	Provides income that is not steady but is directly related to your performance
Allows you to focus solely on the specific task or role you were hired to do	Forces you to learn and succeed at every role and task that you have not hired someone else to do
Removes responsibility for the outcome from you	Places responsibility for the outcome on you
Allows you to focus on your personal needs	Forces you to focus on the needs of the business
Usually provides customers for you to service	Requires you to find customers to service

That last difference is where most new agents experience culture shock. Nearly every job most of us had before becoming a real estate agent involved someone else finding customers for us to service. When we bring this mindset into our new business, we are set up to fail. Owning a real estate business is like working as a server in a restaurant. You must know the menu (the market), make solid recommendations (advise on the right house or the right list price), communicate with the kitchen (lenders, title, escrow companies, etc.), coordinate the delivery of the food (manage your escrow timelines), and keep your customers happy and satisfied throughout the dining experience (buying or selling process).

The one big difference is that in a restaurant, customers are brought directly to your table. Owning a real estate business is like a being a server who’s required to go find customers and then convince them to come eat at your table! This requires skills many of us haven’t developed. We are comfortable serving the customer, but finding them, convincing them, and then closing the sale requires a completely different skill set. Once you understand this, you’ll be on your way to adopting the mindset you’ll need to become a successful agent.

When you first enter the world of real estate sales, you may encounter little support, insufficient training, and the uncomfortable feeling that you are on your own. Perhaps you’ve already experienced this and that’s why you’re reading this book.

The purpose of this book is to provide you with what no one else will—and what no one provided me. It contains the questions you should be asking and, when possible, the answers to those questions. It will help you shift your thinking and adapt to this new world. Your ability to do so will ultimately determine whether you thrive or barely survive in the competitive, creative, and wildly adventurous world of real estate sales.

Sound tough? It’s not all bad. Owning a business has its perks too. For one, there is nobody to stop you from reaching your maximum potential. You’ll also find it can be incredibly addicting to blur the lines between work and leisure. Getting paid to vacation with friends, attend parties, and build authentic relationships isn’t a bad way to make a living. In general, the more well-respected you are within your community, the more likely you are to get additional clients. Getting paid to be likable and show up as someone’s guide is pretty nice too. If you enjoy freedom, autonomy, and limitless potentia...