Is selling real estate easy money?

I know, you think you know the answer to this question. You’re probably thinking: ‘a lot’. But is that really the case?

I pulled the Toronto Real Estate Board (TREB) sales statistics from November 2015 to November 2016 and here’s what they reveal.

Out of Toronto’s 43,680 agents:

  • 20% of registered agents sold 0 homes last year*
  • 52% of agents sold between 1 and 6 homes last year
  • 14% of agents sold between 7 and 12 homes
  • 10% of agents sold between 13 and 24 homes
  • 2.5% of agents sold between 25 and 50 homes
  • 0.4% of agents sold 50-99 homes
  • 61 agents (or 0.1%) sold more than 100 homes

 

A Breakdown of a REALTOR’s Income

  • The average price for a home in the GTA in November was $776,684.
  • While there are lots of real estate commission models in Toronto, for the sake of my example, I’m going to assume that the commission payable is 2.5% to the Buyer agent and 2.5% to the Seller agent
  • $776,684 x 2.5% = $19,417 average commission

The Brokerage Split

In Ontario, REALTORS are legally required to work for a brokerage. The brokerage has various legal obligations (for example, maintaining the trust accounts for Buyer deposits), oversees the agents, and provides various services (from reception, administration and showings coordination, to design, marketing and coaching). Real estate agents give part of their commission to their brokerage, and that ‘split’ can be anything from a $300 per fee transaction to 30% of the commission (or more). Many brokerages also charge monthly “desk fees” that are payable whether or not an agent sells something that month. 

From what I’ve seen and heard, 15-20% of a typical agent’s income is normally paid to their brokerage. 

So using my example above, $2,900 – $3,825 would be payable to the brokerage. 

REALTOR Expenses

The average realtor spends 20-30% of their income on expenses. Those expenses include:

  • Realtor fees and insurance
  • Car, insurance, gas, parking (and parking tickets)
  • Phone, data, internet
  • Home office including office supplies, systems and tools
  • Laptop, tablet
  • Marketing (online, offline, video, photography, postcards, billboards, printing, postage gifts, client events, etc.)
  • Listing preparation costs (which may include cleaning, staging, gardening, etc.)
  • Education (continuing education, conferences)
  • Virtual, contract or full-time administrative assistance

Taxes

Let’s not forget about taxes! Realtors in Ontario are not currently allowed to incorporate (unless they form sub-brokerages), so tax rates are the same as regularly employed people. So assume another 25-30% of that income goes to taxes.

The Math

So let’s do the math for the average agent in Toronto, who sells 6 homes per year, at an average price of $776,684:
Gross Income – $116,502
Broker fees (15%) – $17,475
Expenses (20%) – $23,300
Taxes (28%) – $32,620
Net Income: $43,107

Not quite as glamorous as you thought, right? The number in my example is in line with studies from the National Association of Realtors and the Ontario Real Estate Association that found that the average real estate agent in Ontario makes $30,000-35,000 a year (which of course would be higher in Toronto given the prices here). 

Now don’t get me wrong, I’m not looking for pity or sympathy…and yes, some top agents do make tons of money. But like any business, it’s not just about the income. There are expenses. There are risks. Like everything else in this world, there are people who excel and reach for the top, while there are others who struggle to get going.

Being a real estate agent is different than having a normal job with a salary. Sometimes you spend 6 months with a Buyer and they decide not to buy. Sometimes you spend thousands of dollars on a listing and the Seller decides not to sell. With greater risk comes the possibility of greater reward. Or loss. 

If you’re thinking about becoming a real estate agent, think long and hard about your decision. Don’t get sucked in by the ‘Make six figures and set your own schedule’ BS. It’s hard work. You eat what you kill. But if you’re obsessed with real estate like we are, it can be a pretty awesome life. 

*this statistic is deceptive as many people are ‘registered’ but not practicing real estate (appraisers, mortgage agents, people on maternity leave, etc.). Agents who sell pre-construction condos generally don’t report their sales through the Toronto Real Estate Board either, so they are likely appearing in the  “0” sales category. And of course, there are real estate teams that are made up of multiple people but report their sales under the Team Leader’s name, leaving 0 official sales for the team members. (FYI, we don’t do that at the BREL team).

  1. Nope. Sorry. I am calling BS.

    You cant go by the “average” number of sales, because there are so many part time agents. The 6 per year is not from a full time agent.

    The “full time” agent would be in the 13% club, which is doing 13-100+ deals per year.

    Using your math at 12 deals per year – ONLY ONE PER MONTH – you’d be looking at $86,000. And, that is only at 1 per month. At two deals per month (still peanuts, with very little work) you’d be at $172,000!!!! That more than most CEOs make.

    Don’t cry wolf. I thought you were above the BS fridge magnets.

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