Hi Everyone,

I'm in a position where I'm able to seriously consider a career change to RE, but losing my stable income with a one year old to support scares me. In order to be successful in this career jump, I've got to plan how every dollar will be spent, so....how do you determine how much you should have on reserve for business expenses (a monthly estimate is fine)? Also, which expenses are necessary to incur, say...your first 3-6 mos in? Thanks in advance for your feedback everyone!

About $2,000 a month minimum once all things are considered. So you should also have about $50,000 in the bank to live on before getting started. With a kidlet to support, I'd feel better with $100,000. You will make very little money for your first 2 years in real estate, but will spend plenty. So plan accordingly. This is NOT a good business to go into with a cheap or penny-pinching mentality. You've got to be prepared to spend, spend, spend. You are opening a business, and new businesses fail spectacularly without adequate capital reserves.

Thank you for your response Navarac. I must say that's a JAW DROPPING amount of money! I can't wrap my head around the few successful agents that make it past the first 3 years ALL starting in the business with an excess of $50k saved and $24k in capital!? Is this one of the common threads that make successful agents successful??

OK whoa!

We don't have enough information to intelligently answer this question and I certainly didn't have $50K in the bank when I started. You haven't indicated whether yours is the sole HH income, how much experience you have in management, marketing (particularly internet marketing), or even shared any perspective on your sphere of influence (number of people you know or with whom you frequently interact), market knowledge, etc. Granted, this is a small business and you will likely need a couple of years of income saved to make this work, but we don't know (nor need to know) how much you earn annually.

You might consider finding some best sellers on the subject to get some real answers. If real estate still appeals to you, consider getting licensed, buying business cards, four or five signs and (used) lockboxes while still employed. That might set you back a thousand or so depending on the VA licensing fees. Go ahead and get a website established because the longer your site is up and updated, the greater chance it will be on the first pages of search engines. Then find a mentor, work some open houses and decide whether this is worth a full-time commitment. Remember, you're still employed with steady income and you'd only be out of $1,000 or so and you can re sell those lockboxes!

Hope that helps.

Do you want to do it right? Or be like the 85% of agents who get in the business and either 1) fail outright or 2) stay in the business for years finally achieving this: struggling deal to deal to scrape out a $40,000-$70,000 income before taxes, or 3) do it part time, providing bad service to your clients while expending most of your energy on your "day job" and family? If you knew how few agents in this business make any real money you'd probably want to find another line of work. In fact, if you are supporting a kid and don't have money saved, I'm not sure it would be considered responsible to open your new business in the present adverse economic climate.

And it is nothing less than opening a new business. You will be competing with other agents right from the start, both inside and outside your office. The most successful of those agents spend lots of money to provide the kind of service to their clients that 1) yields results and 2) impresses the hell out of all the potential new clients.

Not saying there has never been anyone who got in light and is now a success. But they are rare, rare, rare. The vast majority (90%) of agents in the business are not successful, and do not make any money. 5% of the agents make nearly all of the money and are successful, and every one of them spends mega thousands of dollars to stay that way.

Why do you think there is a whole industry dedicated to hawking us seminars, webinars, books, CD's, DVD's, personal coaching? And all promising to make winners out of losers if you'll just buy their formula and sign up for their monthly maintenance.

The bottom line is this. If you come into the business basically broke, that is pretty much exactly the way you are going to stay. If you can live with the fact that you are not going to make any money for the first two years, then at least your crushed expectations will not be the factor to do you in.

See what I mean? Everything about this response smacks of the loser mentality that is so pervasive in our field of dreams. Just get in in a half-assed way, and if you fail (which you will), you can sell your used lockboxes... Oy.

Success is defined on many levels. How much income saved up ideally depends on the area you are operating in.

For instance 50k in Washington doesn't go near as far as cost of living as in Georgia.

One of my brothers lives in Washington and is moving down here.His job there pays 130k a year. Most of his work is video-conferencing.He will be able to do his job from down here and fly up once a month. He can live like an absolute king on 130,000 in Georgia.

I would personally say with your child why not go into residential or commercial real estate investing ? Perfect time to do that with the down cycle.If you purchase correctly you can create a passive income stream after your debt service and expenses.

Me and my business partners goal is to eventually have enough passive investment income to do that full time. We still will list really motivated commercial sellers but not waste time with the rest. Right now we have to sell as much as possible to build capital to grow our investment portfolio.

Just a thought.If you had 50k or 100k you could buy an investment property especially in commercial at 90 percent ltv and have the seller hold a second of 5 percent.You could buy a 1 million dollar property for about 50k down.

I might do that than give a bunch of companies money on seminars trying something with a 90 plus percent failure rate.

Judgmental attitude ignored, but I am curious about where the $50K figure came from without seeing her business plan or having any knowledge of her or her market? Did you start with $50K?

C-Free,

You can start a real estate career on a shoe-string marketing budget - there are plenty of ways to generate business for yourself without spending a fortune. Yes, you will have start-up costs and monthly expenses, most of which are predictable and actually quite reasonable considering you're starting a business. I'll estimate start-up costs (excluding real estate school) to be between $1500 and $2500.

Your monthly recurring expenses - desk fees, insurance, MLS dues - will vary significantly depending on the set-up of the office you join, but count on $250 - $1,000.

The real question is how much money you need to have on hand to live on. If you accept the premise that you may make NO money for six months or longer(and that's a very real possibility), what will it take to pay the bills and eat and drive and... and... and...?

So many people go into this business assuming they'll have a closing within six weeks, so they might save up enough to get them thru that first month. The next thing they know, they've maxed out their credit cards and haven't slept in weeks due to the stress.

Navarac is right - 85% (or more) new licensees fail in this business. There are many reasons for this, but yes, being underfunded... and therefore desperate and scared... is one of them.

even established agents can lose their grip if they take a break and stop marketing.

Most businesses fail and it's a proven scientific fact from (BEING UNDERCAPITALIZED).

All I am saying is with a young kid at 1 years old I might keep the job and invest instead.

You have to ask the WHY NOW on becoming an agent and then challenge your answer to see if your perception is reality or wishful thinking.Many aspects intrigue the public on going into real estate.The reality once they get is very different from what they imagined.

So see if you want to be involved in real estate in an agent capacity or an investor capacity. I would then before quitting the job mirror someone after getting your license to see if it's something you would like or not.

If after all of that you want to jump in full force than go for it.

I was a medallion club realtor ranked in the top 200-350 out of 10K realtors during 2004-2008 then I had my first child, lol, I chose my family first and I did about 15 deals in 2009 and then had second child, Ive got about 6 deals sofar this year.
Part of my lack of deals is the market and the other big part is, I stopped advertising and marketing because it wasnt making my phone ring, so now I just spam emails to past clients and COI. FREE!!!!!

So... even if you spend money on flyers, busbenches, local newspapers etc... you may not get any new leads.

Best of luck in your decision