When considering a career path early in life there is a list of choices that always end up in the top 10, not far away from “doctors and lawyers.” The housing market is one of those topics that often comes up at Black gatherings, and invariably, who you may know that is working in the industry follows next. While it’s not for everyone, if you have overlooked real estate as a career choice, there are some reasons you may be interested in giving it another consideration now, be it a second-life career or a that professional job perfect for young Black job-seekers who want independence and generous earning potential.
But before you take the leap into real estate, remember the grass isn’t always greener, and that’s not the only color that could be an issue along your journey as a real estate agent. While there are certainly bright spots to becoming a real estate agent, there are also some dark clouds that may be tougher for Black agents to weather than others.
Here are four things Black professionals should consider before booking their first real estate exam course.
5. Relationships & Networking
If you have some career experience already, you know a strong professional relationship can open all sorts of doors you didn’t anticipate. If you can already relate to that — and enjoy it — real estate will take your networking to new heights. Hard-working agents know constant communication and shaking hands are the name of the game, and you never know what opportunity agents, sellers and investors steer in your direction.
4. Pre-tax income
Personal finances can be unpredictable, especially starting out as a real estate agent (see negative #3 below). The first year is notorious for being the roughest to survive for newbies, but there is one dim (see negative #4 below) silver lining: pre-tax income. Having the ability to manage your pre-tax earnings as necessary can be helpful as you wait for the next deal closes if things get too tough to bare. The national average real estate commission on a home sale is 5% to 6%. With the average home price at about $348,000 in 2002 (source: The Zebra). At a 2.5% minimum buyer/seller commission rate, that’s a minimum of $8,700 for one home, which is not a bad look.
This may seem contradictory when you get further down the list, but there is something to say for diversity in real estate — and that is, virtually everybody knows a Black realtor. Obviously, not every market will be the same, but this is a positive, early sign that there is potentially a place for you if you are pursuing a career in real estate. Becoming a real estate agent is less about if you can work as a Black professional, and more about where you will work.
Wanting as much independence in your job is understandable, nobody likes to be micro-managed. As a fresh real estate agent, most states where you are licensed will require you work under the guidance of broker. This is where you will “hang your license,” as they say. While this is certainly necessary, and for your own benefit, there is still much room to breathe and work without feeling relegated to an overbearing boss. And keep in mind, even if you eventually become less than fond of your broker, you are licensed and free to move to another real estate brokerage. But for the sake of getting your professional real estate career off the ground the right way, avoid leaving your first broker before the first year. Do your homework and make sure the relationship will be a good fit, because you don’t want to escape prematurely.
1. Unlimited income potential
You’re probably thinking extra zeros on your bank account was probably a no-brainer, but the sky truly is the limit in real estate. While it is a fact that earning potential is unlimited, real estate is lots of hard work, following up with leads, and sometimes watching deals unexpectedly slip away for reasons outside of your control as an agent. If you can roll with the punches and occasional discomforts, becoming an agent could be just the beginning of a rewarding career. In fact, becoming an agent is how many wealthy real estate investors got their start. So while you may be earning a modest 5-figure or six-figure income, there are gateways to more deals with the potential to help you build the financial freedom you always dreamed of.
Strong income and independence might sound like amazing selling points, but there are a few potential negatives that could affect how your new career in real estate gets off the ground.
5. Steep competition
While there are many career opportunities in real estate, becoming an agent is the starting point for professionals who become brokers and major investors. This means considering the possibility of working in a market where there isn’t enough for every agent to always eat. What’s more, this year real estate agents have seen a dip in jobs after massive layoffs in 2022. Becoming a real estate agent may not be your long-term goal, but if 2023 is the year you want to shoot your shot at real estate, be very patient.
4. Income taxes
Yes, we said pre-income tax can be a lifesaver if a newbie agent is struggling to make ends meet in their first year, but that will not negate your responsibility to pay income taxes on your gross earnings, and that can be costly. Finding all the qualifying deductions will be key to decreasing you’re tax liability in your first year, and being fresh to the game could leave blind spots in your deduction hunt.
3. The wait
Patience is a virus that even the most seasoned real estate agent will see their tested time and time again. From the property tours, to the window shoppers and escrow, waiting is to be expected, and depending on how hungry an agent is for his or her next deal, it can could be an anxiety-inducting trip that makes you think twice about being a real estate agent.
When an agent is first starting his or her career after receiving passing the Real Estate exam, they are required to hang their license with a broker the first year. Your support — and earnings potential — will greatly depend on receiving leads and networking with local realtors. If you are working in a hostile market, or a toxic brokerage firm, dealing with other agents or brokers who don’t want to be team players could stymie your early growth.
It may come as no surprise that an industry where Blacks only make up a reported 6% of the total number of agents has a problem with discrimination. Yes, the number one symbol representation in any field has a spot on this list, and for good reason. According to a recent NYT story, about 6% of real estate agents in the U.S. are Black. Not only that, their White peers make about three times as much on average. While you might assume this should be firmly in the negative’s column, there is something to be said for how important is that Black professionals are represented in all fields. The obvious hole in racial diversity in the industry highlights an opportunity for young Black agents to change the landscape.
Reports also indicate that nationally, on average, brokerage firms steer less business to Black agents. While there have been decades of legislation aimed at trying to prevent racial discrimination in housing dating past the Fair Housing Act of 1968, there hasn’t been any legislation that protects Black real estate agents. Currently, there is nothing on the horizon that indicates stricter enforcement of anti-discrimination policies that protect Black realtors, so depending where you work, it may require a thoughtful strategy to ensure your first year as an agent isn’t an uphill battle.
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