- author: Lori Ballen
How Real Estate Agents Make Money: Explained by Lorie Balan
Hey, it's Lorie Balan here in Las Vegas and anyone who knows me knows that I couldn't tell a lie to save my life and I'm authentic to a fault sometimes. So, I always like to share what's going on. But I have not been super transparent about the changes in my real estate business and exactly what that looks like. Today, I am proud of my real estate business and the changes that I've made. I absolutely love how I make money in it, so I want to explain some things for those of you that don't know me, and you're going to be listening to this video to find out how a real estate agent makes money.
Maybe you're looking at this because you're trying to figure out on average how real estate agents make money and what's the kind of salary that they earn. If you're interested in this topic, then this part of the article will be helpful in answering these questions.
My Real Estate Journey
For those of you who don't know about my history, I got into the real estate business in 2007, kicking and screaming all the way. I did not want to get into real estate. This was something that my now-ex-husband wanted and was very persistent about. I eventually followed him in. Once I got in, I got really into it. I wanted to be the best. I wanted to make a lot of money doing it because that was our only revenue stream, and there were two of us. We didn't have any other income coming into the house. This was our income, so I took it incredibly seriously.
Right out of the gate, we became top agents in the company, recognized for every kind of award, and we were doing some piece of real estate. However, this was in 2007 when the market went south. Being in Las Vegas, we were in one of the top distressed markets in the US, and so what that meant is by 2010, we were living in short sales and foreclosures. Even though we were doing a big business, we started making a lot less money, and it was much harder to get paid.
Survival Tips for a Down Market
What we found was that in a down market, really good marketers, and people who know how to position themselves, actually can do better and rise to the top. So, what I did is I started ranking for all things short sales on the search engine. I wrote the first short sale handbook, and if you googled anything with, "For Las Vegas short sales," you found me and my team. We were doing a lot. We closed hundreds of short sales but our profits were very, very small.
How Real Estate Agents Get Paid?
Let's break down how a real estate agent gets paid.
A real estate agent goes out and takes a listing. They get paid a certain amount of compensation that they agree upon between the two parties. Commission is never standard, never typical, always negotiable.
Let's say you're going to take a listing and you're going to charge 3% of the sales price when it closes. You've got a $350,000 house and you're going to charge a 3% commission. As a listing agent, you would collect $10,500. You're going to have brokerage fees, franchise fees, that type of thing. Maybe at the end of the day, you keep $8,000, depending on how your splits work out.
Let's say you're running your business pretty lean, and you're keeping 70% of your take-home. You make $8,000, and you're 70% profitable. That's $5,600 in your pocket. Then you've got to pay taxes. Assume you do that twenty-five times, and you're making $140,000 that year, you pay the IRS 30%, and whatever you keep is your profit.
Understanding the Profitability of Real Estate Teams
Building a profitable real estate team can be a great way to increase earning potential and grow your business, but it requires careful planning and a clear understanding of the financials involved. In this article, we'll explore the profitability of real estate teams and what factors can impact your bottom line.
The Importance of Tax Planning
One critical factor to consider when building a real estate team is tax planning. As a real estate agent, you are responsible for paying your own taxes, and failing to plan ahead can lead to financial trouble down the line. One way to stay on top of your tax obligations is to use mobile apps, such as the IRS app, to keep track of your earnings and estimate your tax liability. Additionally, consulting with a tax professional can provide valuable insights into tax planning best practices.
Team Models and Profitability
The model of your real estate team can greatly impact its profitability. There are several team models to choose from, each with its own pros and cons. Some teams may offer salary-based compensation for agents, while others use commission splits. In general, teams that offer higher commission splits to agents may struggle with profitability, making it important to carefully consider the details of your team's compensation structure.
The Benefits and Drawbacks of Large Teams
Large real estate teams may provide more resources and opportunities for growth, but they can also carry higher overhead costs and lower profitability. If you're considering building a large team, it's important to carefully manage expenses and consider revenue streams beyond just real estate sales. Coaching and teaching are both potential income streams that can help boost profitability.
Affiliate Income as a Revenue Stream
Another potential source of revenue for real estate agents is affiliate income. By teaching others how to generate leads and use software effectively, agents can earn additional income through commissions on software sales. This can be a useful income stream to add on top of real estate commissions.
7 Streams of Income: Lori Ballen's Real Estate Business Model
Lori Ballen is a well-known real estate agent and lead generation expert who has developed a unique real estate business model that includes seven streams of income. This model allows her to be successful in her real estate business and also diversify her income sources.
Here are the seven streams of income that Lori has developed:
- Real Estate Sales: Lori generates income through sales from her real estate business. This is her primary source of income.
- Teaching: Lori teaches people how to generate leads and teaches the software she uses to generate leads. She still does this to this day. Lori has built a course and gets paid for coaching and teaching webinars.
- Affiliate Income: Lori has set up affiliate partnerships with companies like OptinMonster, Constant Contact, and IDX Broker. If someone signs up for the software she teaches and clicks on her link, Lori receives a commission.
- Digital Marketing: Lori opened a digital marketing company called Ballen Brands. This company generates income by building websites or creating blogs for others.
- Stocks and Investments: Lori has investment income from stocks and other investments.
- Profit Share from Recruiting: Lori also generates income through profit share from recruiting.
- Shampoo Business: Lori has a small shampoo business on the side that generates income.
Evolution of Lori's Real Estate Business Model
Lori's business model has evolved over time to include seven streams of income. She started generating income from real estate sales and teaching people how to generate leads with software. She then started setting up affiliate partnerships with companies and making money through commissions. Lori also opened a digital marketing company, invested in stocks, and has a small shampoo business on the side.
Changing the Real Estate Business Model
Lori changed her real estate business model to allow her to focus on lead generation while giving independence to her agents. She recruited self-motivated and resourceful agents who don't need much from her besides leads. Lori changed her business model to eliminate providing administrative support and one-on-one coaching. She wants her agents to be super independent and only needs to generate leads for them. Lori's new model allowed her to build a successful real estate business and have more time to focus on the other six streams of income.
Changing the Real Estate Business Model
Real estate has always been a highly profitable yet demanding industry. It requires agents to take on a multitude of responsibilities such as generating leads, conducting tours, coordinating with photographers, and sometimes even coaching clients. Many agents find themselves exhausted and burnt out from these obligations, especially when attempting to build a team. A successful real estate entrepreneur, Glory Balogun, decided to challenge the traditional model and build a more streamlined approach.
Glory’s model is centered around one key aspect, leads. She recruits self-motivated and resourceful agents who can handle the majority of their responsibilities on their own. However, Glory provides them with one valuable asset - leads. Her agents receive leads from her, which they work with to build their businesses.
The model may sound terrifying at first, but Glory believes it is actually quite similar to the traditional model, but without all the additional obligations. She doesn’t have to provide tours, handle management issues, or even provide one-on-one coaching. She’s strictly in the business of providing leads, which is valuable enough.
How it Works
Glory’s model works like this:
- Commission Check: Suppose the commission earned is $12,000.
- Referral Agent Fee: The referral agent who gave the referral receives 25% off the top, which is $3,000.
- Agent Split: The remaining $9,000 is then subject to the agent's split. Glory only takes a 30% cut as she’s not responsible for handling administrative tasks.
- Profitable Real Estate Business: Glory’s agents then have to pay their brokerage and franchise fees, taxes, and license and insurance. They may also choose to use extra services such as administrative assistants, who are paid their share coming from the agent’s cut.
Although it appears that Glory’s agents may not be making much money off of the $9,000 commission check, they are actually quite content with the new model. The agents handle their own marketing and branding, and they never have to worry about management obligations which allows them greater flexibility and autonomy in their work.
While some may argue that it’s impossible to build a real estate model around leads, Glory is proving them wrong. Her model has generated a larger profit margin than her previous, more demanding one. Glory sacrificed the big production numbers and stages in exchange for peace and the satisfaction of a job well done.
It’s clear that the traditional real estate model no longer suffices for everyone. Glory Balogun’s model is a testament to the entrepreneurial spirit of the industry, and it proves that changing and innovating the business can indeed generate greater success and satisfaction.
The Team Model for Real Estate Success
Real estate is an industry that offers limitless opportunities for individuals to excel. One such opportunity is the team model, where an individual can build a team of agents, coordinators, and pacers to generate leads, network with clients, and close deals. The team model operates on a simple principle: everyone does what they do best. If you excel at generating leads, then focus on that, and if you're great with clients, then work with them directly.
The Benefits of the Team Model
The team model offers several advantages to individuals who want to make a successful career in real estate. Some of the benefits include:
Focusing on Your Strengths: With the team model, you can focus on tasks that you're good at and passionate about. You can generate leads and let others do the coordination and pacing.
Improved Productivity: When everyone works towards their strengths, the team becomes more efficient and productive. You'll get more done in less time and generate more revenue.
Higher Income Potential: With the team model, you can increase your income potential exponentially. By building a team of high-performing agents, coordinators, and pacers, you can generate more leads, close more deals, and make more money.
How the Model Works
The team model is simple yet effective. It involves a few key steps:
Build a team: Start by recruiting high-performing agents, coordinators, and pacers. Make sure they share your values, and they're committed to providing exceptional service to clients.
Tasks Allocation: Allocate tasks based on the strengths and passions of each team member. If someone is good with clients, let them work with clients directly.
Focus on Leads: As the lead generator, you'll be responsible for generating leads and connecting clients with the right agent.
Referral Network: Maintain a referral network to generate leads from various sources. You might work with google and other businesses to generate more leads.
Commission Split: The commission split usually works on a percentage basis. You'll get a percentage of the commission generated from the deal, while the agent gets the rest.
Understanding how real estate agents make money is important if you're looking to get into the business. it's not just about taking a commission; managing the business's finances is also crucial to making a profit. as my journey in real estate shows, it's not always easy, but with the right strategies, perseverance, and determination, it could be a lucrative career choice. Building a profitable real estate team requires careful planning and a clear understanding of financials. by considering factors such as tax planning, team models, and additional revenue streams, agents can create successful and sustainable team businesses. In conclusion, lori ballen's real estate business model is unique and highly successful. her seven streams of income have allowed her to diversify her income sources, and her revamped model allows her to focus on generating leads for her agents and providing value to her clients. her story is a testament to the importance of diversifying income sources and changing business models to stay competitive and profitable.
The team model can help you build a successful career in real estate. By focusing on your strengths, building a high-performing team, and generating leads, you can increase your income potential and offer better services to your clients. The team model is not for everyone, but if it aligns with your values and career goals, it might be the perfect fit for you.