Last Updated on September 26, 2020 by Mark Ferguson
Making one million dollars in a year seems like an impossible goal for many people. I am a real estate agent and I could not even fathom making that much money five years ago, but now it is one of my goals. One of the great things about being in real estate is there are so many ways to make money and there is no ceiling to how much you can make. As a real estate agent and real estate investor, I run my own business and the amount of money I make depends on how well I plan, the goals I set forth and the work ethic I possess.
The median income for a full-time Realtor is $54,000 a year, but many agents make much more money than that. My real estate team routinely sells over 200 houses, which brings in over $650,000 in real estate commissions from almost 25 million in sales volume. I did not personally make over $600,000, because I had to pay commissions to my team, I had expenses, and had to pay our staff. However, there are many agents all over the United States making at least one million dollars a year as real estate agents. The best part is you do not have to have a college education or even a high school education (depending on the state). You do have to work hard, plan well and be a great networker.
How much money do the best agents make?
Even though I think over $600,000 in gross commissions and 25 million in sales volume was pretty good, it is not even close to what the top agents in the country make. The top agent in the country had over $1,400,000,000 in sales volume in 2016 and the 250th ranked agent had over $60,000,000 in sales volume according to the Wall Street Journal top 1,000 agents. It is important to know the Wall Street Journal does not include all the top agents in their figures. They only count agents that apply to the Wall Street Journal or that they find through their own searches. Many top agents who do not apply or are missed by the publication are left off of the list and some agents ask not to be included as well.
It is not just the top real estate agents in the country that make a lot of money. My office has 45 agents in it and most of them are part-time agents. However, we had four agents who made over $300,000 last year.
How much in sales volume do you need?
Sales volume is the dollar amount of the homes sold by a real estate agent, not the money a real estate agent makes. On my REO listings, I get paid between 1 percent and 3 percent for selling a house and my average commission is about 2.7 percent of the sales price. It is important to remember there is no typical sales commission and all commissions are negotiable. If we use these same numbers as I have for the 250th agent in the country, they would bring in $1.6 million from a sales volume of $60,000,000. There is a good chance a retail agent who is not specializing in REO listings is making more than a 2.7 percent commission on each deal. We will assume they are making 2.7 percent to be on the conservative side.
The top agent in the country may be bringing in over $18 million a year in real estate commissions from 60 million dollars in sales volume. To sell that many homes that agent has to have a large staff and other agents that he is paying out of the 18 million.
Does an agent that sells $60 million worth of homes net over one million dollars?
Even though a real estate agent who sells $60,000,000 worth of homes will most likely make $1.6 million in commissions, they don’t get to keep all that money. A real estate agent has many costs and may have to pay a split to their broker if they do not own their own office.
A real estate agent that sells that many houses will also need help. Unless your average house sale is one million dollars or more, you must have help to complete that many transactions. I have two full-time assistants and I don’t come close to that much sales volume, but I also have a relatively low median price. A real estate agent will have to pay for marketing costs, MLS fees, staff, office fees, licensing fees and more which I discuss here. If you run a real estate team, you will also not earn all the commissions coming in, because you have to pay part of the commissions to agents on your team who are actually selling houses and doing the work.
A general rule of thumb in the real estate world is an agent needs to sell $50 million worth of homes to net one million dollars a year. Net profit is what is left over after all expenses are paid and is what is important to any business owner. Going by that math, there are at least 250 real estate agents in the country making at least one million dollars a year. However, when we consider some other factors, there may be many more agents making over one million dollars a year.
How many real estate agents make one million dollars a year?
It is hard to figure out how many agents net one million dollars a year because the Wall Street Journal does not include every agent on their list. The expenses and team structure for every real estate agent is also going to be very different. Some agents may need $1.5 million in commissions to make one million dollars net and others may only need $1.2 million in commissions to net one million dollars. Another consideration is the Wall Street Journal list I have been discussing only includes individual agents. There is also a Wall Street Journal list that includes real estate teams. There are another 250 teams on that list with over $60 million in sales volume.
Even though the agents on a team split commissions, I would bet 95 percent of the team leaders are still making over one million dollars a year after expenses. That means there are at least 500 real estate agents making over one million dollars a year in the United States. The great part about running a team is you can have others do most of the work and make most of the money for you!
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How many houses does a real estate agent need to sell?
To make one million dollars a year as a real estate agent you have to sell a lot of houses. However, how many houses you have to sell you depends on how expensive the houses you sell are. If your average sales price is one million dollars, you only have to sell 50 houses a year to make one million dollars a year. Most agents are not in an area that will allow them to sell 50 one million dollar houses a year. In my area, there aren’t that many million-dollar houses selling in an entire year by every agent combined.
In my area, the average sales price is around $200,000, which would mean I would have I sell 250 houses a year to reach $50,000,000 in sales volume and make one million dollars a year. However, since I sell REOs, my sales price is lower than the median sales price. I would have to sell over 300 homes in a year to make one million dollars net. 300 houses is a lot to sell in one year, but it is possible and one of my goals! The top team in the country in 2013 run by John Murray, sold over 1,200 homes!
For a real estate agent with a median house price sale of $400,000, it gets much easier to make one million dollars a year. That agent would only have to sell 125 houses a year to reach one million dollars in net income. Selling over 125 homes a year is tough, but it is not an impossible task either. You would have to sell just over 10 houses a year to reach 125 sales for the year and two to three houses a week. Selling two to three houses a week takes time as an agent. You have to build relationships, generate leads and take care of your clients. If you do all of those things, it is not difficult to sell that many houses.
How likely is it to make this much?
It takes a lot of work, planning, and some luck to make one million dollars a year. Most agents won’t make $100,000 a year, as the median income is $54,000 for a full-time Realtor, but most agents are not good agents. They don’t take care of their clients, follow up with leads or plan their business. If you use systems, train your team and set goals it is definitely possible to make one million dollars or more a year as a real estate agent. Most real estate agents will never come close to making one million dollars a year, but remember most agents are part-time and most agents do not treat being a real estate agent as a business. I can almost guarantee you are not going to make one million dollars a year in the corporate world unless you become a CEO or get lucky with stock options. How long will it take someone to become a CEO and how much of their path is determined by their hard work or politics within a company? Real estate lets you create your own path to success with no one else to answer to.
How else can you make money?
This article has discussed how to make one million dollars a year from selling houses as a real estate agent, but real estate agents can do much more than sell houses. I fix and flip 10-15 houses a year and I wrote an article about what it takes to make one million dollars a year flipping houses. I also own 11 rental properties and I wrote about how to make one million dollars from rental properties here. I hope to make over one million dollars a year very soon, by using a mix of selling houses, fix and flipping homes, buying rental properties and income from other sources like BPOs and my blog. Even if you never get to a point where you can make one million dollars a year from just selling houses as an agent, simply being an agent opens up doors that will allow you to add income streams and make more money in other businesses.
Why I love the business
One reason I think being a real estate agent is better than working in the corporate world is that there is no ceiling with real estate. There is no limit to the amount of money you can make in real estate as an agent, investor or business owner. In the corporate world, it is going to be tough to ever make one million dollars a year unless you start your own corporation or become a CEO. I learned in college the way to become CEO is to work 80 hours a week for 25 years. I don’t want to work 80 hours one week out of the year, let alone for 25 years. Plus there is no guarantee you will make CEO or even keep your job in the corporate world.
There is no guarantee you will make one million dollars a year as a real estate agent either. I think you have a better chance of becoming wealthy by creating your own business than by working for someone else, and becoming a real estate agent is one of the best ways to start your own business.