by Mike Sharkey
Staff Writer
It’s no mystery an astounding number of people are entering the real estate industry and that real estate schools are pumping out graduates at record paces. It’s also no surprise that Realtors are selling millions of dollars worth of real estate every month and year — many brokers even take out full-page advertisements in print publications to promote and celebrate their agents’ successes.
What may come as a surprise, however, is how much money it costs to make good money selling houses, condominiums and undeveloped property.
“You don’t understand how much money I spend,” said Eden Jordan, an agent with Re/Max in Orange Park.
Jordan said she will sell 50-54 houses this year, worth about $12 million. Going by standard industry numbers (6.5 percent commission split evenly between the broker and the agent), Jordan figures to gross about $390,000 this year.
But that’s before the IRS gets its cut. And desk fees are paid. And gas is put into a nice car. And the proper attire is bought. And lunches are bought. And an assistant is paid. And the list really does go on and on.
Jordan explained that in order to build a solid reputation and clientele and do business right, it costs an extraordinary amount of money to become a successful real estate agent. She says it’s almost a myth that anyone who sells $3 million worth of homes in a month is living oceanfront in Neptune Beach, takes exotic vacations and drives the 2007 BMW.
“I made a living the second year I sold real estate. That year, I made about $35,000,” said Jordan. “Last year, I grossed about $275,000. I have a buyer’s assistant that I pay well ($60,000) because she does a good job and it’s important. And, my personal expenses were about $60,000. I’m not saying I don’t make a great living because I do. But this year has been exceptional.”
Lately Jordan has been on a bit of a crusade to educate — almost warn — all agents and especially agents new to the industry about the dangers of assuming that in six months they will be shipping boxes of money off to Fort Knox.
“I’m a little honest and vocal with them to a fault,” said Jordan. “A lot of them come to me and I tell them that it’s tough. It’s the hardest thing they’ll ever do. I spend a lot of money, but you can’t not spend money and be effective.”
Jordan said she entered the profession under different circumstances than most.
“I was 28 and I went to work with my mother-in-law, who was kind of a mentor. I just had a baby and I had just come out of a business in which I was selling trade show space for a magazine in Jacksonville. I had to travel a lot and with a new baby, that wasn’t going to work,” explained Jordan, who also was married. “I knew what I was getting into, but I was not completely dependent on income from selling houses. I had a husband that was working and making money.”
Today, things are just the opposite in the Jordan household. She had a second child last year, a baby who was several weeks premature and requires a great deal of medical attention, and her husband now stays home with the kids while she supports the family. Jordan said it was a hard decision to make, but after carefully analyzing the pros and cons of leaving the real estate industry, she realized that even with the expenses, it was economically smarter for her to continue working.
“I worked from the hospital because I know that business doesn’t stop,” said Jordan, adding she is well aware of the potential end to the great run the industry has seen in Northeast Florida.
“I worry about it every day. The refinance boom was incredible and some of them were making $400,000 to $500,000 a year,” she said. “Now, that has been cut in half. I expect (the bubble burst) to happen.”
With a family came another cost for Jordan, one that many people in other industries don’t realize until they have to pay: health care. Jordan said she pays almost $900 a month for Cobra insurance for her and her family. With her husband at home with two kids, Jordan is the sole wage-earner and Re/Max doesn’t offer health benefits.
And there are still other costs associated with selling real estate.
“One is advertising. Two, once you get past about your 35th deal, you need an assistant because you cannot be in two places at one time,” said Jordan. “You also need to join realtor.com, which costs about $1,200 a year. A cell phone is a huge expense because in peak months you are always going to go over 3,000 minutes. I also maintain two full-time offices and one is at my house. It’s very expensive.”
With all of these expenses, receipts and other potential deductions, Jordan said tax time used to be a real nightmare. After almost eight years, however, she has gotten filing down to a science.
“Now I know how to do it,” she said. “I use Microsoft Money and I keep track of every penny we spend. I have a really good perspective of what it costs.
“The agents are finding out what it really costs to run a business. You almost have to do this as a second income. There’s a financial side to the costs and a time side to the costs. I try to keep a six-month reserve because if there is something like Sept. 11 again, you can go several months without making anything.”