How Profitable is a Real Estate Agency (2024 Stats)?

In 2023, the U.S. real estate sales and brokerage market is worth $222.3 billion, and it’s expected to grow substantially by 2028. With over 1.18 million brokers and realtors in the country, competition is intense. But how does this mean for real estate agency businesses profits?

With average yearly revenue for real estate businesses at $594,000 and start-up costs ranging from $87,000 to $280,000, in this article we will try to answer the key question: how profitable is a real estate agency? Let’s dive in!

Real Estate Sales and Brokerage market overview

As per IBIS, the real estate sales and brokerage market in the U.S. represented revenue of $222.3 billion and is expected to grow to $311.8 billion by 2028.

Residential sale represents the largest share ($177.8 billion) followed by commercial sale ($44.5 billion). Yet, with over 1,180,000 brokers/realtors across the country, the competition is also fierce.

How much revenue does a Real Estate Agency make?

Using the same source earlier, it’s safe to assume that the average turnover for a broker/realtor is around $187,000. Indeed, the U.S. real estate sales and brokerage industry is worth $222.3 billion and there are about 1,180,000 brokers/realtors across the U.S.

Now, using data from more than 1,930 franchised brokerage/real estate businesses, a broker/realtor earns $594,000 in gross revenue per year on average. This number is the average gross revenue per business from 1,930 brokers/realtors from the largest 4 brokerage/real estate franchises in the U.S. This makes sense as franchised realtors are typically larger businesses than independent realtors.

With an average commission per sale of 3%, and an average home price of $430,300, that’s an average of 46 real estate sales per year per brokerage/real estate business.

How much does it cost to start a Real Estate Agency?

On average, it costs between $87,000 to $280,000 to open your own brokerage/real estate business.

This includes various costs such as real estate improvements, furniture, fixtures, equipment, signage, rent, office and computer equipment, insurance, professional fees, licenses, permits, etc.

Real estate/leasehold improvements (30%): Cost of enhancing and customizing the physical workspace to meet specific needs.
Furniture, fixtures, and equipment (12%): Cost of necessary furnishings, fixtures, and equipment essential for day-to-day operations and client interactions.
Signage (2%): Designated for the creation and installation of signage for brand visibility and establishment presence.
Rent and security deposit (2%): Cost of leasing the office space and providing a security deposit
Opening supplies (1%): Allotted for the initial supplies required for the commencement of operations.
Marketing (18%): Cost of promotional activities and campaigns aimed at creating brand awareness and attracting clients to the brokerage or real estate services.
Training expense (2%): Reserved for training programs to ensure that staff is equipped with the necessary skills and knowledge in the real estate market.
Office and computer equipment (12%): Designated for the procurement of essential office equipment, computers, and related technology.
Insurance, professional fees, licenses, and permits (3%): Costs associated with obtaining necessary licenses, permits, and insurance, as well as professional fees.
Working capital (18%): Reserved to maintain liquidity and cover day-to-day operational expenses for the first 3-6 months.