9 Real Estate Agency Financial Statistics: Sales, Expenses, Profit and More

May 2023

Adam Hoeksema

The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 981,453 tax returns that were filed in the real estate industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their real estate agency.  

We hope that this data will be helpful for you as a “reality check” for your financial projections and real estate agency business planning process.  We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.   

Here is what we will cover in this article:

Learn How to Use this Financial Data

If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data. 

How many real estate agency businesses in the US are sole proprietorships

There are roughly 980,000 real estate agency businesses in the US organized as sole proprietorships.  We specifically analyzed 981,453 real estate agency companies based on the 2019 IRS tax return data. 

Average annual revenue for an real estate agency

The average annual revenue for all sole proprietorship real estate agency businesses in the U.S. was just $59,344.  

This may differ depending on the size, location, and time in business for each real estate agency. It is not uncommon to see selling real estate as a part time or side job. 

I think we need to remember that this tax return data includes all sole proprietors that categorize themselves in the “real estate agency”.  Depending on location and size the potential revenue may vary.  These businesses could be one person realtor businesses, or larger agencies with many realtors on staff; however, based on the average revenue of under $60,000 we suspect that the vast majority of these businesses are single realtors.   

This underscores the importance of actually creating your own real estate agency projections based on your potential inventory and customers.  

Average annual expenses for an real estate agency

The average annual expenses for all sole proprietorship real estate agency businesses in the U.S. was $34,249.  

The average annual expenses for a real estate agency will be made up of the rent, legal fees, and advertising, but these all could vary depending on location and age of the business, so again let’s not focus too much on the specific dollar amounts here.  What we can gain from this tax return data is an understanding of expenses and profits as a percentage of revenue rather than a specific dollar amount. 

Average net profit margin for a real estate agency business

The average net profit margin for a real estate agency business was 42%.

If most of these businesses are just single realtors, they may not have any salary expenses for other employees, so the profit is essentially what the realtor can pay themselves as an owner. 

How much can I make by owning a real estate agency business? 

In order to calculate the earnings potential of a real estate agency you can take the following assumptions:

  • # of transactions closed
  • Average price per transaction
  • % of commission 

These assumptions will allow you to come up with a revenue forecast for your real estate agency.  From there you can apply the 42% profit margin.

Top 10 expenses for a real estate agency business

Based on the tax returns of roughly 981,453 sole proprietors operating in the real estate agency industry, the following were the 9 largest business expenses as a percentage of revenue. 

Expense as a % of Revenue Other business expenses 11%
Car and truck expenses 8%
Material Costs - COGS 6%
Sales Commissions 5%
Advertising expenses 4%
Contract Labor 3%
Utilities 3%
Salaries and Wages 2%
Depreciation 2%
Office Expenses 2%

Average other business expenses for a real estate agency business

The average real estate agency business spent 11% of annual revenue on other business expenses.  

This is somewhat of a catch all for different types of expenses within an administrative business.  This can be related to different types of fees, licenses or memberships as well as different kinds of administrative expenses that do not fall into office expenses. 

Average car and truck expense for a real estate agency

The average sole proprietor real estate agency business spent roughly 8% of annual revenue on car and truck expenses.  

In order to meet prospective clients and visit homes, it requires travel to these locations.  This would make sense then to be the second highest expense as it is related to gaining new customers and running the business very closely.

Average cost of goods sold for a real estate agency

The average real estate agency spent roughly 6% of annual revenue on cost of goods sold expenses.

So what could cost of goods sold be in a real estate business? 

Specifically on the seller side of the transaction, it is often recommended to utilize photography of the home, print handouts at open houses, and listing photos on websites to increase interest in the home for sale.  

Average sales commissions for a real estate agency

The average sole proprietor real estate agency spent roughly 5% of annual revenue on sales commissions.  

Depending on the size of the firm, sales commissions both for the owner and any additional agents would be seen here.  The commission amounts and payouts can vary depending on location.

Important Details about the Data

I want to point out a few key items about the data:

  • You can download this data for free from the IRS website
  • The data includes 981,453 real estate agency sole proprietorships in the U.S. in 2019.  
  • This data will include businesses that operate full time, and businesses that only operate on a part time basis. 
  • Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.  
  • This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location.

About the Author

Adam is the Co-founder of ProjectionHub which helps entrepreneurs create financial projections for potential investors, lenders and internal business planning. Since 2012, over 50,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections.

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