The Arithmetic of Real Estate Photography Pricing

December 10th, 2017

I’ve talked about this before but it’s super important so it is useful to keep coming at the subject from different angles. It’s clear a lot of folks don’t understand this. A couple of days ago, I did a high-level discussion of all the pricing factors you should consider. Here I want to look closer at making sure your shoot price is recovering all your costs of being in business.

First of all, your shoot price has several components:

  • Your fixed costs: These are all the fixed costs of being in business. It’s called fixed because it doesn’t depend on how many shoots you do a year. Fixed costs are things like your gear, replacing your gear periodically, insurance, your vehicle, your computer, and software, etc.
  • Your variable costs: These are costs like gas and vehicle maintenance. They are called variable because the more shoots you do, the bigger this cost is.
  • Your profit: Not much explanation needed here. You probably want to look at this from the point of view of how many hours you are putting into a shoot on average so you know what you are getting paid per hour so you can compare it to what you may get doing something else.

So with this terminology, here is the arithmetic:

shoot price = (fixed costs)/(average shoots per year) + variable cost per shoot + shoot profit

In real estate photography, the variable costs and profit are easy to understand. Everybody understands gas and oil costs. The fixed costs are where everyone seems to have difficulty and people get confused! If you are running a sustainable business (one that will support yourself and your family over a time frame of years), you have to recover all your fixed costs of being in business or over time, you will actually lose money and perhaps you’d better find a different job. When I calculate (fixed costs)/(average shoots per year) + variable cost per shoot for me personally, the number comes out to $60.86. In past posts and in my Business of Real Estate Photography eBook, I call this the cost of showing up because that’s pretty much what it is; your cost to show up at the property before you start doing anything.

When I see someone with a shoot price near what it just costs me to just show up at a property, it sets off alarms in my head. Sure, there are variations in the cost of living but I live in Salem, OR and even though it’s the capital of OR, it’s a pretty rural, backward little town and the cost of living here is literally half of what it is in Seattle where I’ve spent most of my life. I now go out of my way to talk to real estate photographers who have, what appears to me to be, crazy low prices. Here are the situations I always find:

  1. They are not recovering all their fixed costs. They don’t include costs like gear replacement every 3 or 4 years or vehicle replacement, or professional insurance, etc. This means that the longer they stay in business, the bigger an economic hole they are getting into. So being in business is actually hurting them economically in the long run.
  2. They are, for various reasons, not including any or all of the fixed costs of doing business. So they are behaving like they have low or no fixed costs. Reasons I hear are things like: a) their spouse has a real job and is paying all the fixed costs, b) they are retired and don’t have to include all their fixed costs, or c) they have another real job and are only doing real estate photography part time and don’t have to recover all the costs. In these cases, they are picking up some extra money and are able to make their phone ring by just keeping their price unrealistically low.

Even though #2 is not hurting the photographers that do it, it is hurting all the other full-time real estate photographers in their local market both now and in the future. They are effectively breaking the local real estate photography market because: a) they are competing with unrealistic fixed costs, and b) they are establishing unrealistic price expectations in their market. Sometimes, you can spot photographers that are engaging in item #2 above because their quality is low, but not always. Once a few photographers using low prices like to make a few easy bucks, it doesn’t take long before it becomes difficult or impossible for a full-time real estate photographer to recover all their costs in this broken market.

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4 Responses to “The Arithmetic of Real Estate Photography Pricing”

  • Well said.

  • I took Larry advice years ago about figuring out what it costs me just to show up on each job to earn a living in PFRE and it taught me not to compete with the low priced competitors. My cost of living is pretty low so anybody promising the same level of service I provide at a lower cost isn’t going to stay in business long. They are also going to have a hard time covering unexpected bills and will be stretching the budget when they need to return for pick up photos on a job where the agent was unhappy or something happened to a memory card that prevented being able to deliver on a job. This is also why it’s not a good idea to build a business model on being booked all day, every day. You don’t have margin for bad weather or illness and it’s hard to go back and fix a screwup right away.

    I consider my cameras to be a variable cost item. The more jobs I do, the faster I’m going to wear out the shutter. This is also something that people shooting HDR/Fusion need to consider since they are capturing more frames on each job. If I am bringing back 150 frames from each job and my camera has an expected shutter life of 100,000 actuations, that’s 667 jobs. If I were shooting 5-image brackets, I would be bringing back twice as many frames or more and using up my shutter life twice as fast. The same goes for the iris in lenses. Anything mechanical is going to wear out faster the more it is used. Flashes and strobe lamps are consumable items too.

    Having a low cost of operations due to another job or a spouse contributing to the household is a great advantage. If you have to dip into money saved up for retirement, you should reconsider your pricing structure so the business pays for itself or what’s the point? Any customer that can’t pay a honest fee for good photos is doing something wrong or is treating their RE business as a hobby and is asking you to help prop them up. I have 1,200 agents on my marketing list and around 10-12 of them use professional high quality photos consistently. The ones that do always sell the most homes each year, always have at least 10 listings active at any one time and hold the most high value contracts. I know that several of them pay much more than I charge for photos and aren’t going to switch photographers to get a better price.

  • I believe that all this must be done. Not necessarily easy since the number of shoots you do as a freelancer can vary. But there is another factor to consider in this world of ours at least in the US. People are money conscious here, perhaps more so than in Europe for example where there are many factors at play in how you are perceived. But in the US, you are often perceived by what you are worth and your worth is established by the price you put on yourself and the resulting work you create. If you undervalue yourself and your work, that is how others will see you. And rate you.

    How many times do you run into people who complain about how much something or someone cost and then they tell you the exact amount perhaps even inflating it. This goes to their own self promo about how much they can pay even as they pretend to wince at the amount and claim they were ripped off, yet they still bought the product or service. Some vendors take this to the extreme and charge ridiculous prices and depending on their self confidence often getting away with it. Quality is so often tied to price in the eyes of those paying. Not a factor to be ignored depending on the market you are working in and the level of quality you are capable of delivering.

  • One of the easiest ways to verify that you are charging enough is to have a bank account just for the business. Everything related to the business gets paid out of that account including yourself and all taxes. If that account is not continuously growing, then you are not charging enough.

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