Monday, 27 May 2019
Agent Resource Center
This Old House - Do-it-Yourself

How Successful Real Estate Agents Budget Their Money

Written by Posted On Tuesday, 14 May 2019 22:05

A real estate agent's income is unpredictable to say the least. Here's how successful real estate agents budget themselves so they can live to sell another day.

The real estate industry is renowned as one of the most stable investments an investor can make. As a result, numerous individuals get drawn to a carrier in real estate.

However, it appears that not every aspiring person becomes successful, in the industry when asked; many agents who did not become successful attribute their failures to the fluctuating market cycles.

There may be some truth to the answer, but it is not the whole reason most people never become successful real estate agents. In fact, with a little self-assessment, they could realize they failed as a result of poor financial management.

Poor budgeting can destroy the prospects of any business before it gets a chance to thrive and the same applies to real estate.

So how do successful agents budget themselves for success?

Well, you have come to the right place for real estate budgeting tips. If you want to learn more, keep reading.

1. Access You Financial Situation via Past Records

If you have been in business for a while, the key to budgeting lies in your past finances. It is essential to keep clean and precise records of all your funds as it is a basis for financial reflection.

Start by determining who much you earned in revenue over the past year. Income should include:

  • Commissions
  • Profit shares on deals
  • Finder’s fees
  • Payments from additional jobs such as coaching

How much money did you retain in profits after setting all your expenses? Profit is the difference between the amount of money you made minus all your business and personal expenses.

The profit you make will need to get budgeted for accordingly if you want to succeed in real estate.

2. Define You Expenses

It is essential to define your expenses because track how much money is exiting the business.

When defining your expenses, make sure to distinguish the businesses expenses with your personal expenses. Businesses expenses are expenses that the business directory needs in order to facilitate its operations. These expenses can include:

  • Marketing costs
  • Salaries for real estate agents who work for you
  • Taxes
  • Professional services such as accountants
  • Office rent and utilities
  • Your salary

Personal expenses include the likes of:

  • Fuel consumption
  • Lunch and dinner (not related to clients)
  • Coffee orders

If you want to learn how to succeed in real estate, learn to separate these two types of expenses. When expenses get mixed up, it becomes challenging to maintain a budget.

3. Prioritize Your Expenses

The key to proper budget is first to understand how much you need to spend in order for the business to remain operational. Despite a company having a long list of expenses, some of them are not essential to the operations of the business.

Hence, once you have listed down your personal and business expenses, it is time to decide which ones can get scaled down.

Business expenses are the most essential and hence they should get the most priority. Categorize your business expenses into the five most common pools. These pools are:

  • Office expenses (utilities, stationery, etc.)
  • Professional services (salaries, accountants, consultants, etc.)
  • Advertising (marketing campaigns)
  • Taxes
  • Vehicles

By categorizing the expenses, you can clearly see which category can take up the most of your income and determine if it can get scaled down. For instance, you can scale down on vehicle expenses as well as office expenses.

As for advertising, you have to determine if the ROI of the expenses is worth it. If not you should consider either scaling down the expense or shifting to a better campaign that will provide a healthy return on investment.

4. Determine the Minimum Expenditure you require to Stay Afloat

The reason for narrowing down your expenses is so that you can have a rough estimate of how much the business needs to operate comfortably. By definition, this should be your budget.

Hence, start by adding the non-scalable expenses such as rent and salaries. Next, add up the scalable expenses based on their priority to the business.

Once you have a sum of the total expenditure, you require. It is always advisable to add 10% of the amount to the total spending. This is meant to be a safeguard in case your estimates are not as accurate as you would assume. 

5. Open separate Accounts for the Business

It is okay to receive all you relator income in one account (the main business account). However, in order to maintain discipline towards the set budget, each expense category should have a separate account. Whenever you receive funds, ensure you designate funds accordingly to the various expense accounts.

Hence, you need an account for:

  • Taxes
  • Office expenses such as rent
  • Salaries
  • Vehicles

Once you decide how much each cost will get per month, you can deposit the exact amount in each account to ensure you do not exceed your budget.

6. Budget for a Rainy Day

A common mistake realtors make when creating budgets is that they forget that the real estate market has no guarantees. No guarantees mean that no matter how well you budget, your income will not remain the same. You will experience highs and lows.

Hence, as you create expense accounts, also remember to create a rainy day fund. Having an emergency fund is essential to the success of a real estate agent. When the market is in recession, you still have a fall back plan that can cater to expenses.

7. Look at Advance Payment Solution

Real estate agent incomes are dependent on how fast a deal closes. In most cases, they are, and hence the pace of a closure relies on the buyer and seller agreeing on the terms.

Sometimes, it can take months before an agent sees their commission from a deal. If you are short on cash, you may need an advance to hold your business together. Else things could fall apart before you get paid.

Companies like provide realtors with advance payments for deals that have already concluded while they wait for payment. Utilizing such a service could help maintain a budget even when income is uncertain.

Conclusion on Successful Real Estate Agents budgeting

If you want to join the league of successful real estate agents, budgeting your income is essential. The seven tips listed above are but a guideline on where to commence your budgeting and how to sustain the budget.

For a comprehensive guide to budgeting in real estate, you need to utilize your accountant. Accountants specialize in financial management, and hence, they should get used in the formulation of a budget.

For more interesting topics on real estate, kindly visit our website.

As for advertising, you have to determine if the ROI of the expenses is worth it. If not you should consider either scaling down the expense or shifting to a better campaign that will provide a healthy return on investment.

Listing Additional Info

  • State: New Jersey
  • Address: 4649 Fairfax Drive
  • City: Montclair
  • Zipcode: 07042
  • SOLD: no
Rate this item
(0 votes)
Stacy Stein

stacy is a real estate writer, and she would like to real estate, business-related topics, she would like to go out with her friends. she studied business management from California University and she presently lives in California.  



Set it and forget it Marketing, Agent Trusted for 21 years. Click Here

Search by State:

Agent Resource

How to capture your next prospect - click here

Realty Times

From buying and selling advice for consumers to money-making tips for Agents, our content, updated daily, has made Realty Times® a must-read, and see, for anyone involved in Real Estate.