Being a real estate agent is not cheap. Shuttling to and from open houses, client meetings, and the office can be quite expensive. And since most real estate agents are categorized as independent contractors, they have no fixed income to expect monthly like salaried employees do. As such it is imperative for real estate agents to carefully plan their income and expenses.
If you are a real estate agent planning your income and expense, the first thing you need to do is determine your personal living expenses. This includes your food, shelter and recreational expenses. Be honest in calculating your personal expenses. If you are married and receive financial support from your spouse, then your personal expenses will be lower.
Once you have accounted for your personal expenses, then you can formally start planning your income and expense as a real estate agent. It is definitely easier to calculate your income and expenses if you have been a real estate agent for quite sometime because you can give a ballpark figure of how much you earn and spend in a month. Your income will largely depend on your ability to sell houses and will greatly vary. However, if you average a sale a month, you can easily project the income you will receive from your commission. The general advice is to make a conservative estimate of your income.
Your expenses will also be easy to estimate since everything would have normalized by now. Make sure you include all expenses that you incur during the conduct of your business. Common expense items for real estate agents include the following:
- Local board of realtors fees and membership dues
- Key cards and lock
- Errors and omissions insurance
- Health and automobile insurance
- Technology fees, including voicemail, Internet access, computers, et cetera
- Marketing fees
- Transportation costs
In the event that you are just starting with your real estate business, then you will notice that there is almost no income coming in during the first few months, especially if you have not made a sale yet: On top of the expenses mentioned above, you will have to pay for the following.
- Real Estate School
- State Application and/or Exam Fees
- State Licensing Fee
Once you have projected your income and expenses, then you can now make a budget for your real estate business. Ask yourself this question. Is my income larger than my expenses; if so, then you are in a good position. But if your expense is higher than your income, then it is time to take a closer look at your expense items and find ways to cut your expenditures. This is where your budgeting skills come in.
You can use a spreadsheet to track your income expenses. This is an expensive way of monitoring your income and expenses. There are also plenty of free templates for planning a real estate agent's income and expense on the Internet. Look them over and decide what is best for you. Just remember to keep a copy in case something happens to the original files.