Congratulations on starting your journey as a real estate agent! As someone who is self-employed and earning a variable income, it’s important to have a solid financial plan in place.
Real estate agents typically incur various expenses when running their business. These expenses can range from marketing and advertising costs, office rent, utilities, and insurance to technology fees, MLS dues, and professional development expenses. According to the National Association of Realtors (NAR), the median annual operating expenses for a real estate agent is $4,090, however, this figure can vary depending on the location, business size, and level of success.
In addition to these expenses, real estate agents also pay commission splits to their brokerage or franchise. Commission splits can vary, but typically range from 50-95% of the commission earned and are negotiable between the agent and the brokerage. Some brokerages may also charge additional fees for marketing materials, technology, and administrative support.
It’s important for real estate agents to carefully track their expenses and factor them into their budget and business plan to ensure profitability and success.
Here are ten tips for financial planning and budgeting as a new real estate agent:
- Create a budget: Start by creating a budget that lists all of your monthly expenses, including rent/mortgage, utilities, car payments, insurance, groceries, and any other bills. This will help you understand your monthly cash flow and how much money you need to earn each month.
- Track your expenses: Keep track of all your expenses, including business expenses such as marketing materials, MLS fees, and office supplies. This will help you understand where your money is going and where you can cut back if necessary.
- Set financial goals: Determine your short-term and long-term financial goals, such as saving for a down payment on a home or paying off debt. Then, create a plan to achieve those goals.
- Save for taxes: As a self-employed individual, you’ll need to pay taxes on your income. Set aside a portion of your earnings each month to cover your tax bill.
- Build an emergency fund: Set aside some money each month into an emergency fund to cover unexpected expenses, such as car repairs or medical bills.
- Live below your means: As a new real estate agent, spending money on luxury items to impress clients can be tempting. However, it’s important to live below your means and avoid unnecessary expenses.
- Diversify your income: Consider diversifying your income by taking on additional work, such as property management or staging services.
- Network: Networking can lead to new clients and opportunities. Attend local events and join professional organizations to meet new people in the industry.
- Invest in your education: Stay up-to-date on industry trends and regulations by investing in your education. Attend seminars and take courses to improve your skills and knowledge.
- Seek professional advice: Consider working with a financial planner or accountant who can help you create a personalized financial plan and provide guidance on tax planning and investment strategies.
Following these tips can set you up for financial success as a new real estate agent. Good luck on your journey!