A budget turns big goals into real numbers, and real numbers turn into a clear plan for how many homes you need to sell.
You love sales, you love people, and you love the idea of being your own boss. Now you have the license to prove it. Welcome to real estate entrepreneurship.
A brokerage firm will train you in sales. But who will teach you how to do business? This is where the budget comes into play.
Your budget: fuel gauge for your business
Think of your business plan as your roadmap and your budget as your fuel gauge. Maps show you where to go. The fuel gauge indicates whether you have enough fuel to reach your destination. No matter how good a map you have, it won’t help you if you run out of gas on the highway.
A budget turns big goals into real numbers, and real numbers turn into a clear plan for how many homes you need to sell.
Create a budget in 4 steps
We like to keep it simple, so we’ve broken down our budget into four steps.
List your business expenses: List all the costs involved in running your real estate business. List your personal living expenses. Expenses that cover your life outside of work, such as rent, groceries, and a car. Set wealth goals: Start saving even in your first year. As a guideline, you should have 3 to 6 months worth of expenses as a rainy day fund. Contributing to a Roth IRA from the beginning can be a game-changer. Thanks to compound growth, even small, consistent contributions can grow to more than $17 million over a 40-year career. Start early. Estimate your taxes: Self-employed people are responsible for paying income tax and self-employment tax. Your tax professional will help you resolve this issue so April won’t be disappointed.
Add it all up and you get business expenses + personal expenses + target wealth + taxes = total amount you need to earn in fees. That is your sales goal for this year.
Common business expenses for real estate agents
The only way to measure profit is to include all expenses. This is a useful list:
MLS dues and NAR/state association dues License renewals and continuing education Errors and omissions (E&O) insurance Brokerage commissions and commission splits Deal coordination fees Printed business cards and marketing materials Professional website and CRM subscriptions Lead generation platforms (Zillow, Realtor.com, etc.) Social media and digital advertising Professional photography and videography Yard signs, lockboxes and open house supplies Mailings, gifts for mailers and customers Mileage and car expenses (keep records, they’re deductible!) Laptops, tablets, and technology tools DocuSign or e-signature platform QuickBooks or accounting software Fees for coaching, courses, and conferences
General personal (living) expenses
Here are some common living expenses to consider in your planning:
Rent or mortgage payments Utilities: Electricity, gas, water, and internet Car payments, auto insurance and maintenance Gasoline (personal driving) Health, dental, and vision insurance (you pay for this yourself!) Life insurance Groceries and eating out Household items and personal care Clothing and dry cleaning Gym memberships and fitness Entertainment, hobbies and subscriptions Student loan and credit card debt payments Child care and alimony costs Pet care Vacation funds
4 habits to keep your household finances healthy
Stay financially healthy and follow these four habits throughout your career. Your financial advisor or accountant will be happy too.
Keep business money and personal money separate. Open a business checking account and get a business credit card. Please use for business purposes only. Thank you for your understanding when paying your taxes. Build a rainy day fund from day one. Real estate income is similar to farming. If you plant in January, you may not be able to harvest until June. First and foremost, save up three to six months worth of expenses as a cushion. Know your taxes before you pay. Learn how to estimate your quarterly taxes and maximize your deductions. More money in your pocket and less money going to the IRS. Track your numbers monthly. A simple tool like QuickBooks allows you to compare your monthly budget to your actual results. If you’re overspending or under-earning, you can spot it early and make adjustments before it becomes a serious problem.
Wealth goals to include in your budget
A proactive budget is more than just a list of numbers. These wealth goals will help you get on track and stay on track.
Rainy day fund (3-6 months worth of expenses) — First-year priorities Roth IRA or traditional IRA contributions SEP-IRA or Solo 401(k) for self-employed Real estate investment savings General investment or brokerage accounts
You’ve now decided on your first budget.
You just did something that most new agents completely skip. So I saw the big picture: my business, my life, my future, all in one place. Budgets don’t close deals, but they do ensure that every deal you close actually moves forward.
congratulations. Have a great first year!
Parius Maeda is an active certified public accountant who has focused on supporting small and medium-sized businesses for 40 years. Connect with her on LinkedIn.
Amy Choliu is a practicing real estate agent who works in the state of Connecticut, listing investment properties and well-prepared homes. Connect with her on LinkedIn and Instagram.
