You need to have your real estate budget in order if you want to make the most money possible. In a world dominated by commission checks, creating a budget—whether for your company or for determining how to best distribute the money you make in real estate—is very necessary in order to achieve financial success.
Here are some of the approaches that real estate brokers from throughout the nation have taken to their financial planning for real estate transactions.
Save for gifts year-round
Because of the erratic nature of our customer base, this may be a very challenging situation. When I am paid, I always make it a point to deposit some of the money back into my Christmas account. Even if I can just put back a small amount, it never ceases to amaze me when December rolls around and I realize how much money I have managed to save.
At this time of year, I have realized that it is more vital for me to have financial resources so that I can care for my family than to hold on to something that isn’t really all that important. — Tamie Williams, a Realtor with Crye-Leike in the state of Georgia.
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“At the beginning of each year, I make it a goal to put some money into savings in preparation for the holidays and birthdays. I also keep an eye out throughout the year for sales and put such items away for Christmas presents. —Beverly Haws, New Star Real Estate, Salt Lake City, Utah
Don’t forget about taxes
I pay taxes out of a separate account that is funded by forty percent of each commission check I get. The balance of the money is used for things like trips, presents, and donations to IRAs. My personal overhead is kept to a minimum, and I try to live within my means. To me, having a good quality of life is more essential than having a big mortgage or a lot of vehicle payments. — Tracy Bernard, from Nikki Coates & Associates in New York
“To begin, I am always on time with my quarterly tax payments. After that, I set aside twenty-five percent of each check that I get as commission and deposit it into a savings account for the winter holidays and the months that are less busy during the year. Gary Randall, who works for United Real Estate in Texas
Cash flow is king
“During the prosperous months, you put away as much money as you can. If you want to be successful in this line of work, you need to have money for at least one year’s worth of expenses. Have a firm grasp on both your financial obligations and your company. —Regina Ambrose, Georgia
“I make it a point to set away a portion of the proceeds from each sale to go toward my membership fees, taxes, critical expenses, and presents for the holidays. Because there are closures at different times of the year, it is important to make advance preparations. —Barbara Parker, RE/MAX Douglass Real Estate, Michigan
Prepare for the cycles
“Real estate, like life, goes through cycles; it’s best to put money away while times are good so you can weather the storms when they come.” —Martin Kukich, Montana
“It may be challenging at times. Either we feast or we starve. But I do my best to put money aside when I have a lot coming in, and then I strive to spend less when business is sluggish. Sometimes I will buy short-term certificates of deposit (ranging from three to six months), and then I won’t be able to spend any money until they mature. —JoAnn Hardon, of Action Plus Realty in the state of Minnesota
Use budgeting and savings apps or tools
I also have an account with Acorns, where I invest a modest amount each week, in addition to the savings account. My credit card transactions are automatically rounded up to the nearest dollar in my Acorns account. —Karen Trepton, Shorewest Realtors, located in the state of Wisconsin
“When it comes to budgeting, the Christmas season is one of the most challenging times of the year for real estate professionals. In the course of running my company, I have developed a new rule of thumb. The first twenty percent of the proceeds from each transaction are deposited into a savings account immediately.
Another ten percent of the transaction is deposited into my savings account, and another ten percent is reserved for use in meeting existing or future financial obligations related to the firm. The remainder of the funds will be used toward the payment of bills or other essentials.
Oh… I always make sure to give myself a reward after each close. My reward may range anywhere from one hundred to five hundred dollars, depending on the size of the transaction. “Me money” enables me to put in more effort toward securing the next business transaction. —Lisa Beckford, Coldwell Banker, Florida
“I am responsible for creating my own budget using Excel. I have broken all of my costs down into their respective categories and am planning everything according to my pipeline commissions. I make it a point to curb my impulsive purchases and put most of my money toward items that are essential to my life or that I know I will make good use of.
It is of the utmost importance to have enough money left over for retirement savings and an emergency fund that can cover expenses for three to six months. —Seth Worthen, of Osmond Real Estate, in the state of Utah
“Take a look at the financials from the previous year and see where you can make improvements and savings. In order to keep oneself financially stable and organized, it is essential to keep up with the latest technological advancements and to make advantage of the services and products that are available. Tools like Mint have the potential to go a very long way! —Nicholas Tzavis, Director of Operations at NDG Student Living.