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The real estate business plan: your secret to success

by James F. McClister

The costs of starting out

“What brokerage you start with as an agent makes a big difference in the amount of money you’ll need starting out,” says Engel.

At Engel’s brokerage, Baird & Warner, all incoming agents are given a suite of resources to help them get off to a good start, including an agent website and training. The resources an agent gets access to will vary depending on the brokerage they join.

Knowing what a brokerage has to offer will affect the expenses an agent ultimately budgets for. Website domain names, website hosting, business cards – the expenses add up, but if a brokerage picks up part of the tab, the agent’s budgeting burden gets a little lighter.

But no brokerage is going to pay for everything. Real estate agents are independent contractors, after all. Whatever expenses their brokerage picks up, agents must have an accurate picture of what their business expenses will be when they start out.

First, agents need to separate their expenses into fixed and variable expenses: those that remain static and those that are subject to change, respectively. An agent’s spending profile will differ depending on their independent needs and goals, but many costs associated with a real estate agent’s business fall squarely into one of those two categories.

A new agent will have to make adjustments to their budget as their business changes, and as they get a clearer picture of how their spending breaks down. Engel suggests his agents revisit their business plan two to three times a year for that very reason.

“The more spending you track, the more you know about what you’ll need in the future,” he says. “I tell my agents to open a separate business checking account, and get a separate business credit card. It helps put them in the mindset that this is a true business, and it consolidates all business spending into those accounts. It makes it a lot easier to see where money is going.”

In an online money management guide, NAR suggests agents also budget for business reserves and a financial “safety cushion” worth three to six months of earnings.

But understanding one’s spending is only half the budget battle.

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