Before I got into real estate I heard there were a lot of 'expenses' but I still thought the compensation would surely outweigh them severely, and it can I know this as I see mega agents killing it, however, I had no idea how much higher they would be then when I was a w2 employee! about 2.5x higher!

Before I could get by spending between $2000 - $2300 month, I'm single no kids, and I don't need to live extravagently. As I was combing over my budget, considering buying a car, getting cable television, and starting a new postcard campaign this is what I came up with:

before new car, cable, & postcard (5,000 month) campaign my monthly bills (factoring in those MLS/NAR/Lockbox/etc. quarterlies & annuals into a monthly breakdown)

$4612

If I add the new expenses:

$6082 ($300 car, $70 cable, $1100 mailers)

and I was planning to put $7k - $10k down on the car which will dent my bankroll a good bit..


Living Expense Total 1484
Communications Total 240
Insurance Total 378
Auto (non-insurance) Total 870
Associations/Professional/Desk Fee Total 1342.33
Advertising/Marketing/Lead Gen Total 1727.49
Professional Services Total 41
Total 6082.82

Does this look like a decent budget or is it way out of whack?

In your auto expenses are you factoring in gas and maintanence? Also for living expenses are you factoring in food?

Some of those items look too low to be annual expenses . . . . but others look too high to be monthly.

Gas ($500), Maintenance, & Food ($500) are all incorporated. They are all monthly expenses. It is a fairly accurate budget as far as projected:actual is concerned, give or take a little on some items that can differ.

I will be going into Real Estate full time starting the first week of November and I am going to do the following to control my expenses and budget.

Business:

- Create my own website, update it and maintain it to save money, this will also keep me busy and I love working with the internet.

- Buy office supplies in bulk from Costco as opposed to Staples or smaller stores.

- Print everything I can at the office and try not to use my own printer and ink at home (unless I really have to!)

- Save on gas by planning my day and what I need to get done and where I need to go etc.

Personal:

- Brew my own coffee, eat breakfast and lunch at home as well and try not to spend too much money at restaurants unless I am entertaining a client or having a meeting etc.

- Pay myself first from every commission check and put it into an investment or high interest savings account

- Shop for clothing twice a year, buy all my winter clothing for business in the fall and my summer clothing in the spring and don't fo shopping regularly for clothing I really don't need


Besides that, my budget is simple and I plan business and personal seperately and plan annually.

So your Association Fees et cetera would total $16,107.96 annually ?

Yes I pay a little over $1200 month desk fee to keep most of my commission. It comes out to about $15,000 per year that I can deduct (so effectively, less than $15,000 when you figure in tax advantage) versus letting my broker passively "take" about $21000 to reach the same split when commissions role in which I cannot deduct. So if deducting the $15,000 saves me $3,000 in taxes, effectively a savings of $9,000 over going with the traditional no fee 'split'.

Aren't you severely mixing the line items in your personal and business budgets?

GIGO

Just sayin -

I have an LLC (sole proprietorship as far as IRS is concerned) and file a 1040 and Schedule C, I am my business and my business is me, all you need to know is which ones are business expenses and which ones are not.. why over complicate things? I just need to know how much money I need to make to actually survive, pay taxes, AND Net a profit, right? That is my budget's purpose, not to confuse me or complicate my life. And those were my catagory totals, I have it broken down further, I know E&O is deductible & auto insurance is not (at least if you take mileage)..

hey man,
be careful..
you can only spend 10-20% on marketing
and 10% on expenses...

So far unless you projected to make 140k
you cannot spend 6,000 a month...

A great book to read is the millionaire agent by gary keller..
he breaks down how much you can spend
based on your gross commissions..

It sounds like you are already spending too much.
I earn over 200k..and will only spend 5,000 a month total

this includes,..all my expenses,marketing, mortgage, car bill, gas bill, mailings, websites etc.. everything.

its called red light ,..green light..

if i earn more..only then can i spend more.

good luck

Once again I agree with Lindy (hope that is OK to use - I was nicknamed Pine here and it stuck).

The Millionaire Real Estate Agent and the subsequent books by Gary should be a must read - I know some CP agents, besides Lindy, that use it like their business bible.

But still - you should have had 6 months worth of personal expense and businesses expenses set aside to start comfortably - but that doesn't mean all the bells and whistles - that means 6 months of what it takes you to stay in the game.

I'm averaging around $1,200/mo. in business expenses but I take every little expense I can find. Kind of embarrassing b/c from what some of you are posting, my expenses are apparently too high. Are you all including any State and Federal Income tax in your equations?

Here's a basic general list of my business expense categories:

Office rent, phones (2), internets (3), websites (2), domain names (6), electronic forms, advertising (3), marketing, association dues (5), lockboxes, keys (many), licenses (2), insurance (2), continuing education, professional reading, office equipment, business cards/badges, materials, vendors, postage, Fed Ex, Mailbox, office supplies, meals, gifts, taxes (3), tax preparation, other fees, signs/riders/frames. And, I'm sure there's more.

its a learning curve..I didnt watch this last year and expenses ate up my profits..
now im a hawk

I'd put 2k or more on mine for the month. If I bagged REMAX I would be where you are VA. I thinnk your numbers are on. My big ones after REMAX are MLS fees by 3, gas, advertising as you described.

I don't have any office fees other than about $45 / month for Realtor.com enhanced listings and a contact management system. My main expenses are: my website hosting and domain names, whatever tech items I want to buy for work (like I just spent almost $2000 on my new camera, lenses, flash unit, etc...which I do use mostly for work) I use my broker's signs. My other expenses of course is the gas/maintenance on my car. I buy a few brochure boxes, printer ink/office supplies. Much of my mailing is paid by the brokerage (not farming but mailing stuff out to clients).

WOW thats amazing..but if thats the case and you not counting desk fees..then you must count your split..thats an expense..cause its not profit and a cost of doing business..
so if you made 100k- and you on a 70-30 split-
that $30,000 given to your broker goes in the expense column..
Net is Net to us..after all expenses..

My Gross this year will probably be around $277,000

but thats not accurate..cause my total expense is about 60k.
and in flat fabout another 15k to my broker..plus 1200 a year in desk fees...

so my net will be closer to 200k..BEFORE taxes..

when I take into consideration my gross, that is after my split. I don't count the split as an expense because it is nothing I ever see...

so when if I say I made 96,000 gross, that is before expenses and taxes but after the split -

I forgot I have a few services I subscribe to - with nominal yearly fees, like flickr pro, realbird...but really I keep my expenses down. I don't even pay for google adwords.

so even though my split is not attractive to some, I am more than satisfied for what my broker gives me in return for that. I would not want to work at any other local office because my broker is about the only one I feel I can trust and who runs the office in a way that I think is professional and acceptable.

when I call other offices and am told I can't make an appt unless I talk to the agent, or nobody answers the phone at 2pm on business day, or nobody answers the phone to make appointments on a Sunday morning...or I talk to the agents and hear what their broker does/doesn't do...I thank my lucky stars to be with a broker that "gets it."

A 80% or 90% split means diddly to me if much of that profit goes back out the door for stuff like signs, lockboxes, and if it means that i have to make all my own appointments for showings on my listings and there is no receptionist to answer the phone when customers call. I'd rather take less profit and benefit from what he provides.

I pay for google adwords,..in fact I will pay for anything the brings me back a 5-1 investment..

I dont care if I spend a million in marketing..if I can get back 5 million..
I mean after all thats how real businesses operate..

check your bank account..investment account, checking account..stocks etc..

where else would I get a 500% return on my money?
last I checked 20k in a 2 year cd brings back $400

20k in the stock market..returns $1800 if you lucky..

I don't have to pay for adwords cause I already rank high for the words I want and get more leads than I can handle myself. if I didn't rank well organically I would pay for them

But Perky, association dues, MLS fees (I forgot that on my list), continuing education, license fees, any mailing that your broker doesn't pay, rider name signs, your cell phone (unless you only use an office phone), electronic key for lockbox, Federal & State taxes - these are all your expenses unless your broker is paying for them.

Even when I was under a franchise, I still had expenses. Expenses are whatever it costs you to do business.

oh yeah, I forgot those. lol. I pay $90/quarter for MLS dues, the yearly dues...my education is every other year. Taxes were implied. Electronic key costs me $214/year. Many of my listings don't have signs cause they're in communities that don't allow them, so I haven't bought riders in a long time.

I guess the point I was trying to make and didn't do a very good job of it, is beyond the standard basic expenses I don't have a whole lot. My biggest expense is tires and gas for my van!

well in my expenses i include my mortgage too..I need hard facts on whats left..and my mortgage is an expense..
my expenses includes my cell phone bills,..gas.. car notes,the works..mortgage, mls fees, education cost..coaching cost..
signs, my websites, my marketing, mls fees, brokerage fees, everything..just like the op..
thats smart..
you wanna know what goes out the account everything total..
I suspect lots of realtors dont make a profit at all..
cause they count only half they expense..

I don't have a mortgage, thank God. we didn't listen to people who said "keep your mortgage and invest your money". when I inheritated a small sum from my parent's estate, the first thing I did was pay off the mortgage. I have no mortgage and no car payment and only a teeny bit of debt (less than $5,000 in credit cards.)

If I can't pay cash, I go without. Will have those cards paid off by the end of the year and I will be debt free. It's a wonderful feeling. And my house is worth double or maybe a little more than double what we paid for it, and that's cool too.

I have very few expenses and that's the truth...esp. now that I don't have to pay a babysitter for my kids.

oh wait, we have a really small home equity loan but hubby pays that. so I kind of forget about it, lol

i'm pretty absent minded in this thread. you'd think i was drinking or something. lol

"I don't have a mortgage, thank God. we didn't listen to people who said "keep your mortgage and invest your money".

I disagree with this statement.

As low as interest rates are having "trapped equity" is not the best use of your money.

1,000,000 today is not going to be the same as it is in 20 years.

That's why the right leverage is critical.You want your money growing and outpacing inflation.

With an investment you get principal pay down,appreciation,depreciation for taxes,and cash flow if you purchased right.

You keep 1031 exchanging the proceeds and then your heirs inherit with a stepped up basis and all the deferred gain taxes are wiped out.

This is how the rich get richer by growing cash flow and keep trading up.

If you just have money sitting around collecting dust it is the wrong strategy.

Investing in treasuries and cd's that pay miniscule returns that don't keep up with inflation is another loser as well.

Having your house paid off is not the way to long term independance with trapped equity.

mwhahaha, what are you buying? Just threw $6,000 in my Scottrade account, bought 2,000 shares (margin acct) of Bank of America during the 'debit card fee' fiasco at 5.50.. cannot wait to see where it is 1 year from now!!! IMO it is still a steal at $6.50 and probably at $7.50 or really anywhere under $12 in the long run..


In terms of my Original Post where you said I'm spending too much on advertising, that $1700 per month number was figuring an increase in $1100 with a 5,000 month postcard campaign.. which I think should have a significant ROI after a few months considering the average sales price of the homes I'll be mailing is well over $500K... I just need 1 deal a year to break even.. Right now though I'm only spending $600 or so on advertising lead gen and I see how it pays off which is why I want to ramp it up.. I know trainers talking about buying the market, netting less.. BS if you are are getting a good ROI why not buy the market? The biggest agents market the most and you can't tell me people grossing $3M+ in commissions are spending it all on advertising.

yeah, my electric bill, my gas bill all that is included in my total expense..im the sole provider..so no spouse picks up the slack..
my kids karate, my duaghter dance lessons are all included,..i keep that number in front of me..so when i dont feel like working..
the only thing not included in my figures are my vacations i take with the kids,.. and those expenses..we do alot of stuff..10k this year worth of stuff..i dont count it in..but i track..and keep aware of it

Ahhh grasshopper,..you have the right idea..

However..

you must play red light ..green light..

its the millionaire agent way.

Have you read the book millionaire agent by gary keller..its like the bible for top producers...

the miilionaire agents that are profitable play red light..green light.

market heavy..stop..get a commission..green light..market..

You can disagree all you want Super Realtor - it's not your money or your livelihood. We almost lost our house when my husband, the sole provider of income for our family, was seriously injured and out of work for several weeks.

We won't be in danger losing our house if we fall on hard times again. I have never been comfortable with debt or with risk. Ever. And I never will be.

Not everyone wants to monetize every aspect of their lives. Leaving equity untapped might be a sluggish business decision, but most folks do not want their homes at risk in a leveraged state. It is stressful and requires maintainence and disciplne. In short is adds risk.

If interested in doing this on a low risk level you could borrow against yourself. Assuming you have a mortgage and want to pay it down, establish your own account for overage principal payments designed to balance out your owed principal. Use it as you wish or not at all. Why allow the bank to have principal payments early?

Once the balance of the account matches the principal owed, you will have a choice to make though. At that time you can balance your tolerance for risk and act from there.

That's my whole point in that if something happened to you or your spouse then the income is gone.

Even with a paid off house they only let you refi out to about 75% these days.

So that money would be gone quick if you needed to tap it.

What I am doing is making investments and growing my portfolio to the point where I can live off the cash flow and then some.Then my closings are icing on the cake.

I certainly respect how you want to live and your right it's your choice.I was just throwing out another way for people to think about planning for the future.

I hope your husband isn't in a skilled trade profession that involves labor.As you get older the body wears out and the income and productivity goes down unless you can work up to foreman etc.and just direct people.

I have seen it happen to others before once they reach a certain age.

Our house we bought 7 years ago is actually way underwater.So all I care about is the monthly payment.

My brothers house is paid for and he owns a used care dealership.I guess it's all about preference.My mother-in-law's house is paid off as well.

I would tell her to invest the money and get it to grow.The thought of doing anything with it scares her to death so it sits diminishing by the day in value.

We paid our house off this year (15.6 yrs of payments). Our interest rate was something like 6.125%. Returns on investment haven't been that great and the interest deduction was virutal nil at tax time. I will say hubby is much, much happier, feels more secure that the hugest debt we had is now gone. We pay cash for large expenses, although I woudn't be surprized if, when he needs to trade in his motorcycle (he commutes with it b/c the MPG is extremely good and motorcycles get free, underground parking (a $350 value - would cost him that much to vanpool but vans don't go his way/his time)...so I wouldn't be surprized if he finances the new one for one year - just to keep the credit score up and alive. I'm happy the house is paid off. Despite any good intentions you all have of making your money grow, it could be easily lost too. I just posted this week that I lost $20k this quarter. Normally, I would say I didn't lose something that I never had, but the economy is now dipping into my principle, so, yes, I LOST $20k.

The one thing you always want is a roof over your head. You can't pay your house off if your investment are down, down, down. So, I'm in full agreement with Perky (and Suze Orman) that paying the house off is the way to go. At least, with the house paid off, it's $1,258 we DON'T have to have every month to pay a mortgage payment when we retire. Take out the insurance and r.e. taxes we still have to pay, it still comes out to roughly $12,000/year we DON'T have to worry or wonder where it's going to come from at retirement time.

I agree if you're young and just into your mortgage, leverage may be a good thing, but, many people out there re-financed and cashed out on their homes to buy depreciating junk or just plain junk, and some, even another house (that leverage thing). Those that cashed-out deserve to be hung to dry. It's time to pay back the money THEY borrowed but they don't want to. Why so? Greed, just plain greed. It'll get you sooner or later.

I'm sorry, but I don't categorize my personal expenses with my business expenses. I rarely buy new clothes - only as needed, not wanted. I 'group' all my errands together in one trip per week. I search the cheapest gas prices that are along on my errand route. I stock up on food when it's on sale (got lots of Del Monte canned goods for 75 each - what a sale). Just loaded up on Dr. Pepper (one of my few vices besides a smoke & Mich) at 99 cents for two-liter bottles (got 6 each at two stores on my errand round). I use coupons whenever I can.

I wait until my marketing postcards (design yourself) are on sale (usually 50% off once a year) and I stock up at that time. Buy stuff at Staples when it's on sale.

We try to live like the Millionnaire next door. We live in a decent neighborhood (acreage and homes averaging around $350-525k presently in my neck of the woods). Our truck is 11 yrs. old this year. We have an old MGB but he only paid $1k for it but it runs! I drive 'used' cars, although hubby says the way we keep a car for 10+ years that maybe the next one should be new. Told him we'll buy it the year after it comes out when some schmuck is unhappy with their car so we don't pay for the instant $5,000+ depreciation when you drive it off the lot.

We're just not picky about some things because we don't care to impress someone (we're more impressed with bank accounts). My thinking maybe be wrong (but I don't think it is), but when I see alot of people around here driving NICE vehicles, in a BIG a** house that's got to cost $500-600/mo. to heat & cool I really wonder about their true financial situation...I have a relative who likes to impress, private school for kids, school trips for kids (we're talking over-seas trips via the school), music lessons, dance lessons...she's living high on the hog...but I seriously don't think she can really afford to feed the hog...especially when grandma paid for the school books this year!

It all has to do with buying right for investment property.

For every 1 investor that buys right I can show you 8 to 10 that are idiots that overpay or talk themselves into marginal deals.Then when something goes wrong they go into a negative cash flow position.

When you are multi-millionaire like Susie is you can invest in marginal returns to outpace inflation.

When you are dealing in smaller dollars you need a maximum return to get to where she is at.

Have you thought about taking some money out of the house and buying a triple net lease property?? Easy mailbox money from credit rated tenant.

You can get a loan only putting 10% down because those lenders will take higher ltv's with a credit tenant with less risk.You can hit 7 to 9% annual returns on your money.

I have a few vices, mainly collecting camera stuff (but I use that for business as well as pleasure, 95% of the use is for business, I'd say) and for personal entertainment I buy movies and books, lol.

Like VABroker, we prefer to live a simpler life - yes we have some nice things but I could also very easily slip into a truly rural hick lifestyle if needed - I don't strive to impress anyone. My van is a 2004 and is closer to 200,000 miles than 100,000 - and I expect to easily get another 50,000 - 100,000 out of it before I retire it. I don't believe in showing off, really (though sometimes, I really do want to buy a hot sporty convertible or fancy schmancy Harley or something, but then it passes, lol).

I just want to live comfortably and am grateful for everything the good Lord above has given me- whether it be outright gifts (like a 2million dollar buyer out of nowhere) or whether it be the ability to do things - I'm thankful for what I have and am not interested in being Richie Rich - just want to be comfortable. And be able to buy a camper to travel the country with one day. lol

I think of all the people taking risks in the 1920s, trying to "imitate" the rich people - until October 24, 1929 that is...

No thanks - I'm content to live safely, and comfortably...and teach my kids to do the same.

Psst, to go back on topic, I don't count my personal expenses as business expenses either.

I count the newspaer as a biz expense. I look first to the foreclosures everyday. I also nned the RE advertising section on occasion for reference. I also look to the transfers.

My son reads the comics though. We clip some coupons on occasion.

i definitely live below my means as well..i drive a ford explorer i live in a 250k home..

my business expenses about 3k-2k of that is marketing-
1k on core expenses-copies,car note,cell phone,websites,signs,desk fees, mls fees, lockboxes,gas,tools..
my household personal expense about 2k-1200 mortgage
then -food-electric-gas

therefore the 5k number

i need to know the 5k number..'

because as mike ferry calls it..

my minimal survival number..

but i do have a nice bank avcount with about las i checked 10 months reserves

if i had to survive i could shed 2k in monthly marketing expense
and be able to survive for over a year..liquid

i usually dont keep this much month reserves liquid..

but this economy makes me nervous..it gives me peace of mind..

although my mentors think its stupid..and i should spend more to make more..but im holding my ground..

i have substantial investments but i dont touch them
and they are not liquid..down big time but im 32 so at least 20 years away from retirement.

im ultra frugal..

trust me i was forced at gunpoint to do the dance and karate lessons, and some of the vacations..

either that or sleep on the couch..