It doesn’t matter how much you make in real estate. It matters how much you keep. It also matters what you do with your capital. In real estate we can often find ourselves in a never-ending cycle of hills and valleys. Times when our businesses are busy and then times when our businesses are slow. Times when our cash reserves are high, and times when our cash reserves are low.
Taking a simple approach to budgeting our expenses helps smooth out the hills and valleys of the real estate business.
Pay yourself a salary not a commission. In many sales industries it is common to have a “Draw” amount. This is an amount that you are paid regardless of your level of success.
The process is simple.
- Set yourself up on a weekly, bi-weekly, monthly salary. A set amount of money that you give yourself and your family to live off of. When your sales volume is high you continue to give yourself the same amount of money as when your sales volume is low.
- Top Ups. At the end of each quarter, If there are capital reserves, you top yourself up with no more than 30% of the reserves.
- At the end of the year you may decide to give yourself a bonus.
Pay your taxes. Do not under any circumstances forget to pay your taxes. It is often easiest to send your tax dollars directly to the CRA rather than keeping them in a separate bank account. There are easy equations to identify how much you should be sending from every check sent to you.
It’s unfortunate that a lot of financial hardship that REALTORS© face is self-inflicted. All too often, we hear and experience agents who have failed to plan for taxes and end up in a CRA debt situation. So, pay your taxes! Both HST and income tax.
Dedicate a portion of your earnings to marketing yourself and future listings/buyers. It’s often easier to track our dollars and cents in the form of percentages rather than in dollar amounts. For example, if we’re projecting that we’re going to make $100,000 a year in gross income and we budget for 10% of our earnings to go to marketing, then the budget for marketing would be $10,000.
Don’t overspend. Be mindful of your spending and be judicial in what services and products are important to spend your Capital on. There are a lot of services available to REALTORS©. be very mindful of which ones you choose to utilize. If you’re looking for guidance, consult with your broker, or a colleague.
Review your spending. Remember to look at your credit card statements for recurring costs that you no longer utilize. Those recurring costs add up quickly and they nibble away at your profits.
At Chase Realty we are dedicated to keeping your costs at the Forefront of our minds. We are dedicated to providing the most amount of service or the least amount of cost at all times. It’s with hyper-focus and fixation on reduced overhead that we are able to provide amazing services to our agents at a fraction of the cost of what other brokerages may charge. If you are interested in learning more about what Chase Realty has to offer, contact us.