Bill Thompson, REALTOR® : A Budget for a REALTOR®

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A Budget for a REALTOR®

By: Bill Thompson, REALTOR®
Friday, May 25, 2007 4:38 PM

Would some of you that live wihtin a buget as a REALTOR® please share the percentages with us.

In my previous career we had management specialists that would give us numbers for well run offices. They would provide numbers like this:

Material expenses        29%
Employees                  15%
Occupancy (Rent, etc.) 6%
Marketing                      3%
(etc.)

You get the idea. I was in that profession for about 25 years and was most productive and felt the most in control when I began following a budget like this.

I have yet to see budget figures like this for Real Estate.

If there are any experienced brokers or agents out there that would care to share, I'd love to star formualting a reasonable RE budget.

Comments

Member Since '05	Linda Reynolds said: These are percentages of your projected GCI. I created a spreadsheet that calculated them based on the GCI I put in. I got these formulas from a business development class for Realtors. Salaries 7% Lead Generation 10% Occupancy/rent 5% Technology 1.5% Phone 1.3% Supplies 1% Education 1% Equipment 1% Auto/Insurance 22% This gives you a little wiggle room but if you stay close to this budget you will be doing well. Hope this helps May 25, 2007 4:06 PM
Member Since '07	Bill Thompson, REALTOR® said: Thanks Linda, this is exactly what I was looking for. Tell me more about the "business development class for Realtors". Any other similar or very different budgets out there? How many of you actually try to live within a budget? I know it made things much easier when I finally sarted living this way in my past career. Otherwise, you can be very busy and actually producing at a high level but have less than you should to show for it. May 25, 2007 4:15 PM
Member Since '06	Joe McCart said: Hey Bill, I use the Star Power guidelines for my business and all seems to be working out well. www.GoStarPower.com you will then need to register, ( you can also sign up for free daily email scripts). Once registered select RESOURCES from the tool bar, from the drop down window select Resource Center. There you will find an abundance of resources, scroll down to Business Planning Worksheet. Enjoy! May 25, 2007 4:30 PM
Member Since '07	Bill Thompson, REALTOR® said: Linda, I notice these numbers add up to about 50%. Is this a typical overhead for Realtors? If so here is a typical example of how much of that "fat commission" the average agent actually keeps and income. $200,000 house sells with both seller and buyer having their own Realtor. For this example we'll say the total commission was 6% or $12,000. (Example not intended to set commisions at any given level or imply that any given commision rate is standard, usual or in any way price fixing in nature.) Each side then gets their split of 3% or $6,000. Each agent is a sales person and has a 70/30 split with thier broker. Thus each agent gets $4,200 of which 50% goes to the above mentioned overhead. That leaves $2,100 for each agent. That is just about 1% of the sales price of the home. We are not as greedy and the media would make us out to be after all :) Oh, oh! That $2,100 is before Uncle Sam takes his cut in taxes. Okay nothing but $1,000,000 plus properties from now on and no dicounting for me! ;) May 25, 2007 4:31 PM
Member Since '07	Bill Thompson, REALTOR® said: Hey John, I just did everything you suggested and those are very helpful numbers. They make a great deal of sense also in the way they change the budget for different gross income levels, some expenses are fixed, others variable, etc. I recommend this site (the "Business Planning Worksheet" at least) John talks about to every Realtor. Knowing and trying to follow these kinds of numbers is very empowering. Great stuff! May 25, 2007 4:56 PM
Member Since '05	Lonn Dugan said: Good question Bill - and Interesting Response from Linda: The only way we learn from each other is to be open and honest, share... so here goes.... Numbers on the left below use Lindas formula - but for an agent that makes $100,000 GCI (round numbers are easier) Numbers on right are more like my own numbers. $7000 Salaries 7% $ 12,000 $10,000 Lead Generation 10% $ 7,000 * $5000 Occupancy/rent 5% $ 18,000 + $1500 Technology 1.5% $ 2,000 $1300 Phone 1.3% $ 3,000 $1000 Supplies 1% $ 1,000 $1000 Education 1% $ 3,000 # $1000 Equipment 1% $ 2,000 ## $22000 Auto/Insurance 22% $ 7,800 Interestingly, my total costs also come to about 50%. My splits are 100% at RE/MAX so.... I should be netting 50% of GCI... Before Taxes. At least, that is the plan. * Lead Generation means advertising and marketing - things you do to make the phone ring, including printing, postage, P2, etc. : ) Last year I was spending $3000 to $5000 a month on PRINT, newspaper, and homes mags. NOT THIS YEAR !!!!! Sales are going up, in spite of cutting print. I still do online packages with P2, Top Producer, Realtor.com, (but I get a lotta leads from my free ride from Google due to SEO!!!!) + Occupancy/Rent for me includes RE/MAX Desk fees. # Education includes board fees, dues, two states - and Con Ed ## Equipment means two new computers this year - spread investment over 3 years til replacement. May 26, 2007 7:38 AM
Member Since '07	Bill Thompson, REALTOR® said: Thanks everyone! This was very helpful! June 8, 2007 11:37 AM