Cost control is a vital skill for budgeting especially during the initial phase of launching a real estate business. As a new real estate agent, I must deal with the unpredictability of how much and when I will earn. Different jobs guaranteed regular paychecks with tax deductions, so we know what we can spend. But as a real estate agent, I will not receive paychecks, tax withholdings, or retirement savings. Reducing my real estate business expenses will surely increase my chances of success.
Here are some real estate business expenses management tips that will help you budget and manage your commission income.
I will maintain a healthy cash flow and maximize my tax deductions by properly tracking my real estate business expenses. In this blog post, I’ll outline the different types of expenses real estate businesses and provide advice on how you can manage them best.
Common Real Estate Business Expenses
Common expenses consist of any money your business spends in its efforts to generate revenue. I usually pay them directly from business funds. So, the common expenses are easy to track and I record them in my general ledger. Some examples of common expenses include:
- Advertising expenses – websites, mailing lists, print advertising, online advertising, promotional materials, and logo clothing
- Professional fees – bookkeeping, accounting, and legal fees
- Business travel – cab, bus, train or plane fares, tolls, and parking fees
- Insurance – health insurance, errors and omissions insurance, business liability insurance, and business equipment insurance
- Professional dues and fees – multiple listing service dues and dues paid to the local Chamber of Commerce, realtor associations, and real estate license renewal fees.
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Special Circumstance Expenses
To be very specific, I don’t pay special circumstance expenses from my business funds. The nature of special circumstances expenses is more challenging to record in my general ledger. I will need extra documentation too, to deduct from my taxes.
Two examples of special circumstance expenses typically associated with real estate businesses are home office expenses and vehicle usage.
Home office expenses are deductible but I need to first make sure my business meets the standards set by the IRS. If it does, I will then need to properly calculate the deduction.
The cost of driving in the course of running your real estate business is also deductible. But only certain types of drives are deductible so tracking your mileage is critical.
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Technology Role To Help Manage Real Estate Business Expenses
Real estate agents have a more difficult time managing business expenses than other professions. I recommend mobile apps and cloud software to make things easier. Here are my further proven suggestions:
- Receipt app – Instead of stuffing receipts into my wallet,I just take a photo of it on my mobile phone. The receipt app will send the details to my general ledger.
- Cloud document storage – I want you to get rid of that filing cabinet once and for all. You can store your documents in the cloud so they’re out of the way but still accessible.
- Mileage app – I can track the exact number of miles I drive for business. The app will update my records so I can be ready on tax time.
- Cloud accounting software – I need to record my business transactions in my general ledger. Cloud accounting software connects the apps and softwares so that the records can get automatically updated.
Business Expenses Management is The SuccessKey
Real estate business expenses management for new real estate agents requires organization and discipline. Being in business for myself has its benefits, but I should pay close attention to my financial situation. I should create a monthly budget and follow it. Budgeting and carefully managing my expenses will help keep me and my business afloat until the commissions roll in.
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