This is our continued look at real estate agents’ commission paychecks. In the first part, we broke down exactly how a Realtor gets paid. You can see that infographic by clicking here.

In this part we will look at agent expenses and a suggested plan to help you budget commission paychecks.


Agent Expenses

The biggest expense for agents is their vehicle costs. This takes about 40% of their expense budget. They also need to worry about NAR membership and MLS fees to stay in business. Overhead expenses include office space and insurance. Marketing will be a constant bill if you want to grow your business, and technology will be necessary just to stay relevant. Many agents set aside a certain amount to continue their education in this ever-evolving industry.

Although not necessarily a business expense, you also need to factor in income taxes, since your taxes are not taken out by the government with each paycheck. This bill is usually 15-20% of your annual income. Hooray!

Suggested Budget

First, set aside 15-20% for income taxes. For a more exact figure of what to expect, simply refer to previous tax statements.

You’ll want to set aside 12% toward agent expenses, like those listed above. This portion will get distributed differently month-to-month, but expect marketing expenses to be the most recurring.

10% of each paycheck should go straight into retirement. This looks like a high-yield savings account that you can’t touch.

You should have another savings account that you use as a goal oriented fund. This can also serve as an emergency fund in times of… well… emergency. This will merit about 8% of each paycheck.

And finally, you can live off the remaining 55%. This portion pays your bills and day to day expenses.

Miscellaneous Tips

Remember that many agent expenses are tax deductible. Client lunches, car care costs, your home office, and more can all save you money down the road.

Diversify your investments. We all love real estate, but that shouldn’t be your only form of savings. Have a Roth IRA, stocks, and so on.

Avoid debt at all costs. Debt is never a good thing, but commission based salaries make debt an even more dangerous spot.

This is just a suggested budget from HouseHunt, but we recognize case-by-case needs and encourage flexibility with all agent related finances. 

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