How to Track my Income and Expenses in My Real Estate Business
Congratulations… you’ve passed the licensing test, and you are officially now a real estate agent!!!! Amidst all of your excitement on making this official, you are also likely somewhat overwhelmed with all of the STUFF you have to do to kick things off on the right foot. One of the most common conversations I have with real estate agents is that they know they need to track their expenses, but they have no idea where to even start. Help me please!
This is actually one of my favorite meetings to have with agents, this means they are proactively thinking forward, and trying to make sure they have all of their hypothetical ducks in a row before things get crazy insane busy for them! I am going to give you 3 tips today to help this overwhelming task seem a bit more manageable.
- Pick the right platform to help you
Now, I am assuming you have a separate account you are using for your real estate activities (if you don’t, check out my blog post/podcast on this exact topic! . Doesn’t have to be a business account, if you operate under your name and social, this can be just a separate personal checking account you use for business activities. You have a few ways you can keep track of everything. QB is wonderful, this can be done affordably because you can use the online platform and just pay the monthly subscription fee. This will link to your business bank account (business only, not personal use accounts) and you just have to tell QB where to put it. Was that an MLS fee? A closing gift? You tell it that, QB will do the rest. There are some competing software’s out there that are geared specifically to real estate agents, whereas QB is much more universal. These do the same thing, but each platform will have slight differences. The important thing here is to make sure it links to your bank account. I love Realty Zam! Now, if you are super green and are still counting every dollar that goes out of your bank account, you can always use Excel and manually type in each transaction and give it a class. This is as simple as this:
|7/2/2020||Amazon||Client Closing Gift||$50|
|7/5/20||Supra Fees||Dues & Subscriptions||$10|
This is fine when you start out, but as you get busier this WILL take lots of time, you will get behind, and you will stress come tax time. Which option you pick is up to you, but the most important thing is that you select the option that works for your budget AND that you can commit to. It does no good to pay for QB if you won’t use it. Whichever option you can stick to is the way you should go. If you know time will be a problem for you, don’t do Excel. Pay for QB, then use it. If you have free time right now and want to save some money, start with Excel. If this gives you a headache just thinking about it, pay someone to keep your books for you.
- Track your miles
We are NOT going to go into the different ways you can write off your vehicle expenses in this article, never fear, I will do another one on this topic by itself! You need to be tracking your business miles, and we will leave out all the rest for this articles purposes. This is likely your biggest expense, and it is also your most audited expenses (and most loosely tracked). If you are old school, you can keep a notebook in your car and jot down by hand every business mile driven in a pen and paper log. This should look something like this:
|30,000||30,025||1234 Sky Blvd||Jane Doe|
|30,042||30,079||77 Sold Rd||John Smith|
Yet again, this needs to be something you can stick to. If you are more of a technology person, there are some GREAT app’s that track this for you. We love Mile IQ. You then simply “swipe” when you are driving for business, “swipe” when you stop driving for business and start doing personal driving, and the app does all of the rest. You can go in and add notes to the transactions, and the app prepares a great summary, as well as the detail for the year for your records. This is fantastic! If you are going to pick one area to be super diligent, let this be it!!!! You drive a lot, and should have the support to back it up (should you ever need to prove it). If you ever get audited with no mileage log, and you have to recreate it (by looking at ever single appointment for an entire year) I promise you will be hating life.
- Have conversations with you tax pro
Keep a listing of questions for your CPA/Tax pro as you have them, too often our agents forget them when they come in. Have open conversations with your pro, frequently, to ensure you are doing the right things and making the right business/financial decisions. There is a LOT to running your business, and it is overwhelming in the beginning. If you don’t ask the questions, or schedule the meeting, we don’t have the opportunity to help you. Many things can happen by having an open relationship with your tax pro…. We can (a) save you $$$ (b) put your mind at ease that you are doing the right things (c) bring up financial info you may not know you need to know that affects you (d) help you structure yourself to be set up for your goals… amongst other things. However, we can do none of this if you don’t reach out. Too many times agents use a DIY tax program because they see that as a space they can save a few hundred bucks. Pay for the tax advice, hopefully we can save you enough money to cover it for you… but if not, we can help you plan and run your business…. A DIY tax software cannot.
As always, please reach out to me if you have any questions on YOUR business, every one is different! I would love to learn more about you, how you run your business, and how I can help you to transition to your next level!
I also did a podcast about this topic. You can listen in here.