I’m a Realtor – Do I Really Need a Bank Account?

Andrea Dillon, CPA, CTRS Real Estate Professionals

While to some business owners, this may seem like a no brainer, we discover quite a few of our new real estate agents that come in for financial guidance are not actually using a separate business checking account for their real estate business. Now, there are really two types of agents that we speak with…

  1. The new agent. They don’t have any formal business structure, they are operating under their name and social security number. They may not have many closings under their belt yet, but they are making their connections and learning as much as they can so they can get ahead in the industry. They likely still have a day job, or a side hustle, to help pay the bills while they are making the transition to their new career path.
  2. The seasoned agent. They have been doing this for quite some time, they have lots of happy, relocated clients, and this is their full time career. They know they are making money, but are not sure they are doing everything right, financially speaking.

Obviously, there is a third option, the agent who is not new and feels like they are rocking their financial game, but this blog will not focus on them.

Does one of the scenarios described above sound like you? In BOTH options we have met with agents who are running all income and expenses through their personal checking account. This account often times has their spouse’s income direct deposited into it, this is really their only daily checking account, and they pay all of their real estate expenses out of it… as well as their mortgage, kids daycare, salon beauty bills, gym memberships… in other words… all of the “things”.

This stops now.

Whether you are a seasoned agent who has never gotten the financial guidance you need, or a new agent that is still getting your feet wet, you are running a business. One of you may be making more money or have more transactions every month, but both scenarios above are businesses. You need to start treating it like one. That starts with giving it its own checking account.

We are NOT going to talk about entity structures in this post, none of you want me to go off on that tangent! So, at a very top level, if you are operating as an LLC or PA, you likely have a business checking account already. We do occasionally see clients who set up their PA, but never notified their broker, so they are still in essence operating personally, but the vast majority of you have set up a business account. The focus now is for those of you who are operating under your name and social security number… and have one hot mess of a conglomerate bank account.

You will not be able to open a “business bank account”, because you don’t have a formal business set up. However, you can absolutely open a personal bank account, most banks will even let you “nickname” it on your online banking so it is easy to tell apart, and use that account just for real estate activities. This means your commissions go into this account, and you pay any real estate expenses out of this account. You have a business, it should have its own account. This will save you so many headaches at tax time (I hope you are preparing financials more often than once a year but I am going to speak to those who are not). Amazon, hello! Was that a business purchase? Closing gift or new blender? Short of looking up every Amazon purchase, who knows? Target, same struggle. Before you know it, your eyes are spinning and you are truly just guessing. If you use your one bank account for ALL real estate expenses, this takes the guesswork away. You may not remember if it was yard signs or a pretty doormat, but you know is you swiped THAT card, it was for business.

The other thing about your current strategy of guessing? The IRS doesn’t like it. Let’s hope you don’t get audited, but let’s face it, many people have to deal with the IRS at some point in their lives. You don’t want that to be when you have minimal support for proving what expenses go where.

Make your life easier. Open the business account, then use it just for that!

You may also listen to my podcast about this same topic.