Latest Articles
Brokerage, Consumer News, Residential Real Estate, Education, Finance
November 01, 2018
What's Your Strategy for Estimating Overhead?

There are various ways to estimate overhead and expenses.
A Question from the RealTalk Community
A while back, Kathleen Allardyce, a member of our RealTalk Community asked:
"I'm wondering if anyone has a formula they use for estimating expenses or overhead to calculate: Gross Annual Commissions - Expenses = Net Annual Commission. Is there a percent of commissions you can use for estimating?
A dollar figure per side? Can you use an estimating figure, or do you need to use hard dollars for desk fees, etc, then add a dollar figure for selling a listing and working with a buyer?"
Ardell DellaLoggia, a successful real estate veteran from the Northwest responded:
"I use an estimate based on my own reality. I take all of last year's "Buyer Agent" fees actually received, deducting expenses directly related to that sale. An example would be if you paid for a home warranty or gave them a closing gift. Add up the total "net" commission and divide by the number of Buyer Agent Transactions. Do the same on the listing side deducting that house's specific expenses. An example would be, sign up/sign down fees, advertising costs, not the lockbox as that is an overhead/inventory item."
Other Considerations
Only deduct the specific cost of advertising this house, not personal promotion advertising or other houses grouped into the ad. Take the total net commission and divide by the number of listings.
I do my plan based on half of my transactions/sides being Buyer Agent and the other half being Listings Sold. YMMV I round down the final number to account for buyers who don't buy and listings that don't sell. If my buyer agent $ is $4,450 I count that as $4,000 for planning. If the listing side is $3,450, I count that as $3,000 for planning.
Then I take the total number of sides from last year and up it to wherever I want it to be next year. Say that is 40 total transactions. 20 X $3,000 plus 20 X $4,000 equals my annual goal.
Then I do the plan, strategy, action list to meet the goals, etc into two separate plans. One, for achieving the listing goals; and then a second for achieving the buyer agent goals. They overlap a bit where I count on meeting buyers from my listings.
General overhead like buying enough lockboxes to keep a stocked inventory, I do not count at all when doing my business plan as eventually, that becomes a constant. If you are a newer agent, these things are one-time "start-up" costs.
I have taken some classes lately on planning, but the "new ideas" didn't fit my business model. This one still works for me."
A Question from the RealTalk Community
A while back, Kathleen Allardyce, a member of our RealTalk Community asked:
"I'm wondering if anyone has a formula they use for estimating expenses or overhead to calculate: Gross Annual Commissions - Expenses = Net Annual Commission. Is there a percent of commissions you can use for estimating?
A dollar figure per side? Can you use an estimating figure, or do you need to use hard dollars for desk fees, etc, then add a dollar figure for selling a listing and working with a buyer?"
Ardell DellaLoggia, a successful real estate veteran from the Northwest responded:
"I use an estimate based on my own reality. I take all of last year's "Buyer Agent" fees actually received, deducting expenses directly related to that sale. An example would be if you paid for a home warranty or gave them a closing gift. Add up the total "net" commission and divide by the number of Buyer Agent Transactions. Do the same on the listing side deducting that house's specific expenses. An example would be, sign up/sign down fees, advertising costs, not the lockbox as that is an overhead/inventory item."
Other Considerations
Only deduct the specific cost of advertising this house, not personal promotion advertising or other houses grouped into the ad. Take the total net commission and divide by the number of listings.
I do my plan based on half of my transactions/sides being Buyer Agent and the other half being Listings Sold. YMMV I round down the final number to account for buyers who don't buy and listings that don't sell. If my buyer agent $ is $4,450 I count that as $4,000 for planning. If the listing side is $3,450, I count that as $3,000 for planning.
Then I take the total number of sides from last year and up it to wherever I want it to be next year. Say that is 40 total transactions. 20 X $3,000 plus 20 X $4,000 equals my annual goal.
Then I do the plan, strategy, action list to meet the goals, etc into two separate plans. One, for achieving the listing goals; and then a second for achieving the buyer agent goals. They overlap a bit where I count on meeting buyers from my listings.
General overhead like buying enough lockboxes to keep a stocked inventory, I do not count at all when doing my business plan as eventually, that becomes a constant. If you are a newer agent, these things are one-time "start-up" costs.
I have taken some classes lately on planning, but the "new ideas" didn't fit my business model. This one still works for me."

Share this post:

Written by
Saul Klein
Recent Posts
Next Videos
Related Post

Industry
Organized Real Estate - Understanding Infrastructure is Key
March 6, 2019

Industry
Real Estate Business Models - Lesson Plan For The Future
March 6, 2019

Industry
Zillow's New CEO and the Implications for Real Estate
February 22, 2019
https://www.realtown.com/blog/9-Good-Reasons-for-Buyers-to-Hire-a-Real-Estate-Professional-Published
https://www.realtown.com/blog/Dont-Waste-Your-Money-on-a-Website-Without-a Broader-Vision-Publishing
https://www.realtown.com/blog/Greater-El Paso-Association-of-REALTORS-with-RealTown-at-Inman-Connect
https://www.realtown.com/blog/online-marketing-thousands-of-agents-sell-homes-online-and-you-can-too
https://www.realtown.com/blog/smart-realtors-will-factor-in-the-advantage-of-short-driving-distances
https://www.realtown.com/blog/point-announces-eleven-new-listing-syndication-program-implementations
https://www.realtown.com/blog/redx-for-sale-by-owner-lead-generation-service-now-available-in-canada
https://www.realtown.com/blog/staying-connected-with-buyers-and-sellers-after-the-contract-is-signed
https://www.realtown.com/blog/how-to-get-more-foreclosure-cleanup-business-via-free-chamber-meetings
https://www.realtown.com/blog/real-estate-marketing-strategies-can-create-your-own-success-blueprint
https://www.realtown.com/blog/westport-real-estate-a-passion-for-the-positive-in-this-negative-state
https://www.realtown.com/blog/r-e-marketing-strategies-are-you-making-these-deadly-business-mistakes
https://www.realtown.com/blog/how-to-use-solo-marketing-emails-to-generate-high-quality-online-leads
https://www.realtown.com/blog/the-international-brand-lays-foundation-on-cheap-timberland-work-boots
https://www.realtown.com/blog/r-e-marketing-strategies-things-you-need-to-know-to-double-your-income
https://www.realtown.com/blog/why-online-consumers-don-t-respond-to-you-and-what-you-can-do-about-it
https://www.realtown.com/blog/is-buying-the-worst-house-on-the-best-street-really-the-right-approach
https://www.realtown.com/blog/housing-forecast-changed-slightly-due-to-impact-from-tighter-lending--
https://www.realtown.com/blog/corcoran-consulting-announces-jetspring-as-a-premiere-service-provider
https://www.realtown.com/blog/r-e-marketing-strategies-simple-tips-for-creating-your-ideal-income-in
https://www.realtown.com/blog/one-third-of-americans-who-sold-their-home-in-the-past-year-lost-money
https://www.realtown.com/blog/federal-way-finds-new-owners-for-bank-and-government-foreclosure-homes
https://www.realtown.com/blog/crye-leike-chooses-fidelity-national-s-transaction-management-solution
https://www.realtown.com/blog/r-e-marketing-strategies-tips-to-double-your-income-within-your-sphere

2020 Real Town The Real Estate Network