Whether it’s budgeting, taxes, or expense management, real estate agents need to pay close attention to financial matters. Chris Heller outlines five financial factors you may be overlooking.
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Keeping in order finance can be very difficult for anyone; there’s a lot to put together, and it can get very stressful and disorganized at times – especially if you have to do everything yourself – from creating and sticking to a set budget, filing taxes, tracking expenses and probably auditing your performance over a period.
This represents even more tasks for an agent, especially those who manage their own brand and sometimes have to be their own. accountants.
There are costly financial mistakes that agents must avoid if they are to grow their business for the long term. Here are five of the most common financial mistakes made by agents. Whether you are a new agent or a relatively established agent, you should avoid them.
1. Do not separate your personal account from a professional account
This problem is particularly common among freelancers immovable agents who run their own business; this does not mean that the other agents are not also concerned. This financial error is due to the difficulty of keeping two separate accounts and auditing them.
More so, it is difficult to completely separate personal finances from those of your business, which is why you still find many agents who use one bank account for everything – business and personal. While it might seem easy to keep all records in one place, it’s even easier to track and verify your expenses while maintaining a separate business account. In addition, the declaration of your taxes is facilitated.
In addition to maintaining a separate bank account for business, you must also maintain a separate card that will facilitate your audit by the IRS (Internal Revenue Service), which a separate account cannot do. If you don’t keep separate accounts, you’re not helping your real estate business grow, as you may find it too easy to dip into your business funds for personal use.
2. Not having or sticking to a budget
It’s a no-brainer, but a lot of agents still don’t buy in, surprisingly. Not just single agents, but every businessperson should know that avoiding this financial mistake is key to scaling any business. Your the budget is the basis of your finances. What do we say? A budget is the clear presentation of your business expenses; therefore, you need to correctly determine how much income your real estate business needs to bring in to cover operating expenses while making a substantial profit.
Not having a budget and/or not sticking to it is a lack of adequate preparation for your business trip, and you must avoid this! You have to make the mistake of not using accounting software to map planned expenses by month, distinguishing between fixed and variable expenses. In doing so, you have just learned about the peculiarities of the particular period of the real estate market.
3. Subscription to all property management tools
It’s more involuntary. The question is, “Are you really using everything you signed up for?” It is very easy to subscribe to platforms that offer any subscription for one service or the other. Most real estate tools like RCMP, websites, analysis systems, coupling systems and applications will be billed monthly. Now imagine paying for everything and not using as much – a waste of resources.
A 2019 survey conducted by Warstone Group out of 2,500 subscribers revealed that each year approximately $3,000 is spent on subscription services. All you have to do is prioritize what you really need in your day-to-day real estate logistics. If you have a lot of subscriptions, do well to do a thorough analysis of what you are really using and what you are not using. Don’t spend money on services you can’t live without.
4. Not saving when the market goes down
It is simply wrong. As with any other industry or economy, there are down times, times when sales slow down. Now, as an agent, you don’t want to make the big mistake of not saving up to cover “rainy days”.
The real estate industry is very lucrative, no doubt, with lots of money to be made. But many agents forget that the market also crashes – major economic decisions can affect it too. Moreover, agents do not immediately receive their commissions on sales; That takes time.
Your business doesn’t have that time; it must continue to function. How do you do that? Economy. The importance of saving cannot be overstated when it comes to dealing with unforeseen events, such as when business slows down and you have to manage logistics like dues and day-to-day operations.
The consequences of this financial mistake are fatal, as you could quickly find yourself in debt or losing your viability as a real estate agent. I’m sure you don’t want to suffer that fate. So, the order of the day should be to save as much as you can.
5. Not preparing for the quarterly tax return
Most likely, you run your own business as a real estate agent. That’s why the Internal Revenue Service (IRS) classifies real estate agents as self-employed, meaning they must pay taxes quarterly in addition to filing annually in April. The costly mistake agents make is not preparing their businesses to make these payments. The quarterly payments you make will cover Medicare, Social Security, and federal and state taxes.
Part of preparing for these payments is determining what tax bracket you are based on your estimated taxable income for the previous quarter. You need to stay organized and get accurate management of your income to prepare your taxes. You don’t want to end up paying taxes that you don’t prepare your business for.
These financial mistakes may seem too gullible to make, but they cannot be completely eliminated. You don’t want to be forgotten. Write them down and you’re ready to put your business on the path to sustainable profit.