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Wednesday, March 22, 2023

5 Costly Financial Mistakes Real Estate Agents Make

Whether it’s budgeting, taxes, or expense management, real estate agents need to pay close attention to money matters. Chris Heller outlines the five financial factors you may be overlooking.

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Keeping finances in order can be very difficult for anyone; there’s a lot to get going, 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. in a period.

It becomes even more difficult for an agent, especially those who run their own brand and sometimes have to be their own accountants.

There are costly financial mistakes agents must avoid if they are to grow their business long-term. Here are five of the most common financial mistakes agents make. Whether you are a new agent or a relatively established one, you should avoid them.

1. Not separating your personal account from a business account

This problem is especially common to freelancers. real estate agents running their own businesses; That does not mean that other agents are not also addressed. This financial mistake is due to the difficulty of keeping two separate accounts and auditing them.

Furthermore, keeping personal finances completely separate from your business finances is challenging, which is why you still find many agents using one bank account for everything, business and personal. While it may seem easy to keep all your records in one place, it’s even easier to track and audit your spending while maintaining a separate business account. Furthermore, filing your taxes is made much easier.

In addition to maintaining a separate business bank account, you should also have a separate card that will make it easier for you to be audited by the IRS (Internal Revenue Service), something a separate account cannot do. If you don’t maintain separate accounts, you’re not helping your real estate business grow, as it may be too easy for you to ditch your business funds for personal use.

2. Not having or sticking to a budget

This is a no-brainer, but many agents still don’t stick, surprisingly. Not just agents, but every business person should know that avoiding this financial mistake is key to scaling any business. Their the budget is the basis of your finances. What are we saying? A budget is the clear layout of your business expenses; Therefore, you must correctly establish how much income your real estate business needs to generate in order to cover operating expenses and still make a substantial profit.

Not having a budget and/or not sticking to it is a lack of proper preparation for your business trip, and should be avoided! You must make the mistake of not using accounting software to map anticipated expenses by month, distinguishing which expenses are fixed and variable. While doing this, he only takes into account the peculiarities of the particular period of the real estate market.

3. Subscription to all real estate management tools

This is more involuntary. The question is: “Do you really use everything you subscribe to?” It is very easy to subscribe to platforms that offer some kind of subscription for one service or another. Most real estate tools like crms, websites, analytics systems, matchmaking systems and apps will be charged every month. Now imagine paying for everything and not using a part as much: a waste of resources.

A 2019 survey conducted by Warstone Group over 2,500 subscribers revealed that about $3,000 is spent on subscription services each year. You just have to prioritize what you really need in your day-to-day real estate logistics. If you have a lot of subscriptions, do well to take a hard look at what you’re using and what you’re really not using. Don’t spend money on services you can live without.

4. Not saving in the face of a market downturn

This is bad. As with any other business or economic sector, there are slow periods, periods when sales will drag. Now, as an agent, you don’t want to make the serious mistake of not saving up to cover “rainy days”.

The real estate industry is a very lucrative one, to be sure, with a lot of cash to be made. But many agents forget that the market also crashes: important economic decisions can also affect it. What’s more, agents don’t get their sales commissions right away; it takes some time.

Your business doesn’t have that time; it has to keep working. How do you do this? Saving. The importance of savings cannot be overstated when it comes time to deal with unforeseen events, such as when business is slow and you have to run logistics such as quotas and day-to-day operations.

The consequences of this financial mistake are fatal, as you can quickly go into debt or lose viability as a real estate agent. I’m pretty sure you don’t want to suffer this fate. Therefore, the agenda should be to save as much as you can.

5. Not preparing for the quarterly tax return

Most likely, you are running 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 have to pay taxes every quarter in addition to filing an annual return 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 which tax bracket you are in based on your estimated taxable income for the previous quarter. You need to stay organized and get accurate income management to prepare for your taxes. You don’t want to end up paying taxes that you’re not preparing your business for.

These financial mistakes may seem overly gullible, but they can’t be completely eliminated. You don’t want to fall into oblivion. Keep this in mind and you’ll be ready to put your business on the path to sustainable profit.

Chris Heller is a best-selling author and currently serves as the Director of Real Estate at Ojo Labs. He also serves as an advisor and director of the editorial board for AgentAdvice.com. Connect with him on Facebook and LinkedIn.

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