Why You Need Financial Help When Becoming a Realtor
If you’re looking for a career path that can make some serious money and can allow you to have some upward mobility, it doesn’t get better than real estate.
Becoming a realtor can allow you to capitalize on your wits, savvy and knowledge to grow your revenue and put people in homes.
However, becoming a real estate agent is still a business and businesses need professional financial advisement to grow and thrive. Becoming a realtor means taking your accounting and finance by the horns so that you can continue to scale and grow.
Simply put, one of the best way to do this is through the help of a financial planning professional. Let’s face it there is a lot to know and focusing your time on what you do best will ensure that your career is successful. Spending years learning tax law, insurance, investments, and estate planning etc. are not the best use of your time.
These tips will break down some financial points to consider, and will illustrate exactly what a financial expert can do for you:
1. Start With the Best and Most Affordable Education
If you’re going to become a realtor, it’s important to start with a solid education in real estate.
For starters, look into the requirements where you live so you can rack up the right amount of training and classroom hours, and learn what you need to do in order to pass the test.
In the state of Florida, for instance, you will need to have a high school diploma, GED or equivalent, and need to have 63 hours of classroom time under your belt before taking your real estate license exam. Today, you can take real estate classes online and on your own time in order to get the credentials that you need.
Make sure that you choose a real estate school that doesn’t just teach the basics.
The best thing you can do is get your real estate education from instructors that teach you about things like finding new clients, managing your money, and staying ahead of the curve of industry changes.
Real estate is a competitive career, so the more you learn and adapt, the easier it’ll be for you to get ahead and achieve some longevity.
2. Manage and Eliminate Debt Whenever Possible
Debt will hamper any business, but with real estate, in particular, you definitely want to make sure you are meeting it head-on.
Creating a sinking fund is way to address debt. This is a fund you contribute to automatically or systematically so that you can eventually use it toward paying down debt.
A lot of people mix up emergency funds with sinking funds. They differ because emergency funds are used for unforeseen circumstances while sinking funds are used more directly and strategically.
Work with an accountant to make sure you are growing this fund in a way that makes sense for you, and that you have a plan of attack for each piece of debt you are carrying.
Since you are likely a one-person shop starting out, the line between personal and professional debt can easily become blurred. Address both with a plan to keep your business light and profitable.
3. Set Up an Operating Budget That Works For You
Your real estate business can’t move forward without a rock solid budget in place.
Be sure that you are operating with clear data and dollar amounts, first and foremost. This way, you are able to manage your expenses and develop a gameplan for you to operate under.
Make sure that you automate your expenses in a way that makes sense, and that allows you to simply streamline your savings and payouts. There are numerous software platforms you can use.
Figure out what works best for your current business model so you can handle matters on your terms.
4. Set Aside Some Savings For Emergencies
It’s important that you also build an emergency fund.
While a sinking fund can be useful, you also need to make sure that you have savings for a rainy day. Choosing a savings account where you can stash your money is crucial because this will be the backbone of your business starting out.
By making sure that you automate savings each week, or on a schedule that suits you, it’s easier for you to grow your real estate business without letting financial pitfalls get in the way.
5. Have a Fund That Can Bring You Some Interest
It’s one thing to have a savings account, but you owe it to your real estate company to also garner some interest.
There are several interest garnering savings accounts and mutual funds that you can deposit money into. By having this sort of arrangement, you’ll be better able to grow your company and be able to pull the trigger on an opportunity that arises.
When you work for yourself, you need to be especially mindful of planning for retirement and other long-term goals. By making your investment dollars work for you, it’s easy to make it through the ebbs and flows of the real estate business.
6. Assist With 1099’s and Other Intricacies
Falling behind on tax information is the last thing you would want to do when running any sort of business. This is particularly true if you happen to work with a number of independent contractors.
You need to keep track of these transactions, and a financial planner can help you do so.
More specifically, financial planners understand the ins-and-outs of the 1099 form and can help you issue them to anyone you have hired for freelance work.
When you’re just getting your real estate business off the ground, you will most likely rely a lot on freelancers in the beginning.
Because of this, the 1099 form will become your best friend, and you will need to fill them out accurately and completely. This is the form you will need to send your independent contractors each year so that they can complete their taxes and report their income.
A financial planner can also help you define what constitutes an independent contractor and differentiates them from an employee.
By properly classifying the people that you do business with, you will avoid fines and fees from the IRS and will keep your books more orderly. You will definitely need to be sure you hit the 1099 deadline each tax year, which a financial professional can also assist you with.
7. Prepare For Volatile Income Circumstances
It’s a fact of life that real estate income isn’t always the most stable.
Even if you have a real estate business that is booming, there will inevitably be abs and flows and cold months to deal with. Some of these circumstances are out of your hands.
The best thing you can do to counteract some of these issues is to hire a financial planner. Having access to a planner allows you to prepare for even the most volatile income circumstances.
These experts will help you diversify your income and plan for financial shortfalls.
When you’re an entrepreneur, you have to be able to deal with and adapt to these ebbs and flows, and financial planners can come up with contingency plans to do just that.
8. Handling Taxes and Write-offs
It’s one thing to file your taxes and another thing entirely to file your taxes in a way that is the most advantageous to your business.
Professionals from all walks of life miss out some tax breaks that could save them serious money. You can’t afford to do this with your budding real estate business.
When you have access to a financial professional, not only will they file your taxes for you, they will do so in a way that maximizes the return and helps you write off expenses, and other factors that add up.
9. Plan For Retirement
You may not know when exactly you want to retire, but you 100% will want to be able to when the time comes.
This doesn’t happen without some seriously diligent planning. Financial experts have their fingers on the pulse and can help you find the best retirement plan so you can retire on your terms, and with the amount of money that you need to live a comfortable life. There are no rules of thumb here as individuals need retirement plans that focus on their needs. Sometimes this may be a SEP account, and at other times it may be a solo 401k. Are you thinking about using Roth accounts? Make sure to do tax projections to see if this makes sense in your particular situation.
Your planner can help you calculate the amounts of allocations that will help your retirement funds grow steadily over time in a way that maximizes the investment.
10. Analyze Trends For Better Future Planning
If you’re like most great real estate agents, you know your area and are great at figuring out which pieces of property won’t last long on the market. You may even be able to estimate the value of a home just by looking at it and factoring in the zip code.
However, if you’re trying to run a business that can expand and become increasingly lucrative, it takes an even more analytical approach.
Your financial expert can study past successes and failures to help you predict the trends of tomorrow. The bonus is that they’re not attached to it, and can give you a completely unbiased opinion.
Using your gut, with the hard data of a financial analyst will help you plan accordingly and minimize your mistakes.
11. Assist With Payroll
Whether you’re paying yourself a salary or issuing payouts for a couple dozen employees, any business owner will tell you that payroll can be one of the biggest headaches.
What’s a challenge for you is easy for your financial professional. Leaving them to handle payroll also frees you up to use your time and talent where it is best served.
Having a financial pro handle your payroll also cuts down on errors, which builds employee trust and keeps your records clean and mistake free.
12. Helping With Insurance
When you work for yourself as a real estate agent, you’re responsible for getting your own insurance.
In a world where an emergency room visit can cost upwards of $3,000 without insurance, be sure you snag the best policy possible. Financial planners also specialize in putting together benefits packages for you, so you never have to wonder how you’ll fund your policy.
Be sure that you take into account your family situation, as you’ll need different types of policies in different situations. Life Insurance, Disability, and health insurance are a few of the necessary items you’ll want to research. On this note work with a fiduciary financial planner. Fiduciary financial planners don’t sell products so you can get a more unbiased opinion as they have nothing to sell you.
13. Pinpointing Valuable Potential Investments
Growth is the backbone of any business, so you will always need to be looking toward ways to expand.
When you have a financial planner, they can help you wrap your mind around the next 5 years, rather than just trying to hit quarterly goals. They’ll offer you investment ideas so that you can diversify your income streams and take your business to new levels.
Having stellar investment management helps you sleep at night because you know your company is growing in the right direction.
14. Choose the Right Financial Advisor
As a real estate professional, you act as a fiduciary for your clients, meaning you are to act in the best interest of your client at all times. It should go without saying that you would expect the same level of integrity and care from your financial advisor, right? Unfortunately, not all advisors act under a fiduciary oath, thus allowing them to sell overpriced products and recommend higher-fee investments because it means a heftier commission for themselves. What makes things even sketchier, is that some advisors may try to call themselves a fiduciary, but not act as one. A fee-only fiduciary advisor has taken a fiduciary oath to put your best interest first at all times and disclose how he or she is compensated so there is full transparency. A fiduciary advisor has no incentive to sell you any particular product or service because no conflit of interest exists with commissions.
One simple thing you can do to protect yourself is to ask your potential advisor to sign a fiduciary oath. If they can’t do that, then it’s best to keep searching for one who will.
Use These Tips to Help You With Your Realtor Career
Becoming a realtor can be an excellent career track. You’ll need to understand the ins and outs of these matters, starting with the business and finance issues that come with the territory.
This is a career that is wide open to you when you use the tips above. The better you handle the financial and business aspects, the more you’ll thrive in your career.
For a complimentary financial assessment, contact FamilyVest today!