Common Financial Mistakes Real Estate Agents Make That Affect Profit
When you made the decision to become a real estate agent, being your own boss and setting your own schedule were probably at the top of your pros and cons list, right along with the uncapped income possibilities.Chances are, it was easy to fall into the role of entrepreneurship, but what about your profit? If the numbers you’re seeing aren’t as high as you’d hoped for, it might be time to pay more attention to how you handle and track your financials.
Avoid the most common mistakes real estate agents make that affect profit:
Not planning for taxes
They happen every year, yet it’s estimated that approximately 30 million Americans aren’t withholding enough taxes in 2018. Understand what to expect when tax season rolls around. Meeting with your tax advisor early in the year will help you project what you’ll owe to prevent surprises later and to get a more realistic view in your ledger.
Be aware that tax laws do change. This year, new tax laws were established that can affect real estate agents that passively collect rent from their owned properties.
Other Tax Tips to Consider:
- Whether or not you owe taxes on a quarterly basis
- What your tax bracket is
- Create a system to keep your tax money separate from your other funds
Not Knowing Your Numbers
Determine what you want your profit to be; work backward to set goals. The most successful agents are those that know where to focus their time. For example, you should know how many houses you need to sell and how many leads you need to bring in each month to be profitable. Work with these metrics until you’re happy with the projections and get to work!
Work off of a 10- or 11-month calendar to cushion you for financial ebbs and flows.
Put a business plan together. This is the foundation for your profitability.
Pay attention to inventory and market trends.
Not Tracking All Of Your Expenses
When you’re on the road as a primary activity in your career, it’s easy to lose track of receipts or other potential tax write-offs. Mileage is one of the most often missed un-reported expenses for any entrepreneur.
Office supplies, marketing materials, association or professional dues and fees and client gifts are just scratching the surface of the expenses you’ll encounter as a real estate agent.
It may be easier to spend the last 30 minutes of your day recording receipts, marketing expenses and mileage before they’re forgotten. There are also many helpful apps and software programs that can help you keep track of your expense account activity.
You’re the only one that can determine how profitable your real estate business will be. Staying organized, meeting with your tax advisor and planning and dedicating time to your financial homework will keep you on the right track.
If you want to learn more about managing your expenses to be profitable watch, "Run A Profitable Business: 5 Key Numbers & Terms You Need To Know" with CEO and co-founder of Hurdlr, Raj Bhaskar.