Financial Habits of Successful Real Estate Professionals
Over the last few years I have made it a priority to attend the National Association of Realtors (NAR) convention every November. It’s a great learning and network opportunity and a great source of materials for my office meetings. Naturally I am inclined to share tips and tricks with other Realtors. I
It seems that each NAR conference I attended had a different running theme. In 2011, the USA was inching out of a major housing crisis and many of the topics revolved around how to sell foreclosures. The next year it was all about advertising and using social media to find buyers. The following year we heard about the magical “foreign” buyer. Then it was predictive analytics and cool new apps that were somehow the shiny new object for quick success. While there are still plenty of shiny new tools the overriding theme of this year’s NAR, focused on the profession….the Realtor profession.
Many of the education sessions focused on strategies to build your business by showing how professional you are. Some of the courses offered had titles like “getting smarter, simpler and more effective”, “Preparing for the global shift” and “When trust is high, negotiating is easy”. Lots of catchy titles, but one stuck in particular stood out. It was called the 7 Financial Habits of Highly Successful Real Estate Professionals. The description billed it as ways to create long-lasting improvements to your personal and business well-being. At my advanced years (he says only half-joking) I have come to realize that I am not immortal and maybe it’s time I start saving for my retirement (again, only half-joking).
I made notes at the presentation which was given by a woman who was not only a successful Realtor but came from a financial planning background. I made copious notes and presented my findings to my office earlier this week. Without further ago…prepare to be mostly amazed.
- Develop and use a business plan. Seems pretty obvious but I have to say that over the many years that I have been in a management role, few agents, despite constant reminders, do not want to develop a business plan. But the few who accurately defined their niche market, known their centres of influence, have a plan to reach people and a budget in place to advertise have ALWAYS been my most successful agents.
- Develop and use a budget. Well I just finished building a home and it could not have happened without a budget and accurate tracking of expenses. As self-employed sales people this is a critical piece of our success. Knowing how much you need to survive tells you how much you need to earn. But you need to also keep money aside for tax planning, marketing, personal development, lattes and, yes, retirement.
- Separate business from pleasure.Not only does this thought process integral to establishing your business budget but it will prepare you for the inevitable tax audit. I use a simple app called Expensify to track my expenses. Simply take a picture of your receipt using the app and then every week or so, log on to your desktop and drag and drop the receipts into various categories. Easy. I throw out my receipts after taking the pic but I’m a trusting soul.
- Hire a tax advisor. For the money, this is the smartest thing you can do. An accountant will maximize your deductions, keep accurate records, will help you eliminate tax surprises in case of an audit.
- Understand the risks. Whether they be investment risks, inflation risks or business risks, keeping up with the latest news will go a long way. If you think it prudent, hire a professional to manage your money.
- Plan for retirement. The last thing you want to do is out live your savings. This is a tougher one for young new agents entering the profession. They think the market will stay good forever. Truth is, real estate has been a cyclical business. There are peaks and valleys. So the younger you start saving the less you have to save. It’s worth doing the math though. How long do you think you will live and how much money will you need to survive. Factor in other assets and investments and see where you stand.
- Lastly, create an estate plan. Make sure you have a will, a solid power of attorney and some medical directives if you wish.
Even if you think you will live forever and are richer than Warren Buffet, these 7 habits will serve you well for years to come. Having been through one real estate cycle already I want to plan better for the next one. I remember a cartoon posted above a Realtor’s desk back in 1990. It simpy said “please God let there be another boom. This time I won’t piss it all away”.