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A Few Critical Money Tips for Real Estate Agents

October 16, 2013 by admin

When you’re self employed, YOU are responsible for more than you think. As an employee, which you may have been familiar with up until the point you decided to become self employed, your employer handled your taxes and social security for you.

Now that you’re self employed, you MUST have a simple roadmap to account for what you’ll owe the government simply for doing business.

Tip #1: Taxes and Crap Like That

When you get your first commission check, or your next commission check, for those of you who have not planned well, you will apply the following formula to the check. As an example, I’ll use a $100,000 sale with a co-broke of 3%, you being the buyer’s representative, without the broker’s cut considered in the calculations to make round numbers and .

On that $100,000 home, you earn a 3% co-broke, which is $3000.00. You dance your way to the bank, deposit the $3000.00 and have a jolly old time at happy hour with your clients and friends.

Did you really make $3000.00? No. You didn’t, because you MUST set aside a portion of that money for self employment tax and income mcc4tax. So, a basic rule of thumb for a new agent who isn’t sure what their tax bracket will be would be to put 30% of the gross income in a separate basic, plain jane savings account. So, on your $3000.00 check, you put $900.00 away for the piper…whom you’ll pay…quarterly. Isn’t that fun? Look, self employment tax is 15.3% as it is, and that’s on TOP of your tax bracket. So do yourself a favor. Plan according to what you think you’ll make. It’s nearly impossible to calculate exactly what you will owe, but you can get good at estimating, over time.

Tip #2: Plan for your annual dues on a monthly basis.

You have annual fees that you pay. You need to determine how much that annual fee costs you monthly. Add the sum of the monthly calculation of all of your annual dues together to determine what it costs you per month to have all of the compare motor trade insurace business privileges you have. If you can be billed monthly on anything, it’s easier to manage your monthly cash flow if you switch. If you cannot, you need to know what an annual fee looks like monthly. For example, Scottsdale Association of Realtors bills annually, but it can be expressed monthly. Figure out that number.

Then, using your business checking account, set up an online transfer that happens monthly for the amount you need. In the case of a single annual expense of $440.00, you would need to transfer roughly $37.00 per month from your business checking account (account used for business purchases) into a plain jane, separate account designated solely for annual dues expenses. When the bill comes for the annual expense, you will no longer feel like you’re being raped by the system because you will already have grown accustomed to 1/12th of the amount every month being moved into a designated account just for this purpose…and nothing more. You cannot borrow from your own account to pay for other crap. This money is considered spent already.

Every year when I get an annual bill, the money is already there because I move it there in little chunks so it doesn’t seem so bad (that includes things like my annual accountant fee for doing taxes.) And, every quarter, when I estimate that nasty tax bill, I have the money to cover it and if I’m short, it’s not by very much.

Be smart as an agent and a self-employed person and put money that you earn away or they’ll come get it from you, and that will suck.

Slave to the Lender

May 28, 2013 by admin

There’s a relational dynamic that many people neglect or aren’t even aware exists when they consider purchasing something with debt. It’s the master/slave dynamic. When you borrow money from someone, regardless of the time-frame you’ve agreed upon to re-pay that debt, the debt must be repaid, or there’s risk of bad things happening.

As a consumer, I have a say in what products or services are of value simply by choosing to do business with that company. In other words, I vote with my wallet. If I don’t agree with something a company does, I don’t have to use their services.

When you borrow money, something is usually used to secure the loan accompanied by an evaluation of your “debt score.” In the case of a house, the house itself becomes the security instrument that the lender uses to ensure they’ll get paid. That is why your rates can be so low. In the case of consumer credit cards or personal loans, since there’s usually nothing put up for security, your rates will be much higher as the lender shifts the risk to you. They make more money that way.

Collecting payments from you can be a costly process, depending on the type of loan you’ve taken. When you buy a house, your payments are typically handled by a company you never chose to do business with. In 2002, I purchased my home using a mortgage broker who promptly sold the note for my house to Countrywide Financial, who was acquired by Bank Of America who subsequently released the note to Greentree Servicing.

I had no say in the matter except that when I signed my closing docs, I gave consent to this phenomenon. Perhaps I could have retained more control over who I was choosing to do business with had I refused to these terms, but at the same time, perhaps I would not have closed on my first home.

Now, as a debtor, indebted to repay a loan serviced by a company (Greentree) with whom I would never choose to do business, I am stuck with their garbage services and practices until I either pay off the note, or they release the servicing responsibilities to yet another collection company.

This is one example of how borrowing money can put you into a situation whereby you have no control over who you choose to do business with. Thus, the borrower is slave to the lender.

Proverbs 22:7 – The rich rule over the poor and the borrower is slave to the lender.

How Do I Know if I’m a Millionaire?

February 26, 2013 by admin

Let’s first define the term Millionaire. The term millionaire defines someone who has a net worth of at least one million dollars. To understand this further, one needs to know how to calculate personal net worth. This is a simple calculation. Add up everything you owe (liabilities) and subtract it from the value of everything you own (assets) and you have your personal net worth.

If this number is $1 Million, then some would say you are a Millionaire.

Let’s say your net worth is $1 Million dollars based on the following. You own a home, for example, that would sell today for $4 Million and you only owe $3 Million on the mortgage. After it sells, you would have $1 Million left over. Many wouldn’t consider this being a true millionaire because you can’t get to the money without either selling your house, or borrowing against it.

You could have a net worth of $1 Million dollars and hardly have any cash in the bank. This is not what is meant by being a millionaire. Many also define being a millionaire as someone who is a “cash millionaire.”

A cash millionaire, after all debts and assets are calculated, has at least $1 Million in CASH in the bank that they could get to today. If you’re a cash millionaire, then you know that you’re really a millionaire.

Now, get out there, kill it, and drag it home.