The Business of Real Estate

Managing Cash Flows

May 1, 2019
Managing Cash Flows

Managing Cash Flows

By on May 1, 2019 in Uncategorized | 0 comments

Your goal as a realtor is to win the biggest commission you can. This is easier said than done. There are countless items that must be addressed while in the real estate business. This must also be balanced with the looming threat of not knowing where or when you next pay check will be coming from. This carries a lot of risk, but the potential is there to win it big.

Average Real-Estate Agent Salaries

As a real estate agent your commission varies based on a number of factors. Anything from your contract with the brokerage firm, interest rates, consumer confidence, inflation and so much more. As you can see a lot of these factors like interest rates and inflation are out of your control.So, you must do everything you can do to increase the factors within your control. First and foremost, you must negotiate a good deal with your broker. If this is not addressed first no matter how well you do you will always be paid based on this level. So don’t sell yourself short and provide evidence as to why you deserve a higher commission rate. Some other factors in your control are associated with what region or regions you wish to practice in. There are two schools of thought on this point and both have their weaknesses and benefits. First you could target more upscale properties. This will win you a larger commission per sale; however, it comes at the cost of less volume and you may go some time without any new sales. If your good at managing your money and would prefer to focus more energy into your projects this may be the route for you. The second way to determine what region you wish to practice in is to target properties that have a lower sales price and work on selling more of them. Per sale your commission will be less but if you sell enough of them you may be able to make up for this lower sale price. You also may find this to be a less congested market to enter, giving you a better chance to take control of certain regions. On average though the brokers earn about 6% of the sales price and the agents themselves will receive about 40% of this price. Changing that percentage by even a decimal point can be a difference of thousands of dollars therefore it is vital to any realtor to do everything they can to take control of the factors that they can.

Why do you need commission advance?

Commission advancement services are becoming more and more the industry standard as the time it takes to complete a sale and receive your commission increases. Because of this one of the primary reasons every realtor who uses these services has a distinct advantage is it improves their cash flows. As a realtor your success depends not only on how good you are at selling the property but also how well you market yourself. Whether you do this yourself or use a company to manage this for you is irrelevant, what is important is that this requires a steady stream of income to actually continue these efforts and win more clients. Getting your money sooner also allows you to pay off any debts you have incurred before the interest costs get too high.

Commission advances are also very affordable by utilizing a fee based structure. This ratio varies from company to company and on the closing price but its normally around $0.75 per day per each $1,000 of commission you wish to advance. This gives you some play in how much you want to give up in order to receive your commission sooner, or how long you want to wait. Even better though is that the price of borrowing is a tax-deductible business expense.Therefore, using a commission advance service will help save you money in the short and long run.

The Potential is There

There is no doubt that the potential is there to make an astronomical amount of money in a relatively short amount of time, but there are plenty of realtors who just could not get started in this field. This could mainly come down to the lack of cash flow going through their business. A lot of the lure in the real estate business revolves around the money and the freedom this gives you. You can essentially be your own boss while working for a brokerage firm. What they don’t tell you is how much of a cost you could incur to enjoy this freedom. You must find a way to have money continually flowing through the business otherwise you will reach a critical point where you will no longer be able to cover your costs. Commission advance may very well be the solution to this problem since it will allow you to maintain your cash flows. This way you are continuing to reinvest in your business and are always winning new clients.