The real estate business involves significant investments, many of them being major financial risks. Therefore, managing your money is even more vital than other business types. For example, if you’re trying to buy real estate in florida, you’ll want to be sure you have enough money before, during, and after the transaction.
This post will discuss some ways to manage your money as a real estate business owner.
1. First, Get a Great Accountant
Our first step applies to any business: hiring an accountant. Crunching the numbers is not something you want to do on your own, especially if you own a business as complex as real estate. However, an accountant can help track your expenses, look for the best ways to save money come tax time, and recommend the latest money-saving methods.
This step is one of the most important and something worth an investment. For example, you might want to spend more for an accountant who only has a select few clients and whose work is highly-rated. While you will pay more, the accountant’s advice and research into tax law can be valuable.
2. Speaking of Which, Always Prepare for Taxes
When Uncle Sam comes around, you need to be prepared. Too many in this business don’t save year-round or pay their taxes quarterly and end up suffering as a result. An accountant can help you with this, but if you don’t have one, save around 30 percent of your earnings for taxes and consider quarterly payments, which might be preferable to paying off your taxes all at once. Do some base research into the area’s tax law to learn what you need to do.
3. Consider an Investment Partner
As a real estate business owner, operating alone has its benefits. The money you earn is yours, no one is conflicting with your management style, and you don’t have to negotiate with your business partner every move.
However, an investment partner might help you manage your money better. As a real estate business owner, you’re going to take out loans and accumulate debt. One mistake is believing you can handle all the debt yourself. Having a partner can help you stave off potential debt.
With an investment partner, you need to select one carefully. Choose one with experience and a similar vision to you.
Some people will choose their friends or family as their investment partners, but be careful about this decision. You might be best friends with someone, but the business might lead to that friendship crumbling. So it’s better that you choose someone you only have a business relationship with, or at the most, an acquaintanceship.
4. Invest in the Latest Technology
As a real estate owner, it’s a wise idea to keep your technology up-to-date. One reason for updating your technology is that many of your clients will be Millennials and the emerging Zoomer generation. These generations have adopted technology to pay rent, apply for homes online, and communicate.
Not only is tech suitable for your audience, but it can work for your finances. For example, you can invest in money management programs to help you make wise spending decisions. Tech can streamline specific tasks as well, saving you money.
With technology, the more you spend on it, the more you can save in the long run. For instance, buying a pricier computer can mean you have a device that lasts much longer when compared to a cheap computer.
Two programs to consider as a real estate agent include Mint, a money management app, and Mvelopes, a real estate tool.
5. Separate Your Money
Another common business strategy that applies further to real estate is separating your expenses. As an agent, you might want to make a personal and a business account for your money. For your personal side, cut as much debt as possible to reduce your burden.
A personal account also works well as a safety cushion. Consider having enough money in there to cover your expenses for six months if you have a situation where you’re not making much money.
Also, look to credit. Consider creating a business credit line if you need it.
With that said, remember that a personal account doesn’t mean you can’t spend some of it on your business. For example, some real estate owners use 10% of their personal funds for marketing or other business aspects.
6. Be Prepared for Cycles
Our next tip continues the idea that you need a safety cushion. Real estate is a business where you will have ups and downs. For example, you might live in a part of Florida where the summer is the hottest season for clients and vice versa. Unfortunately, many in real estate make the mistake of living lavishly in the summer, only for them to worry about bills come winter.
We’re not saying that you have to live like you’re in the lower class, but instead a happy medium. Live in a way where you can pay the bills in months when you might not be earning as much. This situation is another case where an accountant can help you.
7. Look for Discounts
Some benefits programs can offer discounts for apps, technologies, vehicles, and other devices people use for their company. There are several benefits programs for a realtor that will let you save money on products specially designed for those in real estate. These benefits also include healthcare. One place you can look to is the National Association of Realtors’ Benefits Program.
Being in the real estate business can be profitable and allow you freedom and flexibility. With that said, it is a business where you need to be extra careful with your money. You are responsible for your money, and if you aren’t mindful, it can spell the end of your business. However, by using these techniques, you can reduce the chances of that happening.