As a real estate broker, your business success depends on whether or not you continuously have enough money available and be able to pay rent, bills and - of course - your agents, but also whether you will be in a position to take advantage of market opportunities such as securing the best agents or expanding into additional territories.
Keeping your real estate office in basic financial health can reduce your personal stress as the office owner, as well as position your office for peak performance.
While we encourage you to seek specialist financial advice for your business, here are three general ways to keep your cash flow in good shape:
- Establish your financial baseline
- Anticipate cashflow peaks and low points
- Improve and maintain financial reserves
Let's look at each in turn.
Create a baseline budget
- Agents salaries
- Commission splits
- Realtor membership fees
- Professional services
Anticipate peak and low periods
Once you have a baseline budget, you can start making it more specific. As a real estate broker, the best way to do this is to adjust your budget to the ups and downs of the real estate market.
How to Take Real Estate Cycles Into Account
Think strategically: Go beyond looking at your budget per month and look at what you need on a yearly basis.
Compare budget and cycles: How does your spending follow the cycles - most importantly, are you saving enough during the high periods to cover your expenses in the low periods?
Adjust your baseline budget: Plan to save when the market’s up and cut all non-essential spending when the market’s down.
Increase financial reserves
- Review commission splits. Do your compensation plans favor you or your agents? What could you change?
- Train your agents. Brokerages with extensive training programs tend to do better.
- Broaden your network: Real estate is a hugely social industry, so the more people you know, the more opportunities you can create!
- Renegotiate rent, utilities, services and insurance. Some brokers forget they are master negotiators - don’t just use your negotiating skills for real estate deals, but also for any other contracts and recurring costs you may have
- Don’t pay for listings. There are plenty of websites where you can list for free, so why would you pay?
- Use tax deductions for real estate agents. Often you get deductions for operating licenses and fees and the NAR membership costs.
If you take these steps, you’ll be on your way to a healthy business with good cash flow, responsible budgeting and a sizeable reserve resource. Accumulating your financial resources can help position your business to take advantage of growth opportunities and performance improvements.