Financials are Important to Success

Planning on Making it as a Realtor? Your financials are important to success! 

One of the toughest aspects of being a Realtor or owning your own business is understanding financials are important to success!

Don’t play games with the government, it won’t pay!  Be honest about your expenses, don’t make them up, you will have to show receipts.  Don’t add extra 0s to your numbers to pad your returns on HST or your income tax at year-end.

If you have no bookkeeping background, don’t assume you know everything because your friend told you it’s how they do it.  What if they are wrong and have not been caught yet? Do you want to take a chance with CRA?

Get a bookkeeper to help you, trust me on this one!

Take a bookkeeping night school or online course, ask questions from the bookkeeper at the brokerage you are at if they are part of a helpful administrative team.

From past CRA audits I have participated in here are a few tips to help you.

• Have your financials/books on a computer file
• Keep all receipts, (scan them or photocopy as the ink for the receipt will fade with time)
• Restaurant receipts with clients, you can only use 50% of the receipt, called per diem and make sure you put your client(s)’ name on it, even if you take out 2 people or more for lunch
• Keep a gas log for your car.  No one uses 100% of their car for Real Estate.  Remember you are leaving your house to go to brokerage, which does not count because you are going to work, or going home.  Everything in between that has to do with Real Estate can be used. There are apps on your cell phone to log it or do it the old fashion way and write down your mileage, where you went etc.  Look online to see what is acceptable mileage amount that can be applied to your gas consumption. CRA reserves the right to not accept your numbers without proper proof.
• You need an HST number as you are a business and you need to do HST returns.  Have them ready on time and don’t lie on the return. If you don’t know how to do it, perhaps your brokerage offers an HST service to help you out.  Keep your expenses tabulated.
• You have to pay taxes also.  Your HST is driven by the number CRA gives you which is essentially your business number.  Your federal tax or income tax is based on your SIN#. 

Rule of thumb that I have advised Realtors to use is as follows

• On first $32,000, pay CRA at least 15% of your income after your contract is deducted from your gross commission
• From $32,000.01 to about $50,000, pay CRA at least 20% of your income after our contract is deducted from your gross commission
• Anything after that, 25% or more.
• Remember that this is just a guideline and is based on your Real Estate commission only and the fact that you will write off expenses accumulated throughout the year to conduct your business.
• Hair styling, clothing, shoes, make-up, not an acceptable expense. You are the only person who knows how much you make over and above your Real Estate career. Ask your accountant, personal bookkeeper for their opinion of what you need to set aside to pay CRA.

Remember, you’re working for yourself! 

You are an independent contractor which means that your pay will not have CPP or EI deducted off of it. It also means that should you and your accountant decide to pay CPP, you will have to pay both sides, the employer and the employee portions, being you when you prepare your income tax return.

Your income may be sporadic. You are no longer receiving pay cheques on a weekly, bi-weekly, bi-monthly basis. You’re getting $0 for just being a Realtor. Pay is commission based only. When you sell a home you get commission. The money is only really yours when the office receives it.

Being a Realtor takes investment, takes money to make money! 

Make sure you can afford this career as there are a lot of fees attached to being a Realtor, such as MLS dues, RECO license renewal, Errors & Omissions Insurance, course updates to renew your license every two years, your signs, your cards, anything you do or purchase related to Real Estate is yours to take care of and we haven’t even discussed how you will pay for your personal life.

Therefore, remember that your Brokerage is not your personal bank. They do not have to lend you money to tie you over. There are organizations out there such as Agent’s Equity who will advance you money on a firm deal.

You are your own company. All office supplies, signs, business cards, any items you require to do business is your responsibility, not the brokerage.

Financials are important to success, even the Brokerages! 

The brokerage will give you a contract based on your experience in Real Estate, the fixed costs it has to pay out on a daily, weekly, monthly, yearly time frame, and some for profit. They are not a charity holder. So if you take things because they are there and you abuse the system, the brokerage has to absorb your costs.

Would you want the brokerage to take from you? Would you want a stranger to help themselves to your things? Therefore, work with your brokerage and be financially strong.

Get ready, plan ahead and set attainable goals!

Set your financial goals and work to attain them. Give Real Estate your all and it will show.

Don’t put your own ceiling on earnings too low, you are the only one who can attain the financial needs that you have. You are not limited to a regular rate of pay. Also be clear as to what kind of career you want in Real Estate and keep it real.

Get out of your own way and remember financials are important to success!

If you enjoyed this article, you should read my article on respecting your administration team!

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