Episode 7: Calling ALL Real Estate Professionals
This very special episode of THE REAL BUZZ is all about Real Estate!
Tackling the different phases in a professionals Real Estate career. Realtors fall into 3 categories. New, Experienced, and very experienced or Seasoned Agents. The objectives for each of these career phases may be incredibly different.
The New Agent – (licensed agents with 2 years or less of experience. Or maybe those who have taken a pause or a restart in their career and are starting over with income of $125,000 or less in commissions in a calendar year) As a ‘New Agent’ you’re learning the ropes and figuring out what works. As a new agent you are earning $125,000 or less in commissions selling one or two houses a month and your real estate career may be a side gig.
Treat Your Business Like a Business. Establish a separate checking account, credit card & savings account for your business.
Set a Budget & Create a Schedule For Yourself
Avoid the 15.3% Self Employment Tax. It’s not to early to discuss your option to becoming a Corporate Entity with your tax professional. Generally we recommend an S-Corp as the most advantageous way to give yourself a 15.3% tax break and avoid self employment taxes. Many agents don’t treat their business as their business; you want to treat yourself as the owner and an employee.
The Experienced Agent – (licensed agents with 2 – 5 years of experience with income of $125,000 to $500,000 commissions in a calendar year)
Establish a Corporation – you should NOT be operating your business as a sole proprietor. Talk with your tax professional to understand the benefits of creating a Corporation for your business.
Communication is KEY. Now is the time when it is ESSENTIAL to have a Tax Professional on your side that you can easily communicate with throughout the year. Unlike other professions when income is predictable an experience agent can easily double their projected income. Staying in communication with your tax pro throughout the year will allow them to work WITH you and make sure your financial objective are met.
Considering hiring. We know hiring can be a daunting thought but think about how your bottom line will benefit from being able to hand off all those pesky tasks you don’t enjoy doing.
Be CONSISTENT. Not only with your work schedule but with your bookkeeping. Many agents find that with a little guidance they are more than able to maintain accurate bookkeeping records throughout the year rather than waiting until the end of the year to make a mad dash scramble to gather everything up for tax time. No time?!? Working with a professional for bookkeeping may be the smartest choice. Ensuring your financials are accurate and up to date and that you are getting the best benefits for you and your company when tax season rolls around.
The Seasoned Agent or the Investor – (licensed agents with 5+ years of experience with income of $500,000 or more in commissions in a calendar year)
Establish a 401k
Make Sure YOU Are On Payroll
Communication is KEY. Now is the time when it is ESSENTIAL to have a Tax Professional on your side that you can easily communicate with throughout the year. Unlike other professions when income is predictable an experience agent can easily double their projected income. Staying in communication with your tax pro throughout the year will allow them to work WITH you and make sure your financial objective are met.
Considering hiring. We know hiring can be a daunting thought but think about how your bottom line will benefit from being able to hand off all those pesky tasks you don’t enjoy doing.
Be CONSISTENT. Not only with your work schedule but with your bookkeeping. Many agents find that with a little guidance they are more than able to maintain accurate bookkeeping records throughout the year rather than waiting until the end of the year to make a mad dash scramble to gather everything up for tax time. No time?!? Working with a professional for bookkeeping may be the smartest choice. Ensuring your financials are accurate and up to date and that you are getting the best benefits for you and your company when tax season rolls around.
At Busy Bee Advisors we understand the challenges facing Real Estate professionals at the various phases of their careers. We are happily able to assist in the following ways.
Corporation creation – after discussing your different options we’ll walk you step-by-step thru the process and take care of all the legal paperwork on your behalf.
- Establishing Payroll – we have a variety of payroll providers we work with perfect for small business owners like yourself.
- Tax Preparation & Filing
- Tax Strategy – work with our tax professional year round who will create a personalize tax strategy (on average our client save 30% or more over their previous preparer)
- Budget creation and tracking – from creating a budget for you to monthly check in calls we are here to support your career goals.
- Monthly Bookkeeping (done for you) – flat rate affordable done for you bookkeeping, ensuring your financials are up to date
- Bookkeeping (do it yourself) – check out our newest book – THE 4-HOUR BOOKKEEPER available on Amazon.com or at INeedBookkeeping.com
The 750 Hour Rule. No matter what phase of your Real Estate career you are in time spent makes a difference. If you are looking to be considered a Real Estate Professional (in the eyes of the IRS) You must be able to prove that you are meeting the requirements of the 750 hour rule. Are able to prove you are spending 750 hours a year on your business and are establishing yourself as an active professional? This rule is what makes the difference between rental income being passive or active. It can also make the difference in thousands of dollars worth of legitimate business deductions being potentially disallowed by the IRS. With ‘passive income’ your deductions are very limited. If your able to prove the 750 rule it adds to your deductions on your taxes.
Not sure if we can help?!? Schedule a COMPLIMENTARY Consultation with one of our tax professionals. Click HERE to schedule your consultation.
