Happy Agent Co. — Real Estate Podcast for Women hosted by Lindsay Dreyer, Real Estate Coach

Part 1: Spring Clean Your Real Estate Business - Manage Your Money

• Lindsay Dreyer

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Are your finances a mess? It’s time for a reset! In part one of this three-part spring cleaning series, we’re diving into the financial side of your real estate business. Learn how to get your numbers in order, cut waste, and start building real wealth.

In this episode you'll learn:

  • Why financial spring cleaning matters
  • How money stress is holding you back
  • 5 steps to take control of your financials

Financial clarity is the foundation of a thriving business. Take control of your money now, so you can build lasting wealth and enjoy the freedom you deserve. See you in the next episode!

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Speaker 1:

Welcome to part one of my three-part spring cleaning series for real estate agents. We are going to cover the three areas of your business that you need to spring clean, and today we are diving in to one of my favorites your financials. We are going to talk about getting your money in order, because spring cleaning is not just for your closet. It is also for your bank account and your financials in your real estate business. I know so many real estate agents who avoid money or their numbers and they just have commissions flowing in and out of their bank account. They are not paying attention to their cash flow. They have no idea what their profit margin is. They don't even have a profit and loss. To be honest, like the only time that they kind of get it in order is for tax time, which it basically is coming up or has passed, depending on how you're organized. So today I want to give you my tips for getting your financials in order as a real estate agent, so your business can start growing and you can start measuring and paying attention to what matters in your business. So let's chat about why your finances need a spring clean. Money is the biggest source of stress for most real estate agents, and it is a huge reason on why they feel overwhelmed. When you don't have control over your finances and your numbers, your business controls you, or the lack of business controls you. So cleaning up your financials is not just about making more money. It's also about keeping more of it and using it to build long-term wealth, which is what you should be doing if you are in real estate. That is how you eventually exit the business, because, let's be real, most of us do not want to be selling real estate when we are a 85 year old granny. I know I did. I do not. I know my grandma did that, but I am not interested. So let's roll up our sleeves and get into the five things you need to do to clean up your finances this spring.

Speaker 1:

Step number one is you need to know your numbers, and this is really all about getting organized. So, if you do not have an accounting system or a bookkeeper, I want you to go back to your 12 months of bank statements, 12 months of credit card statements and categorize every single transaction that is related to your real estate business. We also need to know what's coming into your business, so you can pull that from your bank statements, obviously, but your brokerage should also have some type of accounting system showing what they have paid you. And this seems very simple, but so many agents get stuck on this and I know a lot of my coaching clients are just like head in the sand about money. But we really dive into this when we work together, which is, we need to know what's coming in, which is your income. We need to know what's going in, which is your income. We need to know what's going out, which is your expenses, and having that information helps us identify what your actual profit is. And then it also helps us identify what your profit margin is.

Speaker 1:

Now, why I like the profit margin number is because that is something we can track on trends. Because that is something we can track on trends, because, even if your profit is going up, it's showing how much more profitable you are or how much less profitable you are. So knowing your profit the actual cash is super important, but knowing your profit margin is also important. So how do you actually calculate a profit margin? It is your profit, so that income minus expenses divided by your gross income, which in our case, as real estate agents, is your gross commission. And if you want it as a percentage. You multiply that by 100. And that is pure and simple the down and dirty of it.

Speaker 1:

I have people ask what is a good profit margin and I think that that just depends on what type of business you're running. So if you have a brokerage, if you have a teamerage, if you're a solo agent, it all depends on what type of business you're running, what your expenses are, what your return on those expenses are. So I would say there really isn't a set profit margin. But it is a good thing to track because you want to make sure that it is improving over time or it's just trending in the right direction or staying stable. One of my coaching clients I worked with thought that she was making six figures because her income coming into her bank account was six figures. But after we broke everything down I gave her the template to do her profit and loss she realized that her take home was way, way lower than she expected.

Speaker 1:

So if you don't know these numbers and you're not tracking it on a at least quarterly or semi-annual basis, you are flying blind in your real estate business. It is so important. So my action step for you for knowing your numbers, is pull up those bank statements, pull up those credit card statements right now. Let's list out your monthly revenue, expenses and what's actually left over after everything's being paid. If you are already ahead of the curve and you have a bookkeeper and you're in something like zero or QuickBooks, pull that up too. We want to get a list of all of your income and all of your expenses so we can move to step two. Speaking of step two, it is all about cutting the dead weight. We want to reduce your unnecessary expenses.

Speaker 1:

So are you paying for tools that you don't use? I'm sure you are. We all do. As real estate agents we like definitely go for the shiny object syndrome. We love shiny objects, so audit those expenses.

Speaker 1:

Are you paying for something you don't use? Are you paying for something that is not giving you a return on your investment? I am going to tell you you probably have at least a handful of things. Cancel those subscriptions. They do not serve you. You do not need them. The other thing is stop impulse buying things that you don't need Courses, software, lead generation, tools that aren't giving you a return on investment. I can't tell you how many coaching clients I have met that are paying for lead generation that is not giving them a return on their investment, stop it, just stop. If you are not taking advantage of everything you are purchasing in terms of courses, software, lead gen tools, stop paying for them, just stop doing them. I'm giving you permission right now Cut it out. I remember I had a client who was spending $800 a month on three different platforms that were essentially acting like a CRM, and she kept jumping to the next best thing and just realized that there's so much redundancy, so technology and systems. There is a lot of tools out there that actually start doing more things. So software is ever evolving. I know that our CRM. At one point we realized we could send our email newsletter from it, whereas that was like a new functionality. So we were able to drop our email software and save our brokerage $8,000 a year. So software is evolving as well.

Speaker 1:

So if you haven't revisited your tech stack or the software you're paying for, maybe it does something. Maybe it has a new feature that's going to allow you to cut out another piece of software or another expense in your business. So this is your step number two you are going to go through your bank statements. Your credit card statements highlight every subscription or tool and really think. Highlight every subscription or tool and really think do I need this or do I need to explore if one of my existing tools can replace this one, and I am going to give you permission to just go ahead and cancel that today.

Speaker 1:

The other thing is not only cutting, but let's say you love a piece of your software. So, for example, calendly was like. It is one of my favorite tools, one of my favorites. You can also experience some savings by just going to an annual plan. So if you're monthly on something, going to annual can also save you some money. So I would only do that on things that you know you're going to want to renew year after year or you know you want to commit to for a year. I personally love doing subscriptions on a month to month until I know that I really love that piece of software. But going month to month at first has saved me so much money because after a month of using it I realized I don't like this, this isn't what I expected, or I'm not going to use it. So those are my tips on subscriptions cutting the dead weight.

Speaker 1:

Step number three in spring cleaning your business is you need to figure out how to pay yourself, like the CEO that you are Shifting from commission based chaos which, let's be real, is total chaos. We have that huge influx in the spring and summer and then it's like what the heck's going on the rest of the year. So we need to stop treating commission checks like a free-for-all, setting up a separate business account, paying yourself a set salary, even if you're not really W-2ing yourself but just pulling out $8,000 a month or $10,000 a month and paying yourself that, getting used to having stability in your income which, admittedly, is very, very hard when you are a new agent and you are still growing your business. Do your best. Maybe you just start with $2,000 a month. My advice is look at your profit from last year, divide that by 12, and then that is what you are going to pay yourself this year. And then, obviously, if at the end of the year you make more money, that's lovely, but I think that that most people are going to do the amount of business they did last year. So I would go ahead and do that.

Speaker 1:

The other book that I really like is Profit First. Admittedly, I do not follow the full method, but it is a really interesting book to read because it will give you an overview of how you pay yourself first, and I honestly follow a more simple version of it. I do not set up all the bank accounts but I still think I learned a ton from that book and highly recommend it because it is so important that you pay yourself first. I know too many agents that ride the commission roller coaster where they have a big check, they pay it all to themselves, they spend it and then they have dry months. So when I switched to paying myself a set amount every two weeks, just like an employee quote unquote of my business, it was a huge game changer. Like an employee quote unquote of my business, it was a huge game changer. It basically got me used to just having a consistent income, which I think is so important to being the CEO of your business. So action step on this is figure out that salary amount that you're paying yourself either every other week or every month. Your business needs to run like a real company, not a side hustle.

Speaker 1:

The number one mistake I see real estate agents make about their finances is preparing for taxes. You can avoid tax season stress and those surprise bills by just being prepared, so let's set aside a certain percentage of every single commission check for your taxes. Have a separate bank account for your taxes. This is a tax account. 25% to 30% is a good rule of thumb, but again, everyone is different. So if you have questions on what you should set aside, ask your CPA. I like having that separate tax account because if it's out of sight, it is out of mind, and then you can just know that when tax time comes every quarter, you can just immediately transfer that money. Now I would do this automatically. So if you have the option with your brokerage, which a lot of them do, you can actually have them. Just take that 25%, put it into your tax account and then the remaining 75% goes into your tax account and then the remaining 75% goes into your business account. So I love things that are automated because, honestly, when people are involved, we're just going to mess it up because we get busy. So if you can automate that tax savings account, it is crucial to making sure that you are ready for tax time.

Speaker 1:

If you do not have a CPA, this is another one. Get one. I don't care if you think you can't afford it. They are worth every single penny. A good CPA will save you what their fee is and they are priceless to being organized for tax time. I have seen way too many agents get surprise tax bills to the tune of $50,000 because they forgot to save for their taxes. And if that's you, this is your sign that you need to get serious about tax planning, and this is something that I absolutely think is crucial to running your business. Like a CEO, you need to be on top of your taxes, because tax liens are no fun. So your action items today if you do not have them, open a separate tax account today you can go online.

Speaker 1:

I love RelayFi. I just opened a bunch of accounts with them. It's super easy. I will opened a bunch of accounts with them. It's super easy. I will put their link in the show notes. They let you set up as many as you want. So I have five accounts for a bunch of different buckets in my business. Highly recommend them. They also have a high yield savings account, which right now is getting about 3.7%. So definitely, definitely, get that in order and check the show notes. I will put that link.

Speaker 1:

And my last step five on getting your financial house in order for spring we are spring cleaning. Do you know that feeling after you're done cleaning and everything just feels so good, like you're just so excited because you just made so much space and room? This is step five. We are going to set some wealth goals that feel exciting because you have created space with steps one through four. In your business, we are shifting from surviving to thriving, so you're going to be building wealth, not just income. So I want you to ask yourself are you actually building long-term wealth or are you just working deal to deal? And what this requires is that you set goals beyond just making more money. I want you to think about investments, savings, passive income, and I think it's so important that you invest in real estate, because that is what we know. That is how I have built.

Speaker 1:

Most of my net worth is through real estate. Honestly, it is one of the best, best ways to build wealth, especially in this unproductable environment. I have my tenants who pay my mortgage, and it is going to be paid off in 15 years or 17 years or 30 years, depending on what type of mortgage you got or how long you've owned that property. But getting that principal pay down every single year on my rental properties is building wealth. So not only am I making money each month on those rentals, but I am building wealth through that principal pay down. You also get tax deductions for owning rental properties. So I am a massive, massive fan of real estate agents.

Speaker 1:

Owning rental properties Also invest in the market stocks your retirement account. We do not take advantage of these vehicles, but this is literally how you build wealth. This is how I have got to the point of having a net worth over $2 million. Is real estate putting money in the market and being responsible with my money? I am a huge proponent of. Money is power, and real estate agents need to realize that how they use their money is going to set them up for success and for an incredible retirement. We have such a unique opportunity on our hands that we can make as much money as we want to, but it doesn't mean anything if you are not saving it and you are not building wealth for the long term. So I want you to decide on your wealth building goal. It might be buying a rental property, maybe it's starting an investment account, or maybe it's just setting aside a percentage of every deal for your long term savings, but I want you to pick one and take that first step today, because I know too many real estate agents who have made multiple six figures for 10 years, 20 years and they literally have nothing to show for it and I do not want that to happen to you. So here's my quick recap on spring cleaning your financials in your real estate business.

Speaker 1:

Number one know your numbers. You have to look at your income, your expenses, your profit and your profit margin. Cut the dead weight, cancel anything that's wasting money. So find the waste and cut it. Three pay yourself like a CEO. You need to stop the commission rollercoaster and pay yourself a set salary. It does not mean W-2. It just means a consistent income salary. It does not mean W-2. It just means a consistent income.

Speaker 1:

Four is prep for taxes. We do not want to be set. Number four is prep for taxes. We do not want to be surprised at tax time. So set aside that money now and not later. And five is set your wealth goals. I want you to build long-term financial security. So, whether that's through rental properties, investing in the market or just having a long-term savings plan, you need to be working on your long-term wealth because you do not want to be 85 selling real estate. So if you do one thing today, I want you to pull up your last three months of statements and start cutting out the waste. Your business should be making you money, not draining it, so let's start building wealth the smart way. If this episode has helped you, please share it with another agent who needs a financial reset, and please don't forget to subscribe for the next episode in this series, where we're going to tackle how to spring clean your systems and your tech in your business so it runs smoother than ever. Until next time,

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Lindsay Dreyer

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