Chapter 7
Building Your Business
In This Chapter
• Real estate associations and the multiple listing service
• Your small business as a productive, organized enterprise
• Lead generation as your top priority
• An intensive tutorial in understanding market indicators
• Technology as the foundation of your business
This chapter is a recipe for beginning your career with a solid foundation. After all, you’ve just become the CEO of your own company. It’s time to implement a plan so you can capably steer your new company to success. When you start out in real estate sales, a good business plan is a must because you are beginning not only a new business, but an entirely new career. To ensure your success, you need many levels of business-building training.
FYI!
Many excellent books have been written about setting up your new business. Don’t reinvent the business model. Follow the steps in this chapter, but also read some books on small business procedures. The Small Business Administration has all kinds of resources and information on its website at www.sba.gov.
This chapter only touches on the basic steps you will need to take to set up your new business. These are just the starter steps, whereas later chapters on marketing, computer technology, database management, and representation of your clients will round out the training you need. They didn’t build Rome in a day, and you won’t build your new business in one day either. If you begin it according to the steps in this chapter, it will be assured of a good foundation. The first step to take is to get some reality training.
A Dose of Reality Training
Realize that you are not prepared for the job ahead. Many people earn four- to eight-year degrees in institutions of higher learning to engage in professions that feel like kindergarten class compared to the transactions you will handle. Yet the real estate industry turns out agents to handle complex, multifaceted real estate sales transactions with just a few months of preparation. You therefore have a tremendous reality gap to bridge between what you know and how to make a living in real estate.
Unless you spend two years assisting a top producer before you handle your own deals, you must come to terms with the fact that you will not have enough time to gain the experience you need. You may make some serious and frustrating mistakes. For the first year or two anything that can go wrong will go wrong in varying stages of your transactions.
FYI!
Ask each of the experienced agents in your office whether they will let you track one transaction with them. This will be invaluable for you. If you limit your request to just a single transaction, you are more likely to receive a gracious response to your request. Although busy agents are hesitant to commit to mentoring you for any period of time, offering to help them on one transaction has an altogether different ring.
It often works like this: you master multiple listing entry, but then handling contingencies plagues you. You get contingencies down, and then dealing with price reductions becomes the new monster. You feel like you’re back on track, and then a title issue comes in the side door. In real estate, where there are so many different roles and issues to deal with, the only way to ward off problems is to be a seasoned agent.
New agents are often taken advantage of by the public; often clients expect new agents to drive them all over the universe. You are likely to be abused by other agents who forget they were once in your position. You may also be led down a rosy path by those who see new agent naiveté written all over you. You may even make legal mistakes, and you might get involved in unethical situations without even knowing it.
When these things happen, as they shall, don’t be surprised. If you’re not surprised, your clients and peers won’t be surprised. Stay calm, and sit down with your mentor or your manager and discuss situations as they arise. Don’t take these issues to heart, but learn from each situation. With that said, let’s plan your business so you can get through your experiences with as much ease and support possible.
Obtain Office Training and Support
Remember the number-one regret agents had about the beginning of their careers? Let me remind you in the words of one agent who mirrored what a large group of her peers had to say:
I wish I had involved myself more fully in my office. There is nothing that makes you feel more insecure than watching these gung ho producers handle five deals at a time, and you don’t even know the first step to take. Don’t sit there. Find mentors, go to open houses, scout out a subdivision and find out everything about it, and ask agents in your office to let you tag along.
The very first step is to immerse yourself in your office. Hopefully, your office will have a well-developed training program and a good office manual. If the mentoring you need isn’t available, find it. Your local association, discussed later in this chapter, will have a variety of programs and support aids available. If your office manager or the rest of the agents are not very forthcoming, you may have to reel them in. Everybody is busy doing what they were doing before you joined the office, so it is probable that you will have to build your own office support.
FYI!
Recall, seasoned agents have often looked back and wished they had chosen their first office based on the quality of its training program and new agent support.
If your office manual isn’t detailed enough, supplement it. It is helpful to everyone in an office, and others are often willing to participate in sharing information with you because they will benefit from your product. A detailed office procedures manual is worth its weight in gold. It will get you through those inevitable, difficult times during your first year when you have no idea what to do. Statistics show that you will stay at your office for at least seven years. It is worth spending the time to set up a system that works for you.
You should also establish relationships with key players in your office. Don’t come with a “what you can do for me” attitude. See what you can do to assist others and become a member of their support team. Determine who the top producers are and offer to assist with their transactions without pay, or offer to act as their administrative assistant. Seek to learn and contribute to the office. Top agents are the very best training tools you could ever pay for. Give thought now to choosing a person in your office to act as your mentor and possibly another person to partner with you.
Finally, and probably more important than anything else, always remember that you and only you are responsible for your success or failure. While you want to eke as much mentorship as you can from your office, you do not want to rely on them to either motivate you or make your business grow. Hopefully, you chose this office for its training and support, but the most important mindset you can have is, “No one is going to do it for me.” Don’t ever sit around the office waiting for something to happen. Follow the lead generation model in Chapter 13 and know that you will succeed; it is just a matter of time.
Agent to Agent
Did you know that the term Realtor is trademarked by the National Association of Realtors and can only be used by members? Go to www.Realtor.org to find out more.
Make Lead Generation Your First Priority Every Day
This chapter contains several steps you should take to make your business a success. By no means, though, should you make these steps more important than lead generation. Marketing for optimum lead generation is something you will do every single day for at least two hours a day. It is only after your lead generation activities are complete that the steps of this chapter come into play. You will encounter your marketing choices in Chapter 10 and your Master Marketing Model in Chapter 13. Just be aware that two hours of each day will be spent on marketing. Do not ever let yourself slip on this. Leads are your lifeline.
Participate with Your Realtor Associations
After you seek training in your office and after you make the best of your office situation, obtain training and support from your local real estate association. Each locale has its own real estate association that provides social and educational support to its members and affiliates. Along with your office, your local association will become the heartbeat of your real estate community. Get to know your local association and its staff. This association is like family to Realtors, and you can reap the benefits of its education, social events, and unbeatable community.
When you join an office, you become a member of your local association. You also may choose to join the statewide association and the National Association of Realtors. None of these memberships is mandatory. The only mandatory membership is with the real estate commission that issued your license and monitors your continuing education requirements. Your local Realtor association will have a continually growing list of educational programs and social events. The educational programs are usually very good as top educators and motivational speakers tour the real estate associations providing quality programs for continuing education credit.
The social events are usually loads of fun. There are bowling events, ski trips, golf trips, gambling excursions, and cruises. The local Realtor groups celebrate everything. And if there is nothing in particular to celebrate, there is a dance or an auction just for a reason to get together. They also sponsor events supporting local charities. Real estate has a unique sense of vitality and community that is not as common to other professions.
Your local real estate board, your state’s board, and the national board also have websites with databases of statistics and other valuable information you should review regularly. These excellent websites are sources of legal, economic, and educational information as well as standard transaction forms.
Your local association also has a store where you can purchase signs, forms, and just about anything you’ll need to practice real estate. You can lease your lock boxes and keys through the association. Your association also has boards and committees you can serve on. This type of service doesn’t network you with clients, but it does present valuable opportunities to learn and to bond with your fellow agents. In the bigger picture, this type of service will gain you recognition from both clients and other agents as you will be thought of as one of the movers and shakers of the real estate community.
def•i•ni•tion
A lockbox is an attachment to a door that holds the key to that door. Agents have access to the lockbox so that they can obtain the key to a property on-site. Many areas have adopted electronic lockboxes that track which agents visited the location, so that the listing agent has another tool for follow-up.
Know the Market
It’s time for boot camp. Put on your boots, or at least your comfortable walking shoes, and walk the market, talk the market, and see the market. It will take time for you to talk market, but you will begin to if you saturate yourself in it. So how do you get prepared?
Check Out the Multiple Listing Service
Each locality has a multiple listing service (MLS) for its sales and rental listings. Most multiple listing services operate independently from real estate associations. Just about every licensed agent or broker belongs to the MLS, which provides a database of current and past listings of properties for sale and for rent. Through the MLS, the agent lists a client’s property for sale or rent, and all agents belonging to that service can view the listings. Some services provide listings for an entire region; others handle one specific geographic area.
FYI!
The listing on the MLS will tell you specific information about the land, its building(s), and its listed price. It also will tell you commission amount and the property’s showing information. There is a photo (or multiple photos), an embellished description, and contact information for the listing agent. There may be additional information, such as a date that all offers will be received, or any special terms, such as whether the owner will carry back financing or a special closing period.
Most services also provide a great deal of information beyond listings. For example, they provide tax assessor information and other agent and office data so you can track market share. We now have the capability for e-mails of new or changed listings to automatically be sent to designated clients and prospects. Marketing is at its best when it happens entirely without you. The more computer-savvy you become, the more benefits you will obtain from the MLS.
The MLS is your best course in real estate economics and statistics. Using the MLS is the course you did not receive in preparation for your license, but it is the one that really makes you a real estate agent. Once you understand the local real estate market and its statistics, you will begin to think like a real estate professional.
Here is a list of the primary statistics to study and compare to the same timeframe from the year before:
• Active listings in the area of your practice
• Average list price
• Average sales price
• Average time on market before sale
• List price versus sales price ratio
• Number of sales year-to-date
• Current interest rate for 30-year, fixed mortgage
Each MLS tracks these statistics. They are easy to retrieve, but you need to understand them. Sit down with your mentor or office manager and talk about these numbers. Only by comparing current statistics with one another and with statistics from the year before can you establish and track the economics of your market. You will see how prices compare to the year before, whether the market is slowing or quickening, and whether it is a seller’s market or a buyer’s market.
Now see how your area’s statistics compare with surrounding areas and with the state and country as a whole. The website for your state association will provide data on where your area ranks within your state. How does its median home price compare to the immediate surrounding areas? Compare your local and statewide median home price to the national median by going to Realtor.org, the site of the National Association of Realtors. It gets very interesting when you start to put these statistics into perspective.
Agent to Agent
The National Association of Realtors has two websites, www.Realtor.com for the consumer and www.Realtor.org for agents. You should familiarize yourself with the consumer site so that you can direct your clients there. The agent site includes business management tips, breaking news, and the latest industry statistics and trends, sales and marketing tools, legal tips, and educational opportunities. In Canada, the national website is www.crea.ca.
Tour Houses
Study homes on the MLS, the inventory that makes the statistics. It would take you three hours to physically tour three properties. On the MLS website, you can tour at least a hundred in that time. It’s not like opening the kitchen cabinets or walking through the garden, but you can see all of the properties’ statistics along with a variety of pictures for each.
Through a careful study of the current active and recently sold listings, you will begin to understand value in a specific area. You will also start to understand per-square-foot figures when you divide the square footage of homes into their sale prices. You will see which areas appreciate more than other areas, and you will gain a sense of how long homes take to sell.
To complete your boot-camp training, move offline and into the field with some of the active listings you studied, physically touring these properties. This is where it gets fun. The numbers you’ve studied become homes and gardens. Hold the listing in your hand as you tour a property so the property’s statistics are at your fingertips. Make sure you know the number of bedrooms and baths before you tour. Know what the siding is and how many fireplaces there are, and so on. Your primary reason for touring is to match up the physical product with its listing price and listing features.
Cave!
Go to properties on your own or with your mentor, hold the listing in hand, and make believe your clients are with you. Now’s the time to perfect your touring style, not later when potential buyers are bombarding you with questions.
The market statistics you studied and the physical features of these properties will begin to relate to one another. An updated bathroom spells value, whereas a fully landscaped garden may spell work. Watch these listings as they travel through sale, and you will understand what makes one property more marketable than another. You may get a feel for why one property gets an offer in just a few days while another one goes through multiple price reductions and becomes stale.
Let seasoned agents in your office know you want to be included in listings they have obtained. Offer to sit for them when they hold open houses. Keep up your study of the market and tours of properties until you have a true understanding of value, property features, and your own local real estate market. Make sure you track the status of properties you tour. This type of monitoring will give you the very best sense of your local market.
Get to Know Your Local Neighborhoods
Tour a different neighborhood every few weeks. Pull the active and sold listings for that neighborhood. Get a feel for neighborhood value in relation to your entire area. Drive around and become acquainted with the amenities that make a certain sector a unique community. Know its proximity to transportation, major city centers, and other neighborhoods. Find out about the local schools and their reputations. Develop a neighborhood analysis based on your observations and the values you have established. You want to begin farming at least one neighborhood. Choose the neighborhood you want to make your own so when you get to the chapter on marketing you will have identified your farm.
It will take about three months of constant study and touring about ten homes a week to get a real feel for the market. If you religiously perform neighborhood analysis for the same period of time, you will develop a good understanding of your area as a whole and the difference in value among neighborhoods. You will tour a home and know which improvements increase value and which features make it more marketable. You will develop the ability to look at homes and come close to estimating the value without even reviewing computer statistics. One day you will drive by a house for sale, a price will come to mind, you will stop and pull the flyer—and you will be on the money. You will become a real estate pro without even realizing it.
FYI!
When you become a real estate licensee, bring out the teacher in yourself and develop a program accredited by your state real estate licensing organization. Through this, you will be more closely connected to the community and become recognized as an expert in the subject you teach. Why not teach a course on helping new agents set up their new business after you get yours running smoothly?
Upgrade Your Image
Real estate is both a highly visual industry and a fast track business. First impressions make or break you. This is probably a good time to hire an image consultant, but if this is not in your budget, step back and take a good objective look at how you present yourself. In a people business like real estate, you have to capture your client quickly. This requires a full assessment of your business surroundings in order to capture your greatest market wherever you go.
Cave!
Find an image consultant in the Yellow Pages under Coaches and Communications Consultants. If not under that category, look under Decorator or Interior Decorator and locate one who also handles personal décor. Also search the internet for someone local under any of these categories.
The major components of your image are: how you look; what you say; and the appearance of your car, your office, and your marketing materials. Before you begin to build your business, you want to make sure its basic foundational components are the best they can be.
How You Look
Do you feel good about your appearance? If not, this is the time to do something about it. Buy those better looking glasses, get a new hairdo that fits the image you want to project, commit to a program to lose the weight you put on while studying for your real estate exam. Use this as a time to upgrade yourself. Not only will you feel more confident about yourself but people will naturally respond better to you.
Do you have the wardrobe required to present yourself as a competent real estate professional? If you are in doubt about attire, wear something more businesslike than not. If you don’t have the clothes that make you feel successful, you will not have your best chance to succeed. If new clothes are not in your budget, go to a second-hand store. There is no reason to settle for less when it comes to appearance in a highly visual field like real estate.
Once you’re looking just how you want, go to a professional photographer and have a few pictures taken. You’ll need one for your business card, your marketing brochure, your web site, and your car sign. In real estate it’s not the properties for sale that get all the fanfare, it’s the agents.
Your Car is Your Calling Card
Since real estate is a field-intensive industry, you will be closely identified with your car. Does it project the image you desire? Look at the clientele you will target. What are they driving? You want your clients to feel an affinity with you, a similarity. Is your vehicle passenger and technology ready? You will be carting people around from home to home even if you primarily represent sellers because your sellers will also buy. Make sure your car is an inviting, comfortable place for them.
You also want to ensure that your vehicle is office ready. Are you able to set it up with all the materials you will need to efficiently operate out in the field? Is it easily adapted to charge your cell phone, PDA, printer, and laptop? Is there room to write offers and review documents? Does it have a global positioning system to direct you to listings? Some of these features can be deferred until you make your first few commissions but the basics should be on board from the get-go.
Now that you have your car ready for business, make it your mobile advertisement. Get a nice looking sign that magnetically attaches to your car and leave it on at all times. This sign will literally be your calling card. You are ready to broadcast your new profession to everyone you come across. You may as well take advantage of advertising as you drive the byways of your life. You will be surprised by how many people start real estate conversations with you just because of your sign. You won’t have to prospect for clients. They will drive up right next to you.
Since you will probably choose to farm your own neighborhood, the neighbors might as well know exactly where you live. What better way than to have your car in the driveway with your marquee visible to everyone who drives by. You might even want to invite them to drop in and see you and even leave real estate requests in your mailbox. We call this reverse prospecting—letting people know where you are so they can come to you.
Make Your Office an Inviting Space
Size up your office. Is it organized? Does it present a picture of competence? Will a buyer or seller feel comfortable in it? Is your computer monitor capable of touring buyers through listings as if they are on site? The more virtual touring you can do in your office, the less time you will spend carting clients around to properties.
Create a 30 Second Spiel
Don’t reinvent the wheel each time you encounter a prospect. It takes too much time and energy. Once you have assessed the markets you feel most comfortable in, you will know where your specialty lies. Are you good with decorating and can guide clients in preparing their properties for sale, will you provide a rebate to clients, will you provide a stager at your cost, will you specialize in certain communities?
Cave!
Don’t take your energy away from the real estate business by becoming a computer nerd. Get some basic training in how to connect your equipment and how to share information. Find a person who knows computers to help you. Otherwise, you’ll add a level of frustration to your business that will decrease, not increase, your productivity.
You will discover your particular unique calling when you put your professional marketing package together. At that time, sit down and create a short, pinpointed commercial about yourself and what you can do for your client. Then memorize it. When you network and encounter prospects, look them in the eyes, connect, and give them your spiel as if you just created it in their presence.
Create Professional Marketing Materials
Use the professional photo you had taken on all your marketing materials. To begin with, your print products will be business cards and a mailer. Make sure all your marketing materials, including your car marquee and open house signs, match. You want to convey one direct message in a visually consistent way.
Manage Your Own Business
When you decided on a career in real estate, you made a decision to become a small business owner. If that scares you, a career in residential real estate sales is not for you. Although you come under the umbrella of a real estate office, you are actually the owner and operator of your own real estate sales practice. There are some important administrative steps you must take as a small business owner. The following sections explore these.
Incorporate Technology Fully
Because the MLS is Internet-driven and the business model in this book is computer-driven, it is imperative that technology become the foundation of your business. Thus, Chapter 12 is devoted entirely to it, covering the computer programs you will require to manage contacts, e-mail, calendaring functions, word processing, Internet access, and accounting. Most agents have two offices and field locations from which they need the ability to access information and to communicate by voice, fax, and e-mail. The challenge of the highly portable nature of your business is solved with a laptop, a cell phone, and a PDA, all of which must work together.
FYI!
The vast majority of Realtors now have their own website in addition to the one provided by their office.
Include Web Technology
Web-based technology is a subject you need to understand and incorporate into your business fully. The way we communicate with others and receive our information has changed, as has the way we market ourselves. Just as every business has a physical address, they now have an Internet address too. The office you work for will have a web presence. But you also want to have your own.
The Master Marketing Model in Chapter 13 will guide you to the best website options. These days you can get a feature-rich website with database management and campaign-generating tools all built in. All you do is push a button and your Internet-based contacts receive your current newsletter. You don’t even have to prepare the newsletter—it comes packaged with your website, all for less than $500 a year.
Open Your Bank Accounts
You will need a business operating account for the commissions you earn and a client trust account for costs your client may deposit with you for payment of expenses. Your business operating account will be the main account for your small business where you will keep track of the income you receive and the deductions you take. You’ll pay all your expenses out of this account, so you must therefore track them to count as deductions on your tax return.
The trust account is required by law if you hold funds for others. It will hold any funds your client has entrusted to you which are to be used on their behalf. Until these funds are spent according to their instructions, they belong to the client and must be kept in a separate trust account. You are not required to have a separate trust account for each client, but you must separately account for their funds within your trust account.
Agent to Agent
Your trust account may have money from your clients for various expenses. Perhaps these are fees to a stager, a painter, or a carpet-cleaning service. Sometimes the client is not local to the property and asks you to coordinate with many people to prepare a property for sale.
Prepare for Tax Time
Now that you work for yourself, you are responsible for calculating and paying your own taxes. The days of receiving paychecks with taxes already deducted are gone. You have state and federal income, Social Security, and Medicare taxes to pay. You will pay a rather steep self-employment tax for the privilege of being self-employed. I realize it should be the other way around, but it is not. These taxes can easily eat up 40 percent of your net income.
You will need to make tax payments as you go along by paying quarterly estimates. You don’t want to get to tax filing day without budgeting for taxes. There are penalties if you do not make tax deposits as you go along. With most accounting software programs, your tax payments can be calculated as you deposit commissions.
If you have employees who are not independent contractors, you will also have to calculate and pay their taxes. An assistant will most likely meet the criteria of independent contractor, which means the assistant pays his own taxes. Workers are considered independent contractors if they have the right to direct and control the way they work, including the details of when, where, and how they do their jobs. If your assistant works out of her home at her own pace and works for others in addition to you, the independent contractor test has most likely been met. Virtual assistants are always independent contractors.
def•i•ni•tion
Self-employment tax is Social Security and Medicare tax paid by self-employed taxpayers on the net income from their trade or business.
An Independent contractor is a worker with the right to direct and control the way he works, including the details of when, where, and how he does his job. The independent contractor receives a 1099-Misc form by the end of January if he has earned over $600.00 from you.
When and if you hire an assistant, make sure you have him or her sign an independent contractor agreement that says what is described above. There is a fine line between employee and independent contractor status, so always watch that you do not cross it. If you do, the taxing authorities can assess you for any taxes that have not been paid both by you and by your employee. The very best way to stay on the right side of the independent contractor fence is to define only the work you want done, leaving your assistant to control how, when, and where the tasks are accomplished.
Deduct Most of Your Expenses
Now that you are self-employed, all business-related expenses are deductible. You pay self-employment taxes, so you want to meticulously claim all the deductions that you can as a small business owner. Pay all tax-deductible expenses out of your business operating account and itemize these expenses under the appropriate deduction category.
Know what deductions you can and cannot take. Your car is now a business expense, as is the business use of your home. All expenses you pay for education, including books you read, are deductible. Dues for clubs you join are also eligible as a deduction. Office equipment you use for your business is deductible. If the expense is related to business, take it as a deduction. This also applies to gas, auto repair, and auto insurance expense.
Save all your receipts for business travel, entertainment, and restaurants. You are required to itemize the specific people you met with, the dates you met, and the business purpose. This is the reason those big, ugly manila envelopes exist—to hold all your receipts in case you are audited. The reason is not to pull the receipts out at tax time and tally them up. You should implement a far better accounting program that tracks these expenses on computer as you go along.
FYI!
Here is a list of common deductions available to the real estate agent who works as an independent contractor:
• Advertising
• Assistants and virtual assistants
• Automobile expenses and lease
• Books and publications
• Business travel
• Dues to business-related organizations
• Education
• Entertainment necessary for business
• Equipment (including computers, phones, PDAs)
• Gifts to clients (all those gifts described in the referral stream system in Chapter 15)
• Home office use
• Insurance
• License renewal
• Supplies (including software)
• Postage
• Professional services
• Rent for office space
• Stationery and printing
• Telephone
• Website hosting and bundled services
There is a whole world of deductions available to you now that you are self-employed. From now on, whenever you pay an expense, go through the mental process of determining whether it is an expense related to your business. If it is, be sure you deduct it. The best way to track expenses is to pay them all through your business operating account or a business credit card. Make sure you have separate business and personal bank accounts and credit card accounts. The accounting becomes simple when everything associated with your business accounts is segregated.
When you pay your business credit card each month, allocate each item to its deduction category with your accounting software. You “split” the total bill into your deduction categories. For instance, your bill is $1,500, $230 of which was for advertising. Itemize this expense as “advertising.” The categories you use should be the same categories you will use on your tax return.
It is especially important to scrupulously document your deductions because they determine the net income your taxes will be based upon. You therefore want to have as many deductions as possible. If you earn $75,000 and deduct $15,000 for expenses, your taxes are based on $60,000 net. Your expenses are your way to receive tax-free income as long as you choose them carefully and document them well.
Set Up Your Retirement Accounts
Many agents miss out on retirement planning because it dawns on them late in the game that nobody else is going to do it for them. We CEOs of our small businesses don’t get the huge stock option packages others do, nor do we automatically have retirement accounts building for years as we toil away. We get nothing, a big zip, unless we begin saving for retirement early. When you set up your office, set up your retirement accounts. Build retirement into your overall business plan. If you set up these accounts with automatic payments from your operating account each month, you won’t even feel the bite.
FYI!
Take the time to consider available retirement options and build them into your business and accounting plan. Go to www.irs.gov and click on business, then small business, to review the simple information the government provides on traditional IRAs, Roth IRAs, Simple IRAs, and SEP-IRAs. A SEP-IRA is a simplified employee pension plan tailored to ideally suit self-employed people and small business owners. It is voluntary, and its contribution level is geared to increase as your income increases.
When you start out knowing you are the only one who will take care of your retirement, you will build in the steps required to fund your retirement. Don’t just automatically open a basic IRA. Review the options, talk to your accountant, and determine whether a Roth IRA or SEP-IRA, or other retirement option, is the best plan for you. Why pay taxes on income when you can legally divert income into tax-deferred or even tax-free retirement accounts? Setting up the maximum leveraged retirement accounts and creating future income streams (addressed later in this book in Part 6) will assure you financial abundance throughout your later years.
Package Your Business
Set yourself up as an entrepreneur with an entrepreneurial state of mind. Every successful entrepreneur sets up his business according to business opportunity resale standards to be sold later when it’s a profitable venture. Any business that has a longstanding client list and a good history of income can be sold as a business opportunity. The longer the business has operated and the more net income it receives, the higher its value.
This is the frame of mind you want to have when setting up your business. The last section of this book describes business opportunity resale packaging of your business in more detail. It is important to set up your potentially sellable business now in its beginning stages for resale later. Here are a few tips to consider:
• Keep good, clear, verifiable records.
• Have a good accounting program that tracks all income and expenses.
• Have your tax return mirror your accounting income and expense categories.
• Set up systems for doing business that will allow your buyer to operate your business as successfully as you did.
Each step you take with your business plan takes into account the marketability of your business. Will this feature make this business more marketable when later sold as a business opportunity? If you revise your business procedures, do it in a simple, straightforward way. If you have a choice between technology and archaic methods, choose technology.
Agent to Agent
Surf the Net for business opportunities to get an idea of resale standards. Just having the intention to build an enterprise that will have resale value gives you an entrepreneurial state of mind. See if there are any real estate practices for sale in your area. Why start from scratch when you can step into someone else’s successful shoes?
Make sure your records, both on the computer and hard copy, are clear. Keep your client base well organized in your contact management program. Your intention is to sell your flourishing enterprise when the time is right, even if it remains a one-person business.
Check Your Insurance Coverage
You also will need to contact your vehicle insurer to report that you are using your vehicle for business and chauffeuring clients. Otherwise, your insurance may not cover you for a business-related loss. Your office will also likely require you to list it as an additional insured on your policy. Your vehicle insurance will increase, so be prepared for that.
def•i•ni•tion
Errors and omissions insurance is known as E & O insurance. This insurance provides legal defense and coverage for claims made against you in your capacity as an agent. Most real estate offices provide this insurance for their agents as part of the fees they charge or in exchange for the commission split.
You also want to check on your new professional liability insurance. Lawsuits are a part of real estate. They go with any territory that involves high stakes. Real estate is about as high as you can get. Your liability insurance is called errors and omissions insurance, and covers you for any claim made against you for your real estate services. You pay your insurance through the office you hang your license with. Make sure the coverage is high and your deductible is low.
Take Construction and Architecture Courses
Real estate lingo is a vocabulary of its own. You need to know the industry-accepted terminology for all parts of a building, its components, its décor, and its land. The appraisal industry has its way of speaking. The construction industry has another. Architecture has a third. Decorating has its share, and landscaping has yet another. You need to know them all so you can intelligently communicate the names of features of a property. Some you met up with on your real estate exam. Much of this terminology may be new to you.
FYI!
Here are a few sample terms you will come across:
• Construction terms: dormer, wainscoting, rafters, trusses, load-bearing wall, joists
• Decorating terms: foyer instead of hallway, swags, cornices, valances
• Furniture styles: Chesterfield sofa versus the camelback sofa, Chippendale leg versus French provincial leg
• Architectural terms: crown molding and cove molding; peninsulas and islands; granite, marble, slate
• Landscaping: hardscape and softscape
• Engineering: septic systems, wells
When you get your license and become involved in the real estate industry, you are immediately catapulted into a whole different language. Read books on these subjects. Watch Home & Garden television and acquire an education in a week that will serve you well in your new career. Surf the Net. A dictionary of real estate terms will do once you know the words, but until then you need to learn what each feature is by touch, feel, and sight.
Take Continuing Education and Specialty Training
As with most other professional licenses, you must fulfill continuing education requirements to retain your license. These courses advance your expertise in your chosen field of real estate or help you to transition into another real estate field. If you plan ahead and choose your continuing education courses wisely, you will continually enhance your practice by broadening your marketplace and establishing your competence in chosen fields of expertise.
Although your job is not to give tax advice or legal advice, by honing your understanding of tax laws and contractual issues you will become indispensable to your clients and yourself. You will stand out as a career specialist who understands and takes advantage of the full benefits and ramifications of real estate ownership.
Agent to Agent
Continually monitor the continuing education courses offered by your local real estate association, your state association, and the national association. Why not take the best courses to help you specialize and become a Top Dog? You may want to begin working toward a special designation like Certified Residential Specialist (CRS) or Graduate of the Realtor Institute (GRI) offered by the National Association of Realtors.
Build in continuing education, not just because it is required by your license, but because you want to be a Top Dog in your business. Don’t wait until your continuing education hours are due to be turned in to take the week-long Real Estate Agent’s Grand Riviera Gambling Cruise. You may get a good tan and have a lot of fun, but it won’t boost your career in the least. Instead, continually monitor courses and pick and choose the ones that will enhance your marketability, your personal knowledge, and your own entrepreneurial skills.
The Least You Need to Know
• Your local, state, and national associations provide educational tools, statistics, and other valuable resources.
• The information and statistics on your local multiple listing service will become your education for the rest of your career.
• Consistently use lead-generating tools to build your business—and never stop.
• Now that you are a small business owner, payment of taxes, claiming deductions, retirement allocations, and resale value should all be built into your business plan.
• Training in computer technology allows you to market and organize your business and bring it everywhere you go.
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