ORLANDO — “We work harder for our clients than any other industry I know,” Victoria Gillespie told attendees at the National Association of Realtors conference. But who is taking care of the real estate agents when they reach retirement age?

ORLANDO — “You all know what it takes to get a deal from start to close,” Victoria Gillespie told attendees at the National Association of Realtors conference. “We work harder for our clients than any other industry I know.”

But who is taking care of the real estate agents when they reach retirement age?

Victoria Gillespie

Victoria Gillespie

Gillespie is the senior vice president and national director of business development for the Realtors Federal Credit Union; in her session, “7 Financial Habits of Highly Successful Real Estate Professionals,” she advised the audience on how to manage their money.

Because life expectancy keeps going up, Gillespie noted that a big risk to everyone is outliving our respective retirement savings accounts.

“If you’re a broker in the room, let me explain to you: When you give agents on your team strategies for saving for retirement, you’re taking pressure off of them,” Gillespie said.

And as for agents, “If I don’t take care of my own retirement, there’s no company-sponsored benefit plan.”

Habit 1: Develop and use a budget

“Every time I sit down to do a financial review with a Realtor who wants to invest, they’re all working paycheck to paycheck, commission to commission,” said Gillespie.

Do you know what your expenses are? Gillespie added that although most of us are well aware of the big ones — the mortgage, the car payment — micromanaging your expenses for 60 days “comes down to the latte factor.”

“We’ll spend $5 on a cup of coffee at Starbucks and justify it because that’s where we do our networking,” she noted. Putting that $5 every day into a savings account instead of spending it at Starbucks would give an agent almost $2,000 a year to invest.

So there are “pockets of money” that you could be missing if you have never done a line-by-line, micromanaged tracking of your expenses over a period of time.

This isn’t just important for investing or retirement savings — Gillespie noted that agents should budget for marketing expenses during slower times. “When do you think you most need to suck it up and spend your marketing dollars?” she asked.

And professional development is also important, she added. Reinvesting in yourself and your business is something you need to plan for.

Habit 2: Develop and use a business plan

Gillespie said the first step in developing a business plan is defining your niche market. “If you say ‘I serve everybody,’ there’s nothing focused about that, and there’s no way you can market to the masses strategically.”

She suggested that agents have a primary and a secondary niche. “That’s the only way you’ll ever spend money and get a strategic return on investment.”

And she added that they should re-evaluate their plan regularly. “If you haven’t re-evaluated your niche in the last two decades, you don’t know what your niche is,” she said.

Where do you find a niche? Agents who involve themselves in community organizations or events, kids’ sports and other groups that meet regularly can all be good niches for Realtors, Gillespie said.

Habit 3: Develop and use centers of influence

Gillespie defined a center of influence as a person who can be a referral source for you.

For example, a certified public accountant (CPA) knows everything about his or her clients’ finances — and is also alerted when a client is getting ready to move, therefore giving the CPA the opportunity to refer the client to you.

Estate planning attorneys are another good source for centers of influence, Gillespie said. Heirs often want inherited property sold quickly so they can divide up the proceeds.

And agents should give before they receive, she advised. Offer free comparative market analyses (CMAs) to estate planning attorneys, for example.

“If you give and do the right thing in the right way, it comes back tenfold,” she said.

Habit 4: Hold yourself accountable to your numbers

Real estate is a numbers game, Gillespie said, driven by the following equation: activity x frequency = results.

“You can’t go into it and hope that the money is going to settle up in the end,” Gillespie said.

Agents need to figure out the answers to these questions:

  • How many properties will you list?
  • How many will sell?
  • What’s the average sales price?
  • How much income will you need to generate to cover your expenses?
  • What expenses have a high return on investment?

Don’t forget about Uncle Sam when considering expenses: “You need to be putting 20 to 25 percent of every commission in the bank,” said Gillespie, “otherwise you will not have assets to pay taxes.”

So, therefore, “if you know you need to sit through seven presentations to get two listings, and you need four listings, you can either go through more presentations” or increase your effectiveness per presentation.

Habit 5: Separate your business from your personal finances

Commingled personal and business accounts are “an audit waiting to happen,” said Gillespie, and it will be too difficult to analyze cash flow, income and expenses with accounts that blend the two.

Gillespie added that agents would be well advised to get a referral for a real-estate-specific CPA to help them legally maximize their deductions and ensure that their tax entity is the correct one for their business.

The No. 1 reason Realtors don’t maximize their deductions is because their record-keeping isn’t in order, Gillespie said.

“Even if you think your income isn’t at the point of needing a tax adviser, it’s going to set up an infrastructure for you to keep more of your income,” she said.

Habit 6: Save for retirement

“Unless we want to be selling houses when we’re 96 years old — which I’m sure we do! — we have to have a long-term, sustainable plan,” said Gillespie.

Saving money involves risk management — either investment risk or inflation risk. The stock market is never a guaranteed return; however, a savings account that gets a 1 percent annual interest rate is a poor choice when the annual inflation rate is 3 percent.

“I’m not professing that all your money should be in investments, but please look at if your money is accomplishing your long-term goals,” Gillespie said.

Agents should hire professionals who can assist them to manage risk — “You have an ailment, you go to the doctor. You have a legal matter, you go to an attorney. Ask colleagues who they use as an investment advisor.”

And agents should ask themselves these questions, or get answers from their professional financial assistants:

  • How much money do you need to save up each month to retire?
  • How long do you intend to work?
  • What amount of savings do you need to retire at your target goal?
  • How are you saving for retirement?
  • How much are you saving each month, and will that get you to your goal?

“Real estate agents don’t do the same hand-holding for themselves as they do for clients,” Gillespie said, but added, “if you don’t build a plan and adhere to it — it doesn’t happen magically at the end.”

Habit 7: Create an estate plan

An estate plan should include the following legal documents:

  • Will — states your final wishes and how you would like your assets distributed
  • Durable power of attorney — allows someone to act on your behalf in legal/financial matters
  • Medical directives — define your medical wishes and tell doctors what life-extending measures you do and don’t want taken if you are unable to communicate

Gillespie advised using a professional for all of these documents — although forms might be available for download off the internet, it’s worth the additional protection and peace-of-mind to have them drawn up by a qualified attorney.

Email Amber Taufen

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