Top 3 Expensive Mistakes That Cost Real Estate Agents > $5,000 Every Single Year!!!

This year alone, I have had strategy session phone calls with over 132 real estate agents/brokers.

As we approach the end of the tax year, I thought I share TOP 3 MISTAKES I learned during my calls with real estate professionals that are costing them thousands of $$$$ every single year.

1) Wrong Legal Entity. I noticed so many real estate professionals do not seek proper professional advice to ensure their legal entity is properly set-up so they are positioned to pay the minimum amount of taxes legally.

Legal entity has different tax rates. The tax rate for single member LLC is different from S-corporation or C- Corporation.

If you are currently a single member LLC, making more than $75k and your business is growing or expected to grow, then you really need to consider changing your legal entity.

There are several factors that determine which entity is right for you. Majority of my clients saved thousands of $$$$ by switching to an S-Corp.

S-Corporation owners MUST pay themselves a reasonable compensation. If you are an S-Corp and you are not paying yourself, you could get AUDITED by the IRS.

These could cost you thousands of $$$ in taxes plus assessed penalties and interests. Go to salary.com and determine what to pay yourself based on your state and job description.

2) Most Real Estate Professionals are NOT paying estimated quarterly taxes. If you haven't made any estimated taxes and you are expected to owe at year end, NOW is the time to perform your accounting and determine what your tax liabilities.

You do not want to wait until tax time and get slapped with a huge bill plus interest and assessed penalties. Estimated taxes are due April 15, June 15, Sept 15 and Jan 15.

3) Real Estate Professionals are NOT tracking their finances or they hire a bookkeeper who keeps their profit & loss as a SECRET.

As a business owner, you should know every single expense every month so you can have a perfect idea of your net profit on a monthly basis.

The reality is that there are thousands of dollars that go unaccounted for every year by not staying on top of your business finances.

Closing homes and getting checks are nice, but if they are going right out the window you are constantly chasing your tail.

Common guys, what's the point of working so hard if you do not know your true profitability every single month?

Here's my approach, if you are making less than $250k in sales, you should be keeping track of your income and expenses. At that level, no one understands your business better than you do. You should review your profit and loss statement every single month. Comment below if you need a template for tracking your expenses and income.

If you make more than $250k and decided to hire a bookkeeper, make sure your bookkeeper understands tax law. He or She should know what is deductible and not deductible.

Your bookkeeper shouldn't write off all your renovation cost in one year when you should be capitalizing your assets and recording applicable depreciation expenses.

All your credit card and bank statements should be reconciled EVERY SINGLE MONTH to ensure you are capturing all your expenses. Make sure your bank statements tie to your financial reports and your financial reports tie to your tax return.

ALWAYS HAVE YOUR DUE DILIGENCE FINANCIAL REVIEW EVERY SINGLE MONTH. If you need further assistance on what to look for when you are reviewing your financial report, comment below and I will send you a due diligence checklist designed specifically for our real estate clients.

Have a profitable week!