Archive for commission

Has The Real Estate Market Hit Bottom?

By Rob Minton · Comments (6) · Wednesday, November 3rd, 2010

This is part two to my previous article titled, “The State of the Union Address for the Real Estate Market.”

Before we get to the point of this post, we’ll assume that you’re reading my blog because your a licensed real estate agent. And if so, at least some portion of your income is derived from the sale of real estate. This would lead me to the conclusion that the real estate market is very important to you and, to some extent, you’re financial well being.

So let me ask you a question…

Has the real estate market bottomed out? Watch this powerful video to find out:

The news seems to indicate that our market has hit bottom and is now slowly starting to recover. Do you believe this?

The reason why I’m asking such an important question is because I’m trying to get you to think strategically about your business. You’re answer to the market bottom question will dictate the actions you take within your business. If you feel the market has bottomed out, you’ll happily focus on selling more homes to increase the revenue to your business.

However, what would you do if the market hasn’t hit bottom yet? Would you handle things differently today? If the market hasn’t hit bottom, home sales and market values will continue to decline. As noted in the video within this post, the market may not hit bottom until sometime between 2012 and 2015. This would mean another 2 to 5 years of falling commissions.

Scary, I know.

Although this is scary, it’s critically important to think your dependence on commission income. If the market hasn’t hit bottom, you need to be proactive about finding alternate sources of income. Don’t simply sit around hoping things get better, because they may not. Take action now to start generating new income streams.

It might be helpful to simply think about new income streams as a hedge (or back-up plan) for your business. You really have nothing to lose and everything to gain by hedging against further losses to your commission income.If the market has hit bottom and things are starting to get better, these new income streams will be a bonus. However, if we haven’t hit bottom as this video suggests, you’ll be protecting yourself and your financial well being.

As you probably know, I’m going to be releasing a new program for real estate agents that will help them start property management. The goal of the program is to help you diversify your income away from home sales. Whether or not you decide to pay attention to property management or not, you should definitely take action now to create new income streams that are not dependent on home sales. I know property management isn’t for everyone, but protecting yourself is.

If you are interested in the recurring revenue available through property management, you might want to sign up for my early notification list for my new property management program. You’ll receive priority access. Sign up here:

http://www.NotificationList.com

Comments (6)
Categories : Business Re-invention, Money Management, Succcess
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The “State of the Union” Address on the Real Estate Market

By Rob Minton · Comments (4) · Tuesday, October 26th, 2010

Before you read this article, you should understand that I’m an optimist and I do see the glass as half-full! However, I have learned to try and think accurately in my optimism. I have also learned to look for opportunity in adversity. In this article, I share what I believe to be the reality we face as real estate agents over the next few years. Hopefully, I’m wrong.

A few weeks ago, I received a new issue of the “The Campbell Real Estate Timing Letter.” It’s a great newsletter that studies the economy and the real estate market pinpointing when an investor should be buying or selling real estate. This newsletter is definitely worth subscribing to and studying. You can find out more at RealEstateTiming.com. (Full Disclosure: I’m not an affiliate and do not earn a penny for the recommendation.)

Robert Campbell tracks five “Vital Signs” for 17 housing markets. These vital signs are:

1.   Existing home sales
2.   New home building permits
3.   Notice of Defaults
4.   Foreclosure Sales
5.   30-Year Fixed Mortgage Rates

By studying these five “Vital Signs” for each market, Campbell is able to spot trends that can be used as a guide for when to buy or sell real estate. He has been publishing this newsletter for many years and accurately predicted the housing bust and his “Vital Signs” screamed sell back in 2006 and 2007.

His recent newsletter hammered home the message that our real estate market is poised for another drop. And sadly, I agree with his findings. I do not believe our market is going to rebound quickly, like many in our industry hope. And in fact, I believe it’s only going to get worse.

I realize gurus are only supposed to focus on positive, uplifting news with the “Go Get ‘Em, Tiger” mind-set. “You can do it, if you just put your mind to it!” All you have to do is dial for dollars. Unfortunately, this rah-rah attitude isn’t practical and can actually be dangerous for your business.

It’s critically important to think accurately about the state of the economy and the real estate market.

There are several reasons why Robert Campbell believes the real estate market is going to struggle going forward. However, the two main reasons are the persistent high unemployment rate and  the unusually high level of debt carried by the average household.

In fact, he wrote:

“With the U.S. unemployment rising to a totally unacceptable rate of 9.6% in August – it was 9.5% in July – the recession is not over, nor has the recovery started.”

The U.S. unemployment rate remained at 9.6% in September highlighting that fact that things are not getting better. This seems to conflict with a recently released report in the media, which stated that the recession was over.

Does the recession feel like it’s over to you? Do things feel like they are getting better or worse?

Christina Romer, chairwoman of the president’s Council of Economic Advisors said, “odds are high that even if we can somehow avoid recession, we’re facing a no growth/low growth economy – and this means the U.S. jobless rate will go even higher in the next 2 to 4 coming quarters.

This simply means we have a few years before things get better. Here’s an interesting quote from Campbell’s newsletter:

“How can you expect to have a legitimate recovery in real estate when the unemployment rate is likely to rise from elevated levels that are already near double digits? I’m talking, of course, about a genuine real estate recovery – one that is driven by true organic demand rather than by demand that is artificially created by $8,000 homebuyer tax credits, artificially low interest rates, and government intervention polices that keep the supply side of the equation artificially low as well.”

The most important part of this quote are the words “true organic demand.” Our real estate market will not recover until buyers really want to buy. This isn’t happening now and will not happen for some time. The second major problem plaguing the economy is the astronomical level of debt. Campbell wrote:

“Household (and non-profit) debt, which includes mortgages, credit card debt, auto loans, and student loans, peaked at $13.8 trillion in 2008. After two years of de-levering, however, the balance has only been brought down to $13.5 trillion.”

He goes on to argue that we need to get rid of another $3 to $4 trillion in debt before things really become stable. This additional de-levering of debt will take a number of years.

This has many implications for your real estate sales business.

Every single real estate agent in the states has already suffered many losses. The number of homes we sell on a consistent basis has dropped significantly. Even worse, our commissions on homes sold have dropped along with home prices. We now have to work a lot harder for a lot less money.

If Campbell is right, this trend is  going to force additional losses to your business, UNLESS you take action now. You cannot continue to focus on commission income from home sales as the main source of income for your business.  You must proactively diversify your income away from home sales. In a recent article titled, “4 Ways You Can Make More Money“, I highlighted a few ideas on how you can diversify your income.

One of the ideas presented was to consider starting property management services, because you’d set yourself up to earn recurring monthly revenue. More importantly, once you have a new property under management, it usually stays under management providing long-term revenue. This revenue can be used to support your business, if things do get worse as predicted.

In the next week or two, I’ll be releasing a new program that will help you start property management in your real estate business. This will include everything you’ll need to get started including how to get property management clients, property management agreements we use in our business, and how to automate property management without hiring any employees. Because this is a new program, I’ll only be releasing 100 copies and it will only be available on a first come, first served basis. If you’d like to receive early notification of when this new program is going to be released and have priority access, join the early notification list now at:

http://www.NotificationList.com

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Categories : Business Re-invention, Money Management
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Financial Advice from a Con Man?

By Rob Minton · Comments (2) · Saturday, January 2nd, 2010

In the midst of writing my new report titled “How Real Estate Agents Can Eliminate Negative Cash Flow in Their Businesses”, which will be released on Wednesday (January 6), I received a Men’s Journal magazine in the mail. The feature article titled “What I learned from My Father, the Grifter – A lifetime of lessons on money from a con man”, by Pat Jordan, summarized various money lessons learned from his father, who was a professional con man.

Here’s an interesting quote from the article:

“I know he would not approve of my mortgage, my car payments, my credit card, my monthly “nut,” which I can sometimes cover, but which often overwhelms me. That’s a gambler’s term – the minimal expense he needs to support his family. My father has always kept his “nut” to a minimum – rented apartments, cheap secondhand cars, no frills. No matter what, he always told me, a man has to meet his “nut.”

Both of these examples reveal the same lesson – keep your fixed monthly expenses to the bare minimum. The lower your “nut,” the more freedom you have in your business. The higher your “nut,” the less freedom you have in your business.

What it really seems to boil down to is:

If your “nut” is lower, you own your business.
If your “nut” is higher, your business owns you.

Or I can put this another way…

If your “nut” is lower, you can work less and enjoy life more.
If your “nut” is higher, you must work more and enjoy life less.

Bottom line – Your “nut” ultimately dictates how much happiness and freedom you’ll have in life.

Another way to think about your “nut” is that for every dollar your business spends, you must generate $5.00 of revenue after factoring taxes and other related expenses. Eliminate the dollar spent and you’ll have to generate $5.00 less in commission income. Aka – less work & fewer homes to sell!

How to Lower Your “Nut”

Let’s analyze some common business expenses your business incurs on a regular basis and see how we can minimize, eliminate or offset them:

1. Real estate licensing/CED/e-boxes/signs
2. Rent/Desk Fees/Commission Splits
3. Advertising
4. Payroll
5. Business Utilities
6. Website
7. Auto-Related Expenses
8. Dues & Subscriptions
9. Business-Related Equipment

In my new report, I detail exactly how to handle these 9 expenses using the 5 strategies listed below:

  1. Eliminate: This is easy to understand. Simply stop using the service or product and eliminate the expense all together. An example from my business was a voice broadcasting service I used to use in my marketing. I would send automatic voice broadcasts to prospects marketing various items for my business. The “Do Not Call” laws virtually eliminated voice broadcasting. This expense became easy to eliminate.
  2. Minimize: Try and reduce your expense. You might be surprised to find that you could get a reduction in many of your expenses simply by asking. Or if you can’t minimize, see if you can use the product or service less and negotiate a lower rate. For example, I have a bookkeeper help out with paying bills, reconciling accounts and preparing financial statements. She works one day a week. I could change her schedule to one day every other week. This would cut this expense in half.
  3. Reversing the Negative Cash Flow: This is a profound concept and can literally change your business dramatically. The idea of reversing cash flow is to generate income specifically to offset the expenses you must incur in your business. I’ll give you a few examples of how to do this later in this report!
  4. Targeted Investing: Investing into an asset that provides you with income to cover a specific expense for your business. For example, let’s assume you pay $100 a month for utilities. Can you invest into something which pays the equivalent of $100 a month or $1,200 a year to offset this expense? There are many stocks available that pay dividends. A few examples would be Nike (pays a quarterly dividend of 27 cents a share) or Campbell’s Soup (pays a quarterly dividend of 27.5 cents a share) and Sysco (pays a quarterly dividend of 25 cents a share).
  5. Restructure Expenses to Pay When Income is Received: The last way to eliminate negative cash flow in your business is to try and restructure or renegotiate expenses so they’re only paid when income is received. Almost as if they are to be deducted from your commissions. This way you don’t have to pay for the expense before getting paid.

NOTE: I’m only going to sell 100 copies of the new Zero Negative Cash Flow report and 57 have already sold to agents who signed up for the pre-release notification list. Watch for an email from me on Wednesday January 6 with the subject line “Eliminate Negative CF NOW!”

Comments (2)
Categories : Business Re-invention, Money Management, Uncategorized
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