What Do You Pay Yourself Per Hour:
I am of the firm belief that an agent needs to log all of the hours she spends doing real estate. Include time showing homes, writing letters, waiting for appraisals, and any other real estate task. Then the agent should get a copy of her schedule C and write down her "Net Taxable Income." That number is different than commission earned. Net Taxable Income is the amount left over after cost of doing business items like marketing and Real Estate Dues.
Once an agent knows her Net Taxable Income, she can analyze how productive she is. I believe what she should do is determine what she makes per hour. To do this she can simply log all of her hours in a given week and then multiply that number by 52 weeks. The agent can then divide her Net Taxable Income by the hours.
For instance:
Agent Joe Smith worked 45 hours this past week so... 45 X 52(weeks in a year) = 2340
Joe's Commissions Last Year were ................................. $62,000
Minus Marketing ..........................................$12,000
Minus Expenses ...........................................$ 3,500
= Net Taxable income ................................................... $46,500
$46,500 (NTI) / 2340 (Hrs. Worked) = $19.87 per hour.
It Boils Down to This:
Since agents pay higher taxes because they are independent contractors, Joe's hourly pay worked out to be about $15.50 per hour in the work-a-day, W2 employer world. In other words, making 15.50 per hour as a manager at McDonalds would put the same money in his pocket.
It's my opinion that an agent making less than $50 per hour either needs to increase productivity or get out of the business before he goes broke.
I'd love your opinions.
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