I made $18/hr last year... How much did you make?
I am an owner/broker in Boise, Idaho and saw this great post by Sergio DePinto breaking down the net per hour rate you make. I typically don't re-blog, but I enjoyed reading the nearly 200 comments so much I thought I would help spread the word.
One thing Sergio mentioned is that on the 300 days a year he works, he averages 14 hours a day. If so, I would suggest adding another factor in his equation for "overtime" since most jobs would start paying overtime after 8 hours a day. Therefore, he really should have calculated his time on those 14 hour days as a 17 hour day (8 hours regular time plus 6 hours of overtime at 1.5 pay rate = 9 hours = 17) so his rate would really be $14.82 per hour).
A number of the comments made it sound like it is difficult to track when really just take your adjusted taxable income divided by the honest number of hours you worked. So if you had $100,000 taxable income in 2009 and if you didn't do well itemizing and tracking your expenses you might have paid 30% in taxes (including 15% self employment tax). So with a net income of $70K if you worked an average of 60 hours a week (70 with my overtime calculation) and took 4 weeks off a year (unrealistic but a nice goal) you would be making $20.83 an hour net income.
So when the neighbor kid comes over to mow your yard to $10 an hour, delegate. When you can hire an assistant for $15 an hour, you are still money ahead. You need to learn how to do more of the $20.83 an hour tasks (prospecting, lead generation, doing presentations to buyers/sellers, writing offers, and showing up to closings) and let other people who are willing to do the things that don't require a license who are willing to work for less do so!
I have one lender that I know that color codes her calendar to show what functions she performs daily cost her money (red) and what makes her money (green). She works at making sure there are at least four hours of green time a day and she does really well financially!
CRS has a great formula for calculating your income and leads to closing to help you with this type of analysis too.
I used to find it annoying when people worked out my paycheck. Client, family and friends even my kids would multiply the price of the house I sold by 6% and assume the cash was all mine. They suspect I scored big time. Unfortunately, some Realtors do the same math, and get themselves into a delusion of financial success; a perception that can lead to personal bankruptcy.
I love what I do and I'm not overly concerned about how others see my commissions anymore. I've learned I have no control over what people think so I just smile and say "... when all the accounting is done, I'm happy if I make a living..." If I'm having an uppity moment, I'll comment "... We have an extra desk in my office waiting just for you... have you ever considered a career in real estate?"
Here's the real math:
In my area, most transactions (a little over 98 percent) are completed with 2 representatives, one representing the Seller and one representing the Buyer. The average commission for one end of the deal is 2.5%. Now, without divulging my gross income last year, I'll just say that I'm a top 5% income earner in my office, and that I have an average middle class lifestyle. Here are the facts of the business.
The capo; the big boss, the brokerage takes a well deserved portion of each commission; I take the rest to pay the following. (This is the same calculation regardless if the items are incorporated into the office fees, and regardless of your split arrangement, the brokerage has to recoup expenses somehow or it goes belly up) This is by no means a complete list but I budget and pay for the following...
Car (including fuel, repairs, lease, cleaning, insurance, etc..), phones (cell and land lines), computers and software, advertising, desk fees, signage, office supplies, promotional items, local board fees, registrar fees, affiliation dues, website, my assistant, referral fees, client gifts, business meals, professional apparel, private health insurance, pension saving (yes! I'm allowed...most employees get this as a benefit), equipment and data loss insurance, office equipment and furniture, photography, field supplies, sub-contractors (accountant, lawyer, videographer, staging professionals, etc...), newsletters and notes, postage, continuing education (most are mandatory), parking, internet services, and taxes, ( oh! did I mention I have to pay taxes... I pay taxes)
On average, I spend 14 hours a day working, thinking, and directing my business. On sick days, I usually invest 4 or 5 hours, and have my assistant work extra time to cover me. I took 4 weeks off last year, and I cannot admit that I was fully unengaged from the business, but I will exclude the time. I removed 37 Sundays completely, which I consider generous, and not part of the 4 in the holiday schedule. That's about 300 days or 4200 hours per year. So, that's $18 bucks per hour with no guarantee of work. The good news is that the year prior... I made less.
Last week I paid $72.00 for a service call to have my washing machine looked at (not repaired... that was extra), and excluding travel time, I worked it out to $45/hr. Hmmmm... maybe I should start working out other peoples pay the same way Johnny Q.Public calculates mine.
How much did you earn? Come on now... be honest... do the math!!!
copyright @ Sergio DePinto 2010
For more information please visit......4realestatecallsergio.com
All rights reserved, not to be duplicated, reproduced, or copied in any manner without credit and written permission of Sergio DePinto, Re/max Premier Inc, Brokerage. Vaughan, Ontario. 905.605.2900 direct, 416.987.8000 office. callsergio@rogers.com, www.callsergio.com. (Greater Toronto Area Realtor) Member, senior member-Toronto Real Estate Board, Ontario Real Estate Association, member of the Real Estate Council Of Ontario (RECO).
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