Comprehensive Financial Advice for Real Estate Professionals

Read the full blog below to learn more.

  • Independent real estate agents face a unique set of financial challenges, and having an experienced advisor on your side is imperative
  • Through optimal cash flow planning, risk management, and tax strategy, alongside vigilant monitoring of possible risks, you can be confident in your business and personal financial plans
  • Future-proofing your practice is attainable, and we outline seven domains you must have covered

It takes a lot of hard work and dedication to become a top-producing real estate agent. Amid so many changes in the industry over the years and with new regulatory hurdles, maintaining consistent income while managing risk is a tall order. Nobody knows your business like you, and keeping a competitive edge requires constant effort. Delegating certain tasks to specialist professionals can not only save you time and stress, but your bottom line can also grow more smoothly through expert guidance. Indeed, building and growing your financial foundation is just as essential as each real estate deal you work so diligently to close.

At Clear Harbor, we focus on real estate professionals, unlike most other advisors who lack such expertise and experience of working with people like you along your financial journeys. Of course, we offer guidance to individuals, families, and business owners with their stock and bond allocations, but true diversification should have a nod to real estate. This balanced approach serves as a shield against stock market downturns, volatile interest rates in the bond market, and impactful events such as the 2008 housing crisis. The goal is to allow you to focus on your business and enjoy your life.

Now, one of the toughest things about being a real estate agent is that your days are long with few hours left in the week to optimize your personal finances, let alone a comprehensive plan. That is why it’s key to know what your possible blind spots are. Here are seven areas successful real estate agents must look for when selecting a financial planner.

1.     Managing Unsteady Income.

Entrepreneurs are well aware of the stress that comes with income ebbs and flows. You do not get a paycheck every two weeks. Rather, lumpy cash inflows make business decisions more complicated, and we commonly see real estate agents neglect their long-term investment plans as a result. An advisor helps develop a tailored strategy that accommodates fluctuating earnings. What’s more, by establishing a clear cash flow plan, you can confidently weather lean periods, make strategic investments during boom years, and maintain a lifestyle no matter what the volatile housing market throws at you.

2.     Better Risk Management.

That gets us to why it’s important to have the right cushion through risk management and insurance. Few markets are as inherently risky as real estate, and a quick market shift can negatively impact your practice’s stability. An experienced set of advisors, like our team at Clear Harbor, periodically assess your ability, willingness, and even your need to take risk. That means constantly monitoring your insurance coverage needs and developing proactive solutions so pitfalls are minimized.

3.     Helping Operate Your Practice as a Business.

Here’s where the right wealth manager stands out from the rest. While building a diversified and low-cost portfolio of stocks, bonds, and funds is always key, an advisor specializing in helping real estate professionals can be like your spotter on the dangerous racetrack that is closing transactions and helping buyers and sellers come together. We work with CPAs and attorneys to establish real estate agents’ practices under the optimal business classification structure, which can save top-performing agents tens of thousands of dollars annually. Furthermore, having a firm grasp of all your income streams and deductible expenses is critical to meeting local, state, and federal requirements. Real estate professionals sometimes forget to claim tax deductions such as commissions paid, marketing and advertising expenses, software and business tool expenses, and their home office.

4.     Exploring Private Real Estate Investments.

It’s always fascinating for us to help individuals new to real estate. It often begins with a side gig, but as the business develops, your workload turns into a 9-5 endeavor and beyond. At the same time, however, income grows and experience deepens. Before long, you might find yourself having an edge when it comes to identifying potentially lucrative private real estate investments. A specialized advisor can be your tag-team partner in guiding you toward top-ROI properties, working by your side to augment your industry insights. What’s great about private real estate from a holistic perspective is that it can diversify your investment mix just as well as any other asset class. Our skilled asset management team offers flexibility and speed to analyze and help you get in on the ground floor, so to speak. These investments, including multifamily housing, office space, or industrial & hospitality, can be effective in inflationary environments, too.

5.     Benefits Assistance.

How did you go about setting up your retirement plan? Do you have a SEP-IRA, Solo 401(k), SIMPLE IRA, or some other account? Are you taking advantage of the benefits that come with a Health Savings Account (HSA)? Are you able to use spousal health insurance? If not, are you sure that you have the best private health insurance? These are just some of the questions we ask to help form your best benefits strategy as a real estate professional. Also, a financial planner with prowess in student debt management and repayment is particularly valuable for all of the costly licenses and educational requirements that come with a career in real estate. Finally, you would be surprised how challenging it is for individuals in your shoes to take vacation time comfortably and confidently. That peace of mind is worth so much and helps you recharge.

6.     Ongoing Tax Strategy.

We love taxes at Clear Harbor. Well, we love it when we can minimize your long-term tax liability. What’s exciting for real estate pros is that with variable income comes the opportunity to really optimize a tax plan each year. Ongoing tax planning is not confined to your business – we fuse your investment plan to what is happening with your practice so that you retain more of your hard-earned income, year by year. And when our friends on Capitol Hill decide to write in new rules, our dedicated team can quickly pivot your plan to avoid you owing Uncle Sam anything extra.

7.     Planning an Exit.

Real estate agents with whom we partner usually have an eye on retirement, or at least making their work more of a part-time lifestyle practice. Planning for the transition to life after work has many facets, and figuring out if you have a sellable business is part art, part science. Here’s how we go about it. First, we help you determine your money values and goals. Next, we score your financial readiness to help form a comprehensive exit plan; including your partners (if you have any) is of course crucial, and we also work with agents who want to include their children or spouse in the business if they have a successor in mind. Lastly, exiting your business is certainly about the dollars and cents, as well as dotting all the legal I’s and crossing all the regulatory T’s, but above all, it’s about bringing together your actions with your aspirations.

The Bottom Line

Your success in the competitive world of real estate demands a robust financial strategy that aligns your money with your values. Partnering with a specialized advisor who understands the nuances of your practice, and real estate writ large, provides you with tailored solutions to meet a range of challenges those traditional W-2 workers just don’t understand. At Clear Harbor, we team with top real estate agents to help them manage variable income, business and personal risks, optimize benefits, and create a holistic financial roadmap with retirement as the destination.