How to Manage Cash Flow as a Real Estate Agent

Posted by Premier Commission on August 26, 2015 in Commission Advances, Helpful Tips, Real Estate Agent

For many real estate agents, the most difficult part of the job isn’t selling houses or finding new clients. Rather, it’s managing cash flow. Real estate is unlike nearly every other business in the world. As you know, there are no regular paychecks. There are only commissions.

It can take a long time to receive your commissions. Even after your buyers and sellers agree on an offer, you have to wait for the deal to close, which could take weeks or even months. In addition, you may even have to wait a few more weeks after closing to receive the commission. 

If you don’t know how to manage cash flow, your real estate career may not last very long. Indeed, many agents quit the business because an unexpected cost or emergency has hit them hard and they either don’t have the cash flow to cover it or don’t know when cash flow will come through the door.

Managing your cash flow can help you avoid these kinds of cash crises. Some simple planning can help you be proactive and take steps to avoid the next cash crunch. Here are three tips to help you keep your cash flow under control:

Use a cash flow planning system

The first step and most important step in managing your cash flow is to have a system in place. Far too many real estate agents use nothing more than a scratch piece of paper to do this, or they even keep track in their head. That kind of “back of the napkin” planning isn’t robust enough to help you avoid cash flow blow-ups.

Instead, use a system where you can clearly and quickly see all pending cash inflows and outflows. There are various platforms online that do this. You can also use an Excel spreadsheet.

Include every outflow that is planned for a certain period and all expected inflows. Plan out months in advance. The farther out you plan, the more time you’ll have to prepare for possible cash flow trouble. Look for time periods where cash flow is tight or even negative. Then take steps to address the issues, either by adjusting outflows or finding new sources of incoming cash.

Plan for the worst

One of the biggest challenges that many agents face is their own optimism. It’s easy to get caught up in all of the potential sales and add up the money that could be rolling in.

However, when you’re learning how to manage cash flow, it’s important to remember that pessimism always pays off. You want to plan for the worst case scenario. What if the buyer backs out of a deal? What if that house sits for months? What if the commission takes 90 days instead of 60 days?

Plan for the worst and you’ll be pleasantly surprised when you experience a better outcome.

Get some cash flow help

When you notice a trouble spot in your cash flow projections, it’s important to know that you have options. You don’t just have to sit on your hands and wait for your commission check.

One of the best options to facilitate a steady cash flow is a commission advance service. Premier Commission’s commission advance service allows you to convert your pending commissions into cash. The true benefit of having the available cash flow more than outweighs the minor post-tax cost of the advance. Learning how to manage cash flow is one of the most important skills you can learn as a real estate agent. In fact, it could make all the difference between real estate success and failure. Contact us at Premier Commission LLC today for more information!

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