Selected for Tax audit illustration

2023 IRS Audit Triggers for Real Estate Agents

IRS Audit Triggers for Real Estate Agents

While you may be celebrating, or hoping for better things to come the following year, your income (or profit) is almost always in an inverse relationship with your tax obligations. While it’s better to owe a lot in tax than owe none, you will want to make sure that you are “in the know” with regard to the new tax law. With that in mind, here are some audit triggers as well as some changes to the tax law to help get you off on the right track.

IRS and State Audit Triggers

1. Your numbers don’t match. Make sure your 1099’s and W-2’s match up to what’s being reported to the IRS. This is the fastest way to get a letter from the IRS because the matching is automated and is one of the first things they look at.

2. You made a lot of money this past year. This one is simple, and it is good. You want to make a lot of money. However, increasing your income also increases the amount of your income the IRS could stand to gain by auditing you, if they think you aren’t being honest with your deductions. If you are making a lot of money during the year, be very meticulous with your record keeping, and make sure you can prove everything that you are taking as a deduction.

3. You made a lot less money this past year. This is not as good. If you made a lot less money, you probably also have a lot less of it laying around to pay taxes with, so an audit could be extra devastating. If you are legitimately reporting all income, you shouldn’t have anything to worry about, but if there’s a chance you might not have reported everything (even by accident), this won’t look good in an audit. It is best to keep meticulous records of all income so that you can show the accurate income amount in case the IRS comes knocking.

4. You are self-employed. If you are in real estate, this likely applies to you. Even if you’ve set up your business as a corporation or an LLC and pay yourself that way, you will still fall into a higher risk category than someone earning a paycheck from a large company. There’s nothing you can do about this, but you can be extra cautious about the deductions you take, as well as ensuring you pay all of your tax liability in a timely manner, with quarterly payments made if possible.

5. You deduct your home office and/or vehicle. You should! But you have to do this one right. You should get clear with your CPA on exactly how much is allowable for home office and vehicle deductions, as going over these thresholds can be a red flag that results in an audit, regardless of how much income you make. Be very careful to follow these guidelines.

  1. Client Meals are Tax Deductable.For only 2021 and 2022 meals with clients are 100% tax deductible.  The full cost of the business-related food and beverage purchase from a restaurant. Otherwise, years it’s only been 50% deductible.

To qualify for the enhanced deduction:

  • The business owner or an employee of the business must be present when food or beverages are provided.
  • Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
  • Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023.
  • The expense cannot be lavish or extravagant.

Here’s what business owners need to know about certain costs:

  • The cost of the meal can include taxes and tips.
  • The cost of transportation to and from the meal isn’t part of the cost of a business meal.

Entertainment events

Business owners may be able to deduct the costs of meals and beverages provided during an entertainment event if either of these apply:

  • the purchase of the food and beverages occurs separately from the entertainment
  • the cost of the food and beverages is separate from the cost of the entertainment on one or more bills, invoices, or receipts.

7. Are Commission Advances deductible? Generally the fee incurred would be deductible, but check with your CPA to confirm. A commission Advance is usually considered a business expense but improper documentation of this may lead to an unnecessary audit.

8. You were particularly generous this year! The IRS is always on the lookout for people who inflate their charitable donations and use a range based off a percent of income that is reasonable.

9. Big Deductions? Is one or two of your deductions exceptionally large and outside of the norm for your industry, income bracket or year over year trend.

10. Suspicious Round Numbers? Suspiciously round numbers on your returns will raise and auditor’s eyebrow.

11. Tax Credits? Claiming Tax Credits that aren’t yours.

Bottom line if you have questions about a deduction that you can ask your CPA, it is better to ask them instead of going through an audit after the fact.

About Us: Express Cash Flow provides commission advances for real estate agents and brokers. Check us out at www.ExpressCashFlow.com or call us at 844-818-2274.

10 Best Real Estate Recruiting Tips for Brokers

10 Best Real Estate Recruiting Tips for Brokers

Best real estate recruiting tips for brokers and teams on a minimal budget!  Get some new ideas and grow your business.

Expanding your office with a hands-on marketing and tracking approach can be extremely cost effective and efficient.  If you have some support behind you make it a team effort and delegate some of the ideas below.  Before you start on the 10 best real estate recruiting tips get a handle on your strategy:

  • Strategize on what type of agents will fit your culture the best; i.e.: new or established agents. Do you want self-starters or needy agents that ask you a lot of “How about this”, “What if this happens” questions?
  • Have a full media profile for yourself and your company. Actively use the account by posting about yourself, your brand, agents, properties, trends and other news.  Outsource this function to an admin/marketing person if needed.
  • The best real estate recruiting starts with…tracking every recruiting activity such as interested calls, phone interviews, in-person interview and offers made in an excel spreadsheet every week so you can see your activity and what your spending money on.
  • Go beyond compensation, make agents want to work for you and in your office. The highest commission split, biggest marketing budgets and lowest E&O insurance premiums are not all that matter. Make an exciting and welcoming environment for your new and existing agents.  Introduce them to your preferred title, escrow, and insurance reps.  Discuss tools and training that have worked in the past and open opportunities.
  • How much is this recruiting going to cost you in marketing, on-boarding, training and materials? If your escrows do get delayed consider a commission advance to help with expenses from Express Cash Flow at ExpressCashFlow.com.  They will provide up to 75% of your net commissions within 4 hours.

10 Best Real Estate Recruiting:

1.       Friends, Family and Associates

Post on social media that your looking to expand and grow your office.  Tell everyone! What are the benefits to working with you and in your office?

2.       Hold an office contest

Encourage your agents to setup appointments for you with potential prospects and reward them with $250 on each new hire.  Or maybe the prize is dinner with you or just recognition in front of the entire office.

3.       Targeted Mailings

Targeted mailings could increase your brand awareness but the list needs to be very focused so that the conversion rate is higher to offset the costs.

4.       Local Charities

Get involved in local charities and attempt to serve on a few non-related real estate boards in your community. Learn to tell success stories about past clients and how you worked in different situations.  Everyone wants to hear good stories so rehearse them for when you have a few minutes before a meeting starts, dinner conversation or just telling friends.

5.       Become Friends

Get to know agents from competitors in your area.  Comment on their posts.  Are they active producers? Work ethic?  Values?

6.       Open Houses

Open houses are a great way to meet other agents in a comfortable setting.  Introduce yourself, hand out business cards and tell them what’s unique about your company, marketing, and culture.   Always follow-up, it might take 2 months or 2 years but plant your seed!

7.       Recruiting Landing Page on Your Website

Have a landing page for prospective agents to learn more about your business and fill-out a small questionnaire.

8.       Ask your past Clients

Ask your past clients (buyers or sellers) if they know anyone looking for a new career?  Email, phone call, text message, etc. Maybe it’s a niece that is just graduating college, someone that is in retirement looking for part-time work, a teacher that has the summers off and looking for a pay raise?  You won’t know if you don’t ask.

9.       Community events – 4th of July, Open House, New Shopping Center, etc

Have a table with some free popcorn, give aways from the 99-cent store or kids toys with your contact information. This is especially important if its in your “farm” neighborhood.

10.   Senior Centers

The best real estate recruiting tip! You may think that once people are in a Senior Center they might not need a real estate agent but it is truly the office administrators that you might want to deal with.  What happens when a couple needs to move into senior center and they have to put up the deposit and sell their house?  The office administrators usually recommends a real estate agent or two in their area that can sell their house quickly for top dollar…THAT NEEDS TO BE YOU OR YOUR AGENTS!  Obviously, you might have to pay a referral fee but you should come out on top!

Hashtags: #RealEstate #Broker, #realtor #realtorlife #realtors #luxuryrealtor #topproducer #realestateagent #realtormarketing #recruiting

Qualified Opportunity Zones Tax Savings

Qualified Opportunity Zones Tax Savings

Did you know that there is now a better method of deferring capital gains tax on appreciated assets than a 1031 exchange?   Even better than that, did you know that it is possible to sell massively appreciated real estate free of any capital gains tax whatsoever? Answer Qualified Opportunity Zones!

One of the lesser discussed and lesser known aspects of the Tax Cuts and Jobs Act of 2017 was the formation of Qualified Opportunity Zones (QOZ) and Qualified Opportunity Funds (QOF).  It’s on page 130, and doesn’t directly affect you unless you have large quantities of capital gains on which you’d rather not be taxed, so I’ll forgive you if you haven’t heard of it until now.

If that situation applies to you though, it is worth looking into.   But how do you know if the situation applies to you, what is a QOF and what is a QOZ?  Glad you asked- that’s what I’m here to answer.

There are two sides to this legislation that can benefit different folks in different ways.  Let’s first start with people who have recently sold an appreciated asset and are going to have a capital gain.  That might already be some of you, and that may be others of you in the future.

In the past, if you’ve sold this appreciated asset (let’s assume it is real estate), your only option to defer capital gains via a 1031 Exchange, in which you must relinquish your appreciated asset and purchase a replacement asset within both a finite period of time and a stringent set of guidelines.  The problem inherent in doing that, though, is that if you are picking a particularly good time to realize your gains (seller’s market!), guess what you’re going to need to do in order to defer your capital gains?  You guessed it, buy into that same market.

Now there are ways around this, you can sell in an “A” market and buy in a “C” market, or you can sell a particular type of property (residential) and buy a different type of property (Industrial?) via which you will be able to achieve a higher yield.  Or you could turn one multi-family property in CA into 85 single family rentals in Ohio, which I’ve helped facilitate and absolutely do not recommend for everyone.

But let’s say you don’t want to do any of that.  Let’s say you just want to not pay your capital gains tax at all.  Do these opportunity zones let you do that?

Well… kind of.

Here is exactly what the IRS has to say about Qualified Opportunity Zones:

Q. How do Qualified Opportunity Zones spur economic development?

A. Opportunity Zones are designed to spur economic development by providing tax benefits to investors. First, investors can defer tax on any prior gains until the earlier of the date on which an investment is sold or exchanged, or December 31, 2026, so long as the gain is reinvested in a Qualified Opportunity Fund. Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor would be eligible for an increase in basis equal to the fair market value of the investment on the date that the investment is sold or exchanged.

Ok, so that’s a lot to unpack, and you can read more about what the IRS thinks are the important questions here, but essentially what the benefits actually are:

  • You can defer your gain until 12/31/2026
  • If you hold the reinvested funds via the QOF into QOZ assets for a minimum of 5 years, your basis in the original transaction increases by 10%, and if you hold for 7 years, you get an additional 5%, for a total of a 15% decrease in your initial liability (not bad!)
  • If you hold the investment for a minimum of 10 years, your basis upon sale is equal to your sales price.

I’ll go ahead and comment on those- 1 and 2 are cool if you’re talking about large dollars, but only really moves the needle if you are talking about very large numbers.  3 is a different story- 3 says that if you a buy a property through a QOF, don’t sell it for 10 years (or more), you pay no tax on the appreciation in that period.  This is an astounding bit of legislation, especially for those of us familiar with development and entitlements- things that generally take a while to accomplish, and see substantial amounts of profit (much of which is typically eaten up by capital gains tax).

If you’re like me, it might take a minute to fully appreciate the impact of that.  That means that if you buy a property in a QOZ via the captive capital gain in your QOF and hold it for 10 years, or more, your gain upon sale is entirely tax fee.  No two ways about it.  Just to make sure though- let’s walk through an example.

Let’s say that you sell your appreciated asset and that creates a capital gain of $2 Million.  You then invest that gain in a QOF, and that QOF buys property in a QOZ (also for $2 Million).

You then wait the requisite ten years (and remember, after year 8, the amount you are taxed on decreases to $1.7 M), and your property is now worth $5M.  The additional $3M gain is now not going to have any capital gains at all.  Zero.  $3M of tax-free gain… the holy grail of real estate investment (or any investment).

Ok, so these sound pretty cool?  Where are they?

Well, here.  And while the zones are certainly in places that you might expect them, they are also in a number of places you might not expect.  Huntington Beach?  Costa Mesa?  San Clemente?  These aren’t exactly areas that are screaming for outside capital to renovate a forgotten about and forlorn metropolis.  But, through the miracles of bipartisan legislation, they were included.

If you would like to know more about Qualified Opportunity Zones and how to best take advantage of this new and unique opportunity, feel free to reach out and we can connect on the topic.

Express Cash Flow – www.ExpressCashFlow.com

Recruiting Real Estate Agents pointing at contract

Real Estate Agent Recruiting Tactics

We all know that agent recruiting is the life blood of any successful real estate office, and it should be the goal to recruit the most, best agents.  But how does a real estate brokerage actually go about doing this?  Here are some of the tactics used by the most successful recruiters from around the world.

  • Some of the best agent recruiting is done by your current agents! Ask your agents whom they’ve enjoyed working with on past transactions, and whom they look up to at other offices.  Then provide incentives (trips, meals, a boost in their split) for the agents that provide you with the best referrals.
  • Get involved with charities and your local community. Sometimes the best way to find good real estate talent is in the most unlikely of places, and being involved in communities outside of your industry will help you grow your network immensely.
  • Get involved in communities in your industry, too! Hold a new agent training for your local board, and make sure to follow up with any qualified candidates.  Have your agents support you in this endeavor, and encourage them to follow up as well.
  • Email all of your top recruiting targets with their end of year sales and what they could have made working for you- NOTE: make sure you are confident of their current splits and that this would compare favorably before sending.
  • Organize an outing or mixer for some of your top agents to mingle and socialize with your top recruits, so the recruits can get a feel for what will allow them to continue to grow and succeed.
  • Everyone wants to grow their network, make sure you not only connect with your potential recruits on social media, but ensure that you impact your relationship with them positively.

Once you’ve had a chance to implement all of these tips, agent recruiting will no longer be about hunting whatever agents you are able to convince they should switch to you, but rather farming your various networks for the most, best agents around.

Happy recruiting!

Attractive blonde young woman at the wheel in her new car

Realtor Tips – Buy vs Lease Vehicles

Realtor Tips - Buy vs Lease Vehicles
Realtor Tips – Buy vs Lease VehB

Realtor: Buy vs Lease

A typical realtor makes well informed decisions when it comes to the vehicle they are going to drive.

In today’s economy, if car dealerships had it their way, everyone would be leasing their vehicles.

For starters, the shorter term life cycles of leases guarantee more transactions will happen, keeping dealer volume high.  When a customer returns a vehicle on lease to the dealership, multiple transactions happen.  In addition, customers enjoy the perks of a short term lease, such as a full manufacturer warranty, and customer loyalty is always the goal.  This is the dealer’s best case scenario.

Do Your Homework

Any realtor looking for a new ride will want to map out goals ahead of time.  Having a plan of what you want will help avoid the pitfalls of an unethical salesperson.  If you are going to consider a lease, keep in mind that realtors drive more than almost any other profession.  In fact,  National Association of Realtors (NAR) estimates the average realtor driving in excess of 30,000 miles annually for business alone.

Dealerships often offer leasing as an attractive option due to a lower monthly payment, but this can be misleading. The monthly payments may be lower and tempting, but so is the annual mileage allotment.  Exceeding this mileage allotment will result in extra payments, and possibly even a higher payment than the purchase option.

Let’s see which real estate agents should NOT lease:

Any agent who drives more than 17,000 miles per year. NAR estimates that its own agents average about 30,300 miles annually for business-related driving. If you do that much driving from open houses to showings, or if your lease is not set up correctly (cannot afford the payments of high mileage lease), don’t get talked into leasing a car. Since leasing companies charge between 15 – 30 cents per mile you drive over their standard limit of 10,000 miles annually, a 7,000 mile overage could end up costing as much as $2,100 at the end of the lease.

The Decision

If you are not into changing cars every three years, and would like to buy one and drive it until you are ready for a change.

If pre-owned is an option. You can save several thousands of dollars on a one-year-old, low mileage pre-owned vehicle.

It’s practically impossible for buyers—who on average only buy three to five cars in a lifetime—to keep track of it all and be informed enough so no one takes advantage of them. There are many loopholes and facts to be aware of and so make sure you do your homework before going into the dealer.

About Us:

Express Cash Flow provides commission advances for real estate agents and brokers.  Check us out at www.ExpressCashFlow.com or call us at 844-818-2274.

Top Ten Realtor Facebook Tips

Top Ten Facebook Tips and TricksThe Best Facebook Tips for a Realtor to Connect:

  1. As a realtor, your Facebook profile picture should stand out!  One of our best realtor Facebook tips is to have a professional headshot. Include all contact info including your phone number and email address.
  2. Let the world know you are their “Go to Realtor” in your introduction section.
  3. Join local community groups to connect with your customers, partners and prospects.
  4. Make sure your friends and co-workers know to “Like” and “Share” your post to reach more prospects. (Text them to “Like” it)
  5. Publish articles to show your knowledge of the industry.
  6. Contribute and comment to blogs and posts that industry leaders make.
  7. People love pictures and video! Get as many pictures of your listings and closings as possible on Facebook.  Do a video of you at your listing.
  8. Ask a title rep for all the homeowners in your farm and ask them to connect to your Facebook business page. This will take time but well worth it.
  9. Search leaders in your community and connect with them to share locally relevant info.
  10. Don’t forget that Facebook should be used for a balance of business and personal posts… too many of either will turn off your followers. Also watch your frequency, maybe 1 posts a day.  The best time to post is mid-day to get the most “Likes”.
About Us:
AgentBranch.com is a real estate recruiting platform for real estate agents and brokers.
ExpressCashFlow.com provides commission advances for real estate agents and brokers.
Real estate agent at work in California

Finding the Best Commission Advance Company

Real estate agent at work in CaliforniaThis past summer, the U.S. Census Bureau reported that single-family housing sales were at a higher level than they’d been in nearly 10 years. That’s good news for those who depend on the real estate market to make a living. Strong markets don’t always mean you are able to avoid a cash crunch, though. In order to quell cash flow issues before they become a burden, you might consider a commission advance company.

family-photo-of-new-house-being-built

Best Mortgage In America

family-photo-of-new-house-being-built

Mortgage Today

Applying for a mortgage can be a tough task for aspiring homeowners.  Especially so for borrowers with low to moderate incomes or perhaps less than stellar credit. While the availability of credit in the early-mid 2000s made it possible to get a mortgage, this was irresponsible.  These types of mortgages would typically include a teaser rate, eventually leading to payment shock.

These days, NACA seeks to avoid that mess.  In addition to a wide depth of resources available to homebuyers to ensure they get the best possible deal, NACA also provides what has been dubbed the “Best Mortgage In America”.  This means that qualified borrowers will be able to take advantage of the following mortgage perks NACA has to offer:

  • No down payment
  • No closing costs
  • Below market interest rates
  • No Points
  • Buy-downs to near-zero interest rates
  • No fees

Seem too good to be true?  For once, it isn’t!  What’s more, NACA is not a program only available to people with certain income or credit scenarios, it is available to all qualified borrowers who do not currently own a home!  Even if the desired property requires more renovation than the buyer can afford, NACA will finance that renovation as well to allow the buyer to purchase their dream home, even if it is a fixer-upper.

This underutilized and underpublicized product is a great tool in the tool belt of first time homebuyers and realtors alike who are striving to get the best deal.

You can read more about the different programs available at www.NACA.com.

 

About Us:

Express Cash Flow – Commission advances for real estate agents and brokers www.ExpressCashFlow.com.

When to lock mortgage rate

When to Lock a Mortgage Rate

When to lock mortgage rateReal estate agents are often asked to advise homebuyers on financial matters especially on mortgage rates and when to lock them in. These can be difficult conversations, because things like whether to lock or float an interest rate can be guess work. A mortgage rate lock simply guarantees a specific interest rate if a loan closes by a particular date. Rates can often be locked for up to two months. At Express Cash Flow, we work with agents to keep their cash flowing with commission advances, and we’ve picked up a few tips for homebuyers who are deciding when to lock in an interest rate.

Commission Advance Cost?

700x400_1 - Green Background

How much does a commission advance cost?

 

This is usually the first and most important question to real estate brokers and agents who inquire about commission advances. This is a very reasonable question, but not a simple one.

While other companies have flat fee or fixed pricing based on the amount requested for an advance, Express Cash Flow don’t operate that way. This is almost always to the benefit of the agent requesting the advance.  A one-size fits all approach doesn’t take into account the different variables of a real estate transaction.  It also doesn’t factor in experienced agents and inexperienced agents. If no two transactions and no two agents are exactly alike, then it makes sense that those transactions have different risks. If they have different risks, then it would only make sense that those different risks resulted in different pricing. So, what are the different risks, and how do they affect the commission advance cost?

Transaction Risk
No matter how solid a real estate deal seems, there is always the chance that it could fall apart. Sometimes a buyer is unable to qualify for financing, or has a cash emergency. While this is rare and unfortunate, it does happen. There are a number of hurdles to each transaction, and any of them can be its undoing. As such, an advance requested early in the lifespan of the transaction will always be more expensive.

Agent Risk
While there will always be risks associated with a transaction, we also measure your production history as a real estate agent or broker and the risk associated with a replacement transaction should your transaction fall apart. The more history of closed transactions you have, the lower our risk, and the lower your pricing will be.

Delay Risk
It is also entirely possible that there will be delays.  Because of this, we have to have protection from these delays since close of escrow date determines pricing. So, the only fees you will ever see besides our initial quoted fee is if your property does not close escrow on time. Note, however, that the close of escrow date we agree on does not have to be the same as the close of escrow date on the purchase agreement. In order to avoid these fees, you can project a close of escrow date after the scheduled close of escrow, which is a savvy, cost saving move.

Conclusion
There is only one right answer to our most frequent question “How much does a Commission Advance Cost?” That is, we don’t know yet, but would be happy to look at your scenario individually.  If you’re able to provide us all of the details, we should be able to give you a ballpark price.  The good news is, unlike some of our competitors, we give you the full amount you ask for and are paid back only at close of escrow, so our interests are aligned with yours throughout the transaction.

About Us:
Express Cash Flow provides commission advances for real estate agents and brokers. Check us out at www.ExpressCashFlow.com or call us at 844-818-2274.