As real estate professionals, you have been there. Sure, you have your commissions, but you don’t get them until later after the deals close. In the meantime, you have to pay for personal expenses. You will need to pay for business expenses as well.
The thing is, we all overshoot our budget sometimes and run into cash flow problems. And when we do, stress always comes along with it.
So how should you deal with cash flow problems and how do you avoid cash flow headaches in the future? For this one, we ask the Larry Weltman.
As they say, prevention is better than cure, so one very effective way of dealing with money problems is to make sure you never have to. And you can do that by saving and setting aside something you can use readily when funds get short.
If you make it a habit to save a portion of your income, you will have something to tide you over when times get rough. Try built up six months worth of commissions savings to float you.
Also look at establishing a bank line of credit – usually offered at close to prime bank lending rates. However mant realtors who are self employed hav difficulty with banks in this regard.
2. Do not spend the money in your head.
It is all very tempting. Once you come near to closing a sale, you will start to imagine how you are going to spend the money even before it is in your hands. You are already thinking about that new car that you are going to buy or about taking a long vacation in some tropical island.
Weltman says that this could be a recipe for disaster because you are going to rely on money that is yet to be coming in. This will embolden you to spend much more than necessary, too. It is better to spend money when you already have it.
And, hey, what if the deal just does not close? That would be such a bummer!
3. Do not ignore your cash flow problems.
It is normal to run into cash flow problems. Maybe that’s because you you have personal bills piling up, or you need to put oil into the machine to keep the sales moving and growing.
However, do not ignore an pending cash flow problems, they will only build and hurt your sale business. And he stress will only put you down!
Commission advances are a solution – whereby you can advance your pending firm commissions ahead of closing.
Look for an advance company that would allow you to get your commissions when you really need it. Take a look at their fee structure to see if you can afford the fees and that there are no hidden fees.