As a real estate professional, you face unique challenges – long hours, intense yet rewarding work and the constant pressure to create outstanding results for your vendors and landlords. Somehow, you need to do this while creating a lifestyle that you enjoy – and preparing for the future. To enjoy today and build future wealth in a category as changeable as property, you’ll require a proactive, strategic financial plan that is specific to your career trajectory.
Whether you’re a sales agent, property management professional or Principal – your goals should lie beyond taxation compliance and administration, with a focus on wealth creation and financial freedom powered by your talent. Today, Wilson Pateras Principal, Brendan Farmer, talks us through the benefits that a specialised accountant offers to property professionals.
Why is specialist accounting so critical for the real estate industry?
All Australian businesses need to understand their profitability. Real estate agencies, however, have a unique structure with more moving parts than some other big business industries. Real estate businesses must balance the responsibilities of not only the employees working within their agencies, but also the transactions, ebbs and flows of their rent roll and sales divisions.
Whilst the sales division is often viewed as the most ‘profitable’ division of a real estate business, the rent roll should not be underestimated. While property sales bring in profit, this arm of business cannot be relied upon to bring consistent success. The rent roll is ultimately where the value of the business lies – it is tangible, it can be bought and sold, and it’s critical that a real estate agency understands the value of this.
In both of these branches the importance of reliable numbers is paramount. The data attributed to property dealings must be correct and must be continuously monitored. If the financial systems in a real estate environment are producing nonsense numbers – Directors, stakeholders and decision makers will receive nonsense advice about their agency’s performance and will make nonsense decisions that will impact the longevity of a real estate business.
How do a real estate agent business’ accounting and financial needs differ from other industries?
Real estate businesses have financial requirements that are unique to their business undertakings, structuring and property dealings. An example of this is a real estate business’ trust accounting responsibilities. Real estate agencies hold, release and transfer large sums of money for a variety of stakeholders. These transactions need to be heavily regulated, which can be a simple yet extremely important process. It’s an area of business that is scrutinised and audited regularly.
Economic factors also have a great impact upon the real estate industry. This was observed most recently with the response to the 2019 federal election. The property market was directly impacted by the election results – people who were holding off on purchasing property moved forward, interest rates changed, and the property market gained momentum. These economic factors whilst often unpredictable, can be easily absorbed with specialised accounting systems in place.
Real estate businesses also often hire staff based on commission, or a percentage of the sales or the rental income they manage. Some use a combination of a fixed salary plus commission. Commissions style structures can make payroll complex, as payments will fluctuate from month to month.
What are two common concerns that real estate professionals may have?
Like many businesses, real estate businesses are always concerned about profitability. They want to be producing good, consistent numbers. Good quality bookkeeping is the answer here.
Succession is the second concern. Or, rather, it should be. For a larger real estate business with multiple partners, multiple locations, or high turnover in the leadership team – a solid succession plan must account for the various risks to the business should any one of these elements be impacted.
How can Wilson Pateras best support real estate businesses?
Engaging a Wilson Pateras expert accountant to review and discuss these matters ensures that your numbers are accurate, and you’re working with real data – whilst remaining compliant with ATO guidelines. We’re able to structure a real estate agency in the most tax-efficient way, provide guidance on avoiding unnecessary expenses and sharing updates, reports and forecasts with a future-focused attitude.
Real estate can be a very profitable industry, and we’re here to work with agencies as they scale. We also work with individual real estate professionals to encourage accountability in spending, minimisation of tax and to plan for comfortable retirements. Ironically, many real estate professionals believe the only way to build wealth is via property. This isn’t true. Wilson Pateras can support real estate professionals widen their investment portfolios, through shares or SMSF structuring.
If you’re interested in further advice or expert guidance about specialised accounting services for the real estate industry, Brendan and the team at Wilson Pateras are just one call away! Learn more about how our experts can best support your real estate business here.