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Tax Savings Strategy for Real Estate Agents – Accountant Mississauga

This article discusses a unique tax saving strategy for real estate agents. If you are a real estate agent, then it is very important that you read this article.

As a real estate agent in the top income tax bracket in the province of Ontario, you are paying tax at a rate of 46.4%. Now, wouldn’t it be nice if you could incorporate and pay tax at a rate of only 16.5%?

“16.5% is the corporate income tax rate for small business corporations in Canada. Unfortunately, the Real Estate Council of Ontario (RECO) does not permit real estate agents to incorporate,” says Allan Madan, Accountant Mississauga, Toronto, Canada.

So how do we solve this dilemma? It involves a series of steps, including the use of a management company. This article will walk you through those steps.

Create a New Corporation – Tax Savings Strategy for Real Estate Agents – Accountant Mississauga

Step 1 – Create a New Corporation – Tax Savings Strategy for Real Estate Agents

The first step entails creating a new corporation that is owned by your spouse. The new corporation will perform managerial services including marketing, administration, accounting and other functions on behalf of you, the real estate agent.

The new corporation will charge a fee to you for performing managerial services.

Determine Expenses to Charge

Step 2 – Determine Expenses to Charge – Tax Savings Strategy for Real Estate Agents

The second step is to identify the types of expenses that the managerial company will pay for and charge back to you. The expenses that you would ordinarily pay for as a real estate agent and that would now be paid by the management company include:

• Advertising, Marketing & Promotion
• Supplies
• Staff
• Rent
• Telephone
• Computer charges and internet
• General overheads

The above expenses should be charged back to you by your spouse’s corporation at cost plus a mark-up of 15 to 25 %. An invoice must be prepared detailing the expenses and mark-up.

Charge for Labour Hours – Tax Savings Strategy for Real Estate Agents – Accountant Mississauga

Step 3 – Charge for Labour Hours – Tax Savings Strategy for Real Estate Agents

The third step is for your spouse’s corporation to bill you for time spent (on an hourly basis) by the corporation’s staff on administering the marketing, administration and other functions on your behalf. The time spent by your spouse should also be billed back to you.

Write Monthly Cheques to Management Company

Step 4 – Write Monthly Cheques to Management Corporation

The fourth step is for you (real estate agent) to write a monthly cheque to your spouse’s management corporation for the services performed that month.

For example, assume that the invoice totals ,000 for the month. You (real estate agent) would receive a deduction for the ,000 paid at a tax rate of 46.4% (marginal tax rate). Your spouse’s corporation will pay income tax on ,000 received at a tax rate of only 16.5%. So you can see how we saved 30% of income taxes by simply using a management company structure.

It is very important that you have a management agreement in place that is drafted by a business lawyer and reviewed by a Chartered Accountant in Mississauga / Toronto / Oakville. The management agreement must comply with the Canada Revenue Agency’s guidelines and it must be able to withstand an audit by the Canada Revenue Agency, if an audit occurs.

Please do not attempt to create a management company and management agreement on your own.

Nowadays, everyone has a license to do the Real Estate Agent Jobs. If you are curious on what real estate business is, you must probably wonder how those real estate agents being compensated with their job. The agents are being paid by the commission that they receive or the percentage of the selling price. In this article you will know on how the agents are paid with their gained commissions.

In some cases, the agents split the commissions with the manager in the real estate office known as the broker. The agents have choices, either working at home or in the office, however they are still connected with the brokers because they are the responsible for the service. There percentage of split is different, but the commonly applied is the 50/50. The amount of the assistance provided by the broker and the service brought by the agent covers the percentage split. For an instance, the commission earned is ,000, the agent and the broker will divide it into 50/50 basis, ,000 goes to the agent and the other half is for the broker.

Another case is the 100% commission real estate. The commission earned by the agent is given to him fully. There are Real Estate agencies following this method. They have no splits and the agent could get the 100% commission they earn. This means that they will not give commission to the broker. In this method, the agent will pay the monthly fee to the office in order for the office or company certifies their name. By this, it may help the business or the agent to generate. The monthly fee could be a high, but the agents have to pay for it in order to get the full commission. In this situation, the costs are limited but the probable earning and the income is not limited.

Lastly, some of the real estate agents are compensated based on the referrals. For an instance, Agent A will refer a seller or a buyer to Agent B. Agent A may charge 25% referral fee. If Agent B close the deal and receives the ,000 commission, Agent A will receive ,500. Agent B would either split its commission to the broker or he would just take 100% balance commission, this will only happen if the agent is working on 100% commission Real Estate method of compensation.

Now, you already know how the real estate agents are being compensated. They are paid by their efforts through receiving a commission or percentage on their closed deal. The three methods of agents’ compensation are broker/agent split, 100% commission real estate, and the referral fee. Therefore, if you want to know the real estate agent jobs you must determine first what type of compensation methods you want. You should make certain that the compensation method that you choose will provide your needs. You should know also if the Real Estate Agency you are dealing with is reputable, so that you will not encounter any uncertainties.

Introduction:
A real estate broker or an agent is a person who act on behalf of the buyer and the seller i.e. customer and the supplier. Real estate agent is otherwise called as “sales person”. More or less a sales person and the real estate agent are one and the same. They find the buyer and the seller who wish to buy and sell.

They provide you information regarding the property and guidance to assist you while you’re willing to buy and sell the property. We find real estate agent any where around the world to guide us. In America, the relationship of agent or broker has been formed as per English common law to have a cordial relationship with their clients. The term estate agent is used to refer the agent.

What is equity?
The term equity refers to the cash value or a monetary interest given for your house minus the loan you obtained for your house. Even the additional cost incurred for selling a house will also be included. While buying a home you don’t have money for down payment, you can enter an agreement with the seller that you pay in a proper sum. It allows you performing needed repairs and maintenances such as painting, electric work etc

In a real estate agent we have two types of agent: seller’s agent and the buyer’s agent.
Buyer agent: buyer agent is a person who acts on behalf of the buyer who wishes to buy. The agent will find the properties which are listed in the market for sale. The broker will act as per the desire of buyer. The real estate agent will provide information regarding each property in the market and they also guide you in every aspect. They recommend on behalf of the buyer about the terms & prices offered for sale. A real estate agent will help you while negotiating the transaction and guide you in the final process.

Seller’s agent: he is a person who acts as per the desire of the seller. If the seller wants to sell his property, he calls upon the agent to list in the market. The real estate broker will give you details regarding the worth of your property, financing, terms and condition prevailing in the market for your property. Even the brokers list your property to other agents and also to general public. They help you in all aspect to complete your sale.

Do you identify your agent, how?

Analyze properly in the market who is the ideal broker.
Make sure that his listing are brought and sold correctly in the market.
Ask him, how he will list your property in the market.
Ask him to describe, how he identified the true value of your house.

You can ask yourself a variety of queries to identify a proper agent. When you identified, you don’t have to worry how to buy or sell a house.

Brokerage: for completion of his work successfully, a broker or agent get commission or brokerage for the services rendered. The commission percentage will be decided upon the value of the property, he/she arranged for the seller or the buyer. Usually states like America they have a fixed percentage around 5 to 10% Commission for a real estate. Both the seller and the buyer have to pay the commission. They can even transfer among them self. Commission will differ for each country according to their popularity. The expenses incurred by the broker will also be paid by the buyer and the seller.

Thus, real estate is a type of business where three parties involved. Namely seller, buyer and the agent. With the help of this service many are benefited. Real estate agent plays a vital role in developing the economy of the people. They provide useful services for the economy. One wants to sell or buy a property he/she can refer a real agent.

If you invest in real estate it is worth trying to find a good estate agent.

A real estate agent is one of the most useful resources for a real estate investor.

An agent’s job hinges on being knowledgeable about the real estate market. This knowledge includes property that is available for purchase, the exact thing a real estate investor is looking for.

When you are working with a real estate agent, it is important that you get him or her to understand that you are not the typical buyer or seller. Most real estate agents, if they have worked with investors previously, will already be aware of this. However, there might be some instances that you have to educate the agent on the way real estate investors look at buying and selling real estate.

Whenever you make a connection with a new real estate agent, even one that is already aware of an investor’s viewpoint on real estate, it is necessary for you to let him know the criteria you use for purchasing investment properties. Doing this ensures the real estate agent will only contact you with properties that have investment potential for you

Sometimes agents have their own questionnaire forms for you to fill out. In any case, the key information you need to relay to the agent includes the following: the criteria you use to purchase a property, your goal for purchasing the property, whether or not you wish to be contacted about properties outside your criteria and goals, total number of properties that you might purchase at a time, and any issues with financing that you might have.

If you are an investor that primarily works with properties that you can fix and flip, you need to let your real estate agent know the kind of “fixing” you prefer to do with your property. You might only want to do light repairs such as painting, replacing fixtures, etc. Perhaps, you are not one that shies away from houses that need extensive repairs like plumbing or foundation repairs. It is important to let your real estate agent know these criteria as well.

Keep in mind that real estate agents are paid commission based on the price of the property. When you purchase a low-priced property, the agent makes a low amount of commission on this property.

Unless you plan on doing the extra work associated with the purchase, like writing up the offers, it is a better business practice to compensate the agent for the time spent working with you. If the agent spends a great deal of time showing you properties, consider negotiating an hourly wage. The real estate agent will see that you value his time and is more likely to notify you with good investing deals.

In your career as a real estate investor, you will meet many people that will be of use to you. The real estate agent is perhaps one of the most important of these.

Maintain a good working relationship with agents by being clear on what you are looking for and compensating him for the time he spends working with you.

If you are buying a home, choosing a real estate agent may be the most important decision you make. A good real estate agent can help ensure that you are notified of homes that meet all your criteria. A good agent will also answer your questions and will walk you through the buying process, which is an invaluable service for first-time homebuyers. Despite all this, most buyers choose their agent in a completely haphazard way, simply falling into a relationship with the first real estate agent they encounter. A much better strategy is to do some sleuthing to uncover the agent who will truly help you find that perfect property. You can find the right professional by:

1) Interviewing candidates. It may seem like a lot of work, but comparing different real estate agents from different agencies can quickly show you which agents you respond best to and which ones seem to offer the best service. Interviews also allow you to assess experience, education, and other factors important in a good real estate agent.

2) Checking qualifications and sales. Look for a real estate agent who has some experience and has been on the job long enough to have expertise in the area. Ideally, you want someone who has worked as an agent for years in the same area and has an impressive sales record. In every community, you will generally find a few agents who perform very well because they know what they are doing and are good at what they do. Look for these agents and check to make sure that no complaints have been filed about them with the State Board of Realtors.

3) Lining up personalities. Buying real estate is highly emotional, so it is important to find someone you are compatible with. Look for a real estate agent you can really communicate with. If your personalities do not match, you may feel that your real estate agent is not doing enough for you and your real estate agent may get frustrated that you are not placing any bids. Find someone that registers a high comfort level with you and you can avoid these problems.

4) Making sure that your real estate agent is creative. Your agent will use the Multiple Listing Service (M.L.S.) to find homes, but he or she should also use their knowledge, contacts and experience to find homes that match your needs. You don’t want someone who can simply run simplistic searches you can run yourself from home.

5) Ensuring that your agent knows the area. A real estate agent who knows the area where you hope to buy can help you understand what is available and at what prices.

6) Checking customer service before you enter into a relationship. Real estate agents are busy people, but they should still be able to offer you good care. Your phone calls should be returned, your concerns should be addressed and you should be able to contact your real estate agent when you need to. If your agent uses an assistant, you need to ensure that it is the real estate agent themselves who will handle all work with contracts as well as the closing. That is what you are paying your real estate agent for. Stay away from agents who seem distracted, disorganized, and are not able to interact with you personally. You may find that your home buying experience suffers with these sort of agents.

The good news is that there are plenty of terrific, highly qualified real estate agents out there. Now that you know what to look for, you can hunt them up and have superlative help when it is time for you to buy property.