CPA plus Realtor

[jeanniee]

I am thinking about revising my tax practice to free up some time and getting my real estate license with the plan to become a broker. Has anyone out there done that? If so can you provide me with some advice such as whether I should keep both businesses totally separate? I'm getting burned out on trying to cram another client into that narrow tax window. I live in a northern state where the cold winters are pretty much dead in real estate. The timing should actually work out pretty well. Any thoughts or experience in this area? Thanks!

[Mo Sheets]

Interesting Career Topic

I had my real estate license back in the early 80's and I can honestly say I wouldn't go back to that again. I love real estate, but you will spend a lot of time with people who want a house but do not have the financial means to afford it. Real estate sales is a business that you build over time. I'm not sure of the percentage, but my guess is 90% of the people who get their real estate license eventual either let it lapse or place it in escrow. You will need to pay your MLS dues which can get expensive, especially if you are not selling something every month.

I'm not trying to dissuade you, but if you are interested in a real estate career, sit down and talk with an experienced agent or broker who has been in the business for at least 10 years and listen to their complaints/concerns.

Good luck!

Mo

[JohnH]

And plan to never have a weekend to yourself again.

[AZ-Tax]

What I see here in AZ & my personal take

If there is any time of the year here that is slow for Realtors its this time of year with our HEAT thou dry still hot. I must receive a mailer once a week on average from a different realtor wanting to come by and give me a free valuation. I have seen quite a few homes over the yrs where the Realtor signs goes up and it does not sell and that is continuing. Since Realtors are paid by commission, that is no money for your effort and expenses. With AZ Realtors its my understanding Realtors are allowed to rebate which usually comes in to play on new builds but most Realtors despise it and get very irritated when you inquire about it but there is a handful of Realtors here in AZ that advertise the rebating.

Two of my current clients are Realtors and both have basically turned their interest somewhere else but keeping the license active. I had a few past clients that were Realtors and the highest gross I seen was about $19K. Realtors are not exactly the clientele I desire. The last house I owned I sold about 12 yrs ago I sold on my own and about 10 months ago I helped a relative of mine sell their home on their own and I plan to sell the house I am currently at on my own in the next couple yrs.

In addition to tax prep, I maintain some of my bus clients books plus I have a P&C Insurance Agency and have a Series 7 securities license.

[ATSMAN]

My sister in law decided to get her real estate license to supplement her income and it has not worked out in this market. The broker still charges you certain fixed expenses regardless of your commissions and at the end you may be just working for min. wage!

[TXEA]

I guess I have a little different take than the others. I would say go for it. I have several clients that maintain a real estate license along with another full-time or part time job, and they do just fine. They may sell three or four houses in a year and sometimes more. I think in today's world having other options to earn an income is important.

Yes, real estate agents come and go, but who is say whether you will be successful other than you. If you have built a tax practice, you can find real estate clients.

Just realize that in the beginning there will be some expenses for MLS fees, dues, etc that you will be paying prior to having any listings. So, some savings might help.

Finally, the tax practice and real estate sales should be kept separate for tax purposes.

[Gary2]

Aside: Just a reminder that the word "Realtor" is a privately owned trademark that shouldn't be used generically (even though it often is).

Now if only there were a professional designation for tax preparers that was used (or even misused) as much.

[Roberts]

Yes, definitely keep the business' separate.

Do you consider yourself a sales person? Real Estate sales is really hard work is you want to make any real money. Repeat customer business can be a difficult prospect compared to tax prep.

Doing real estate appraisals seemed like a good side business. You know when you are working that money will be flowing. In real estate sales you can work 40+ hours with a client and earn nothing.

I have a client (in theory). Biggest idiot the world has ever seen and yet she makes a living in real estate. Doesn't ever pay her taxes so the IRS is all over her but she does make a living. Last time I talked with her she said she wanted to make an offer in compromise but admitted she didn't expect to actually ever pay what we'd be offering.

[JohnH]

I have a few like that.
Sometimes I'm not sure if I'm providing tax preparation or baby sitting services.

[Roberts]

I have a few like that.
Sometimes I'm not sure if I'm providing tax preparation or baby sitting services.

I told her I'd do another offer when she paid me in full for my services.
I'm doubtful it happens.

[Burke]

A person who sells real estate, whether residential or commercial, must take a course and pass a state exam to obtain a license. They will pay for these expenses. Thereafter, one must affiliate with a currently licensed broker. After 3 years of active experience (in my state), one must go through the same process again to obtain a broker's license if they wish to be a broker. During the time one is a real estate agent, very few are successful part-time. Most broker's now require monthly "desk fees" or a percentage of their office expenses, including E&O insurance, which you will pay in addition to all of your own expenses as an independent contractor. They may also require a 20%+ commission on any sales. Many large firms expect a certain amount of income to be generated, or your contract is terminated. You will pay for all your own advertising and continuing education. The listings you obtain belong to the brokerage firm. If you leave it, the listings stay with them. There are NAR dues, local association dues, MLS dues, etc. So be prepared to spend some time at this venture.

If it were me, I would look to supplement my tax income in the off season with some other related business which can be obtained from existing clients to begin with, such as bookkeeping and/or accounting work, audit representation, etc. Many tax preparers do this and they are busy all year. I once knew a lady who was a very successful insurance sales agent with a nationally recognized company. (#1 or #2 every year.) She also was a real estate broker. And she had a tax business run by preparers who worked under her. Her clients did sort of "one stop shopping." She sold them insurance, sold them a house, and did their taxes. She was so busy, she had a driver so she could work in the car. She was an exception. None of these endeavors are a part-time job.

[Roland Slugg]

Hello Jeanniee

Has anyone out there done that?

I had both licenses in California for 24 years but let my REB license lapse at its next renewal after I moved to Nevada in 2007.

If so can you provide me with some advice such as whether I should keep both businesses totally separate?

What do you mean by "separate?" You should probably separate their functions, and definitely have separate letterhead, etc. I always had two sets of separate business cards and a separate phone number for each business.

If you associate with and perform your RE activities for another REB, it would probably be difficult to try to maintain your CPA/tax practice at the same location. However, this may depend on the size of the city where you are. If you don't associate with another REB, operating a combined RE and tax business out of a single location might work out fine ... especially in a small town.

I can think of no compelling reason to set up a separate tax entity for your RE activities. I always included my real estate income and expenses on the same set of books as my CPA practice, and reported everything on the same tax return. I did have separate income and expense accounts for each business, but all in one general ledger. That way I could easily prepare a separate income statement for each business while still combining everything for tax reporting.

[jeanniee]

Surprised and pleased to get so much feedback. I live in a small town where the only broker currently living here is an attorney. The other broker in town moved and was handling all his closings remotely. He needed a real estate agent to take care of business for him and asked me if I'd be interested. Just got an email from him. He has decided to close his office. All of the comments I received here were leading me down the path of not taking on this new venture. Probably best to stick with what I know. Thanks so much for taking the time to respond!