We all probably know what real estate agents are.
But not many know that they are also self-employed professionals (aka sole traders), or that they do things other than sell houses.
Let’s chat real estate agents.
What you need to know about being a real estate agent
Simply put, real estate agents organise property and house sales for their clients who are looking to sell their property. In Aotearoa, most real estate agents are independent contractors who work under larger real estate agencies. A really big perk of being a real estate agent, who is also a contractor, is the flexibility. They’re their own boss who’s in charge of when they work, where they work, and how they work.
The way real estate agents get paid is a little different to a salary/wage worker. Generally, they only get paid once they sell a property, as they work on commission. Their commission is usually a percentage of the selling price – so if you think about how much property can sell for… We’ll let you do the maths.
Because real estate agents are handling the entire process of selling a property (more on this in a bit), they often have a broad range of skills:
- sales,
- customer service,
- marketing,
- market analysis,
- financial knowledge,
- people skills.
Naturally it’s a very people-centred job (because people live in houses) so it really helps if you’re a people person!
What do real estate agents do for work?
Short answer; sell houses. Yes, that’s the ultimate goal, but there’s a lot more to it than that.
Real estate agents wear lots of hats.
People skills are a big part of what makes a real estate agent so good at what they do. Real estate agents are constantly networking and building good rapport with their clients. Good rapport means repeat business. It also means their services get recommended to other homeowners, which is crucial if they’re wanting to build out their portfolio.
Sales and marketing are also huge parts of the job. It’s a lot of work to bring a property to market; the property needs an appraisal, to be photographed, and the pictures need to go to print and online. Knowing the best time to do it is a skill in itself – a real estate agent will often need to evaluate the market for trends and advise their client of an optimal time to sell.
It may not be immediately obvious but real estate agents also have to handle a lot of legal stuff. As we previously said; real estate agents are facilitating some pretty big-value sales so understanding property laws and regulations and communicating this to their clients is just as much part of their day as their morning coffee. Not only is it encouraged to be open and honest, but The Real Estate Agents Act Rules 2012 actually requires real estate agents to disclose all relevant information about a property to potential buyers.
Taxes for real estate agents
If working as an independent contractor, real estate agents are responsible for their own tax admin (as if all the above wasn’t enough work, the fun never stops!). Let’s go over some of the important tax stuff that real estate agents should know about:
Business expenses
Real estate agents who are independent contractors are responsible for keeping track of and claiming their own business expenses. Here are some frequently claimed expenses for real estate agents:
Vehicle expenses
It’s common for real estate agents to travel for their job. The properties they are selling could be local, rural, or even a commercial property like an office building. Since they’re travelling for work they’re able to claim the business use of their vehicle expenses.
Home office expenses
Real estate agents aren’t your regular 9-5ers. They’re often working long or irregular hours which can include evenings or even weekends. Because of this, they should be able to claim a percentage of their household expenses
Licensing and education fees
It’s common for real estate agents to keep training even after becoming a registered agent. The cost of seminars, courses, and other ongoing training can be claimed if they directly help them earn an income. Plus the cost of renewing their REA (real estate authority) license, which has to be done annually.
Other common expenses
Other expenses include: mobile phone bills, entertainment expenses (if they directly help you earn an income, and accounting fees.
ACC levies
If you’re earning an income in Aotearoa, you are required by the government to pay ACC levies. They apply to everyone, even real estate agents. Paying your ACC levies mean that in the (hopefully unlikely) event you’re injured at work, you’re financially covered. Every industry has a different level of risk associated with it and therefore different industry codes. It’s important to make sure you’re on the correct industry code as a real estate agent so you can put aside the correct amount to cover your ACC levies.
GST registration
If you’re a real estate agent contracted to an agency, they may require you to be GST registered because they’re GST registered, and will charge this when they make commission from their clients.
If they don’t require you to be GST registered, or if you’re not with an agency, then it’s your responsibility to keep an eye on your income. As soon as you think you’re going to make over 60k in self-employed income in a year, you must register for and start charging for GST. If not, you could be slapped with a hefty tax bill come the end of the financial year.
Hnry for real estate agents
Now that’s a lot of info, and it’s clear that real estate agents are a busy bunch without all the tax admin – so why not let Hnry sort it for you?
Hnry is an award-winning accounting service designed specifically for sole traders. For just 1% +GST of your self-employed income, capped at $1,500 +GST a year, we’ll sort all your tax admin for you. Easy!
Save time, save money, and never think about tax again. Join Hnry today.
Share on: