YYYYYAAAAAAYYYYYY!
One of my side hustles is real estate sales. I first got my license years ago just after I took the bar exam. Since I was already in test mode, I figured that I should go ahead and get it done. After the beast known as the bar exam, the real estate licensing course and exam wouldn’t be too big of a deal. I had recently began my career as a real estate attorney, and I thought it made sense to get the license. My former boss at a previous firm (a firm where I was a paralegal), an attorney who had been practicing for decades, once told me that he had often felt like he should get a sales license because he saw many deals in which commission dollars were being “left on the table.” So, I went ahead and got the license.
Right after I got my license, I purchased my condo. As a licensed agent, I was able to collect the commission on the buyer side of my own deal. In the end, I ended up walking away from my closing with a few thousand dollars in my pocket.
Then, I proceeded to do nothing with the license for years. Since I wasn’t doing anything with it, I figured it best to let it lapse. That was until around this time last year.
As I began to come to terms with the gravity of my financial situation, I thought that getting the license again would be a really good idea. This time, however, I would use it. I needed a way to supplement my law firm income. And I needed a way that could, potentially, produce some windfalls – big chunks of money at one time.
Speaking of big chunks of money . . . I just got my first commission on a sale listing!
~ Single Girl
Speaking of big chunks of money . . . I just got my first commission on a sale listing!
I sold a strip shopping center on behalf of a client. Here’s the breakdown of the money.
- Sales Price: $1,700,000
- Commission Rate: 2.5%
- Commission Split with Broker: 70% (me)/30% (them)
- Other Fee to Broker: 6%
- Commission Split with Other Agent: 50%.
A couple of things to note:
(1) Commission Rate: In a commercial transaction, the commission rate is usually higher than that in a residential real estate transaction. In a residential transaction, the rate is around 3% per side. The commercial rate usually ranges between 3.5% to 5% per side. I made the mistake of agreeing to cut the commission on account of the size of the deal and the fact that the seller wasn’t going to make much on the transaction. The seller was in a bad financial situation with their business and were desperate to sell quickly. Lesson learned. I will not cut my commission in the future. This was also an unusual deal because the buyer agreed to pay their own agent’s commission. Typically, the seller pays the commission for both sides of the deal.
(2) Commission Split With Other Agent: At the time I received the listing, I was overwhelmed with business travel and a couple of speaking engagements. The client was very high maintenance and, as I mentioned, desperate to sell quickly. In order to get the property listed swiftly, I needed help from another agent who could take action promptly and handle the initial research and other work that needs to be done upfront to get a commercial property listed.
Here’s the breakdown of the money in dollars:
You never know whether a deal will actually close. When it comes to income, it isn’t . . . until it is. In other words, I try not to count the money until the wires have been sent or the checks have cleared the bank. That said, I didn’t include these funds in my October budget. I’m handling these funds completely separately.
My business and life coach suggested that I allocate the funds according to percentages and to do it prior to actually having the money in hand – at a time when there’s no itch to spend the money because I see it in the account. I thought through the various parts of my life that need to be handled, then allocated a certain percentage of the funds to the different categories. This will allow me to address certain parts of my life that need attention, but will still allow me to tackle my highest priority – my debt. By using some of the money for sinking funds, I’ll be able to stop allocating money on a monthly basis for such purposes. For example, for clothing and car repairs I’ve been allocating $50 to each category every month in my budget. By funding these accounts with lump sums, I can refrain from funding those accounts over the next few months and focus on my debt snowball.
Overall, by handling the money this way, I feel like I am covering a lot of ground. From an emotional perspective, I see that I am making headway by paying off some debts, but am also managing my needs in a responsible way.
The one thing I know for sure is that I want to pay off the taxes that I owe for 2018. After that, I like the idea of using the percentage allocation model.
Here’s how the money will be spent:
- 55% ($3,569) – other debt, in addition to the 2018 taxes
- 10% ($649) – Health (e.g., eye exam, contact lenses; maybe eyeglasses)
- 10% ($649) – Personal care and clothing sinking fund
- 10% ($649) – Home repairs
- 10% ($649) – Miscellaneous
- 5% ($324) – Car care sinking fund
I didn’t set aside any of these funds for the payment of taxes – not because I didn’t learn the lesson from my recent tax debacle (see The Tsunami Situation – Tax Edition). When I checked the amount of taxes I’ve paid this year through payroll I found that I’ve already paid close to what I owed for last year’s taxes, even though my adjusted gross income this year may be a little lower than last year’s income. I’ve been making additional tax payments through payroll (i.e., an extra $150 per payroll check).
The reason I didn’t allocate more funds for home repairs for the special assessment that I’m expecting from my HOA (see Homeownership: A Speed Bump on My Debt Free Journey) is because I was told by the HOA treasurer that this likely won’t happen until 2020. I’m thinking that I can cash flow it, once the HOA details the payment structure for the assessment.
I’m grateful that this deal closed and that I’m in the position to pay off some things and fund some accounts. I’m also hopeful for additional side hustle income. I’m really going to need it!