As we head into 2015, real estate CEOs, investors, and agents are dusting off new plans. However, their effectiveness in budgeting will make all the difference in whether they reach their goals or fall short. So, what essential items do these pros need to be budgeting for in the year ahead?
Even real estate professionals with a few months of experience are pretty familiar with the usual line up of business and operational expenses. Those that are serious about making it in real estate investing, as a Realtor, will already have business plans and cash flow projections laid out. So what we are focusing on here is the unexpected expenses that can really throw a wrench in those forecasts if not accounted for.
That said, what might you be overlooking in budgeting for 2015?
1. Technology
Even without jumping on the bandwagon to adopt new software tools, cloud storage, project management or property management apps, there will be technology expenses that can catch independent professionals off guard. New laptops, smartphones, and tablets are just a few of the items that need your consideration. Count on needing a couple backups and replacements too. New technologies are being released every day. If they can help your business, you need to take advantage of them.
2. Faster Internet
While Google Fiber and other hyper-fast internet developments of the last few years were sometimes ridiculed, real estate investors who use them are now enjoying the benefits of advanced speed. While seemingly minimal, this speed can keep you ahead of the competition.
3. Talent & Labor
Although talent and labor costs in the real estate world have already risen dramatically over the last four years, they are still just a fraction of what they used to be, and of where they are likely to go for those seeking the top talent. That said, consider some real estate experts are working for 10% of what they used to, and they are going to get hungry to bridge that gap. For those with great technology, high-speed internet, and great systems, this may not be as much of a big deal, as higher productivity and faster momentum can offset it, but it is critical to account for.
4. Real Estate Education
Every true professional in the real estate industry is going to be investing in education next year. They know it’s critical to get ahead. However, so many completely fail to budget for it. Beyond mandatory continuing education for Realtors and mortgage loan officers, there are subscriptions, seminars, conferences to send team members to, and coaching. Some of this may not cost more than a decent lunch, other parts might cost more than the car you had when you started in the real estate business. Decide now what level you want to be competing on in 2015 and beyond, and budget accordingly.
5. Escalating Marketing Expenses
Real estate marketing has been dirt cheap thanks to a slow economy and little competition. Those elements are changing rapidly. It’s only natural real estate advertising and marketing expenses will rise. More competition will drive billboard and outdoor advertising bids up. The new Zillow and Trulia merger, as well as new monopolies controlling large swathes of internet traffic, could make a huge difference in what you get for your dollar. Even postage and other parts of direct mail won’t stay this cheap forever.
6. Rising Interest Rates
While many have become immune and desensitized to the warnings of rising rates, they are inevitable. Just a couple point hikes will change the viability of many deals, purchasing power, and more. We may not see rates move at all in 2015, but those that are ready for higher rates will be ahead of the game.
7. Networking
In-person networking is a critical staple for real estate agents, investors and business owners. It is often seen as a free method of marketing and business building, but there can be a lot of associated expenses from travel to drinks and food, to business cards, and more.
8. Office Space
Whether an independent professional or business, there will be office space related financial needs in 2015. Some will need to scale in-house office space to accommodate swelling teams, others will need to budget for hiring meeting space on a regular basis. Even those working from private executive suites or from home with only remote support will certainly want to invest in optimizing their spaces for enhancing productivity and doing their best work.
