What they don't tell you about becoming a real estate broker

Welcome to CRE Broker Playbook!

One of the things they don't tell you when you're becoming a real estate broker is that you are now a business owner. You hear them say that the income is volatile, and you might not make money for a while, but have you thought about what you'll do when you start making money?

A lot of times, the answer is no.

Success happens slowly, then suddenly.

You've been paid lots of money directly to your bank account to solve someone else's real estate problems. And now you have a pipeline of your own problems to solve and money to be allocated to expenses, growth and taxes.

You have a business.

The truth is you had a business before too. When you couldn't pay back your $35,000 draw and accumulated $17,000 of credit card debt while living with three college buddies in that rundown house in the best part of town.

You were a business owner then. And you are one now.

But your floor isn’t just empty beer cans anymore, it’s $300K/year.

And you're 27. It just happened.

What do you do now?

💸 LEASED SPACE

Today's newsletter is brought to you by For CRE Brokers.

Mike Salmon and Jake Crandall provide CFO services to high-performing CRE Brokers across the country.

What started with our own tenant reps seeking financial guidance has evolved into a comprehensive service specifically designed for CRE brokers.

As both financial advisors and CPAs, we bring the perfect combination of expertise to assist brokers in optimizing their independent contractor status and 1099 income.

We act as your personal CFO, streamlining processes and ensuring you stay focused on growing your business while we handle the details.

Interested in learning more?

⚓ ANCHOR TENANT

The Choice You Have To Make

"Do I need an LLC?" "I've heard of S Corps." "I don't have enough money to pay taxes."

You have a decision to make when you get to this point. Are you going to:

1. Ignore this stuff altogether and just focus on making more money

2. Try to save money by doing all the financial stuff yourself, or

3. Find someone who knows how to take care of this stuff for you so you can just focus on making more money?

"It can't be that hard."

That's what I thought right before I was calling ServPro to vacuum the water out of my house after a DIY 'routine repair' to my washing machine.

Brokers lose thousands of dollars every year because of shoddy tax planning. It's usually a cocktail of penalties, interest, missing business expenses, improper entity structure, and paying themselves the wrong salary.

In most instances, the S Corp will eliminate $6,000 of taxes for every $100,000 you make.

Remember, you are a business owner now. You can't just not think about it and expect it will all work out somehow.

So if you don't spend the time to learn this stuff, you'll spend the money anyway.

Just inefficiently, and usually as penalties to the IRS.

🤓 FROM THE BACK OFFICE

Same $300K income, wildly different tax bills—what separates the smart from the sorry

The numbers tell a compelling story: 31.30% vs. 22.99% vs. 18.54%.

These represent the effective tax rates for three CRE brokers, each earning $300,000, but structured differently:

Broker 1 operates as a Sole Proprietor, paying $93,905 in taxes (31.30%).

Broker 2 has an LLC taxed as an S Corp, paying $68,970 in taxes (22.99%). The savings come from two key factors: a $34,317 Qualified Business Income deduction and self-employment tax applied only to the $110,000 salary portion rather than the entire income.

Broker 3 maintains the S Corp structure but adds a 401(k), reducing their tax bill to $55,633 (18.54%). This includes $23,000 in employee deferrals and $27,500 in employer profit-sharing contributions (25% of W-2 wages).

The total tax savings between Broker 1 and Broker 3? An impressive $38,272—and potentially more for those in states with income tax.

We see many brokers leaving significant money on the table by not optimizing their business structure and retirement planning.

The difference between a $93,905 tax bill and a $55,633 tax bill? $38,272 that could fund your marketing budget, office upgrades, or investment portfolio instead of going to the IRS.

Thanks for reading until the end! We appreciate you!