THINGS. Smart REALTORS Should Do Before They Retire

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1 5 THINGS Smart REALTORS Should Do Before They Retire Retirement may seem like a far-off and distant dream to real estate agents in the prime of their careers. But no matter what stage you are in, there are some things that you can do now to maximize your earning potential throughout the lifecycle of your career and into retirement. For many, real estate is a second career, and therefore, the retirement age is higher than for other professions which is good news! That means there s more time to take the steps that will get you to where you want to be when you enter that next stage of life.

2 So where do you start? First, congratulations! Joining the Council of Residential Specialists and pursuing your designation as a Certified Residential Specialist is a great step toward achieving your goals and preparing for the future. CRS members are top producers in the industry and CRS Designees are twice as successful as the average REALTOR. By joining the council, you gain access to tools and resources that can help you increase your business, strengthen your personal brand, and connect with other top agents who can be a valuable source of referrals now and in the future. Now that you ve taken that first critical step, there are five things you can do to continue working toward your vision of retirement: 1. First, assess your needs and objectives What does retirement look like to you? 2. Create a strong, practical exit strategy from your real estate business 3. Get your financial house in order: Focus on saving and implement cost-reduction strategies 4. Make a push for additional income 5. Pump up your personal brand now to finish in a strong position Value of a CRS Designation $43,500 Average REALTOR serving as a sales agent CRS Designee $100,000 MEDIAN ANNUAL INCOME MEDIAN ANNUAL TRANSACTIONS Source: 2013 National Association of REALTORS Member Profile and 2013 Council of Residential Specialists Member/Non-Member Survey Report 1 Assess your retirement needs and objectives What does the perfect retirement look like to you? And how does that relate to your real estate business? Do you want to make a clean break from work, and spend your retirement in the garden chasing your grandkids? Or do you see yourself dabbling in the business, helping your friends and family buy or sell their homes while you relax in a villa in the Caribbean? RETIREMENT PLANNING TOOLS AARP Retirement Calculator MarketWatch Retirement Planner The Motley Fool T.Row Price Retirement Income Calculator Vanguard Retirement Calculator Yahoo! Finance Retirement Calculator The best way to end up where you want to be is to know where you want to go! Here are a few tips for assessing your needs and objectives for retirement: Establish a timeframe. Set a date or an age for your potential retirement from real estate (which might or might not line up with your official retirement date) and use that to estimate your financial needs and set savings goals. Figure out what involvement you want to have in real estate after you retire or sell your business. Do you plan to keep your real estate license active after you retire? Do you want to sell your business or maintain your database for as long as possible, even after business slows down? Answering these questions will form the foundation of your exit strategy, so do some soul-searching and figure out what role you want to play in your business after you retire. Do the math. Use a free online tool or one through your investment firm or bank to assess how much money you will need to live the lifestyle you envision for your retirement. For most of us, monthly obligations after retirement are about 20 percent less than our current obligations, according to the averages. It might also be helpful to meet with a financial planner to work out a realistic retirement budget and savings strategy. Take your personality into account. Will you be able to walk away from the real estate business you ve built? (This is particularly relevant if you are thinking of selling your business). 5 Things Smart REALTORS Should Do Before They Retire 1

3 2 Create a strong, practical exit strategy The National Association of REALTORS (NAR) indicates that 56 is the median age of REALTORS, which means the industry is likely to experience a mass exodus of retiring agents and brokers in the next years. Subsequently, many of these folks will be selling their agencies or businesses. If you want to be more competitive in the future, start planning your exit strategy now. Figure out your retirement vision and create a clear plan for working towards it. Things will change markets will shift, the economy might falter again, and emergencies and life events might force you to make adjustments to your plan. But by preparing now, you will be in a stronger position later on than your less-prepared colleagues. Is selling your business right for you? Even thinking about selling your real estate business can be an emotional, difficult process for some REALTORS. This business is all about relationship-building and after all of the blood, sweat, and tears that you ve invested into nurturing those relationships, you may find it difficult to hand them over to another agent. How do you know that you can trust another agent to service your clients with the same level of attention to detail and professionalism? Well, that s what the exit plan is all about. Evaluate your business infrastructure. Look at your brand, marketing, technology, staff, etc., and make sure it s as strong as possible in the years leading up to the potential sale. Ensure that your database is clean and current. This is arguably your most valuable asset. If you ve been neglecting your database and have not been touching base with your contacts, revamp your marketing so that you re-establish brand recognition. Document your accounting and marketing processes. Spot any areas If you want to leave your clients in good hands and enter retirement on your own terms, you will need to start planning years in advance and ensure that you have a strong brand with a bulletproof vault of referrals. for improvement in the short term and to ease transition of the business when the time comes. Identify a potential partner. This is the critical piece to this puzzle. Selling your agency or book of business can be a golden ticket for you and the right REALTOR one who aligns with your selling style, ethics and marketing approach. However, you must be careful about who you approach and make sure they re a good fit for you and your clients. Start talking; then get it in writing. When you find a potential partner, engage in many conversations with them about their goals for the future, their approach to client relations and their openness to buying your book of business. Start with a non-disclosure agreement (NDA). If you feel it s a good match and the time is right, then draft a formal agreement. Not every deal will pan out, however, so be patient and start early. Plan for at least a 1-2 year transition period. The best exit strategies with the most financial success allow for a transition period. One year (at the minimum) should be spent introducing your database to your new partner, delivering co-branded marketing materials and messaging, and giving your clients a chance to warm up to the agent buying your business. To ease the transition for your clients, it s recommended that you leave your business phone activated for at least 1-2 years after you cease to handle primary operations for your practice. Create a 3-5 year referral timeline. This should specify decreasing percentage payments for completed transactions originating from your database. One of the most valuable resources for understanding the process of selling your business is NAR s Sell Your Business Toolkit which you can access online. It covers everything from figuring out how much your business is worth to finding a buyer, negotiating the sale, closing the deal and paving the way for a smooth transition. CRS s recorded webinar on Buying a Book of Business can also be a great resource for those looking to expand their practices in their prime earning years. 5 Things Smart REALTORS Should Do Before They Retire 2

4 3 Get your financial house in order: Focus on saving and implement cost-reduction strategies No matter where you are in your career as a real estate agent, you will benefit from getting your finances in order, saving for the future, and looking for ways to cut business costs. Once you ve completed all of the calculations to figure out how much you should be saving toward your retirement, the next step is to do it! This is also the time to figure out where you can cut costs to streamline your operations and strengthen the financial health of your business. You might consider doing a monthly profit and loss statement for your business to trace where every dollar is going. In order to reduce your costs, you may consider any number of tactics, from extreme (ceasing to have a physical office) to doing a thorough analysis of suppliers/vendors and wasteful office product usage. One obvious solution is to go as paperless as you can, storing as much documentation digitally. Also, make sure you re getting the best 4 Make a push for additional income possible pricing on everything from coffee to toner for the copier. For individual agents, cutting costs can mean working from home rather than renting space from a broker. Also, if you re working with a financial planner and paying substantial commissions, you can shop around or switch to an online investment site. Reining in business costs and personal spending is beneficial for anyone 5-10 years away from retirement no matter what the economy is doing. One way to secure your future is to find new ways to make money. Depending on how near to retirement you are, it s a great time to put the pedal to the metal to play catch-up on your savings and build up reserves for retirement. According to CRS Instructor Mark Given, it s a great time to think seriously about investment properties, since prices are still reasonable. You might consider other options like farmland and retail space. Also, think in terms of ongoing revenue vs. making a huge profit by selling. And funnel that income directly into savings and paying off debt. If you re reluctant to buy income properties, be more aggressive about getting referral business even consider a pay-for-lead program with former clients, friends, family and others you know in the community. If you re looking to diversify your income stream before you retire, you might also consider becoming a business advisor/consultant to an established business or direct to buyers and sellers. To do this effectively, Julie Garton-Good of Garton-Good Seminars advises: Start by deciding what your special areas of expertise are. For instance, are you adept at improve vs. buy analyses? Consider offering these to buyers and as a value-add for other agents and brokers. Get over the idea that people won t pay for a service that has often been free in the past. People perceive a greater value when they pay a reasonable fee for an important service. Another thing to consider is becoming a paid trainer/coach or instructor. Once again, leverage your particular strengths and think about how you can develop a pragmatic program of tips for up-and-coming REALTORS. Start slowly, perhaps with a blog. You might even want to volunteer at first to get some success stories under your belt. If things take off, consider doing a series of videos to put online. By adding a new dimension to your career, you can generate another source of income in your retirement years, keep your hand in the game and pass the torch to younger generations. 5 Things Smart REALTORS Should Do Before They Retire 3

5 5 Pump up your personal brand now to finish in a strong position If you re still 10 or more years out from retirement, it s likely that you spend a considerable amount of your time building your personal brand, keeping in touch with your clients, generating new leads and marketing your business. As you get closer to retirement age, it can be tempting to cut back on the time you spend building relationships and maintaining your business infrastructure. If you ve already noticed that trend in your practice, it will benefit you to dedicate some time and attention to rejuvenating your brand. Why? Because no matter what your exit strategy is, referrals can be a source of income for many years after you leave or sell your business. You want to fill your database full of loyal, satisfied clients so that you can introduce warm leads to your new partner with confidence. A little effort now can really pay off in the end. Referrals can be a source of income for many years after you leave or sell your business. Even if retirement is a long way off, you should consider taking these steps and implementing these strategies now. No matter what your vision of the future looks like, with planning, discipline, creativity, and determination, you can make that vision a reality. These are skills you ve been relying on all your life to build the successful career you have. So don t stop now! Keep learning and moving forward, formulate a plan and stick to it. Before you know it, you ll get there. 5 Things Smart REALTORS Should Do Before They Retire 4