For some real estate agents, 2021 has been very, very good
The dirty secret of the real estate year is that when the Canadian market is as hot as it was in 2021, agents and sales reps make a lot of money.
Nationally, the total dollar residential home transaction volume reached $ 308.2 billion in August, up 77% from the 2020 figure in the same period, according to data provided by the Canadian Real Estate Association. The comparison to 2020 is a bit misleading, given that there have been several months of shutdowns that have brought most real estate activity to a halt, but the industry is still on track for a record year. And while there is no standard nationwide commission for a home sale, it’s safe to assume that between 3 and 5 percent of that dollar volume was shared with realtors. This means billions of dollars are pouring into the pockets of realtors, with business close to double that of 2020.
The question of what to do with all that money is not a trivial matter. All of the real estate agents who spoke to The Globe for this story had some of their best years, although not all were comfortable saying what they had spent it on.
âI know when people stumble upon money fast, their first impulse is to finally splurge on whatever they’ve wanted to get; they immediately think of luxury they couldn’t afford before, âsaid Nasma Ali, founder of the One Group sales team with Re / Max Hallmark Realty Ltd. âSome agents think that’s what it’s going to be every yearâ¦ they’re the most likely to buy the expensive car.
Veteran agents warn that smashing success can be tempting, but glory can be temporary.
“He’s not a secret agent making more money than ever, and there are some really selfish agents who don’t understand that the public doesn’t want to know how much money you make,” said David Fleming, a licensed Bosley Toronto broker. Realty Group Inc. which writes in TorontoRealtyBlog.com on industry weaknesses every week. “I look at the younger generation and some of them have a real YOLO [you only live once] mentality; they make trips to the US Open or to Cannes. â¦ I never did any of that. For me, personally, I’m doing very well and making a good living. But I am the king of self-deprecation in my blogs. What if I drive a gold-plated Cadillac and take pictures of invoices? It’s disgusting! A very small percentage of the population is drawn to it.
Mr. Fleming admits a flaw: collecting old hockey cards.
Mike Turner, owner of Royal LePage Turner Realty in Gander, Newfoundland, is one of Royal LePage’s top performing agents in Canada in 2021, and his approach has been to reinvest most of the earnings back into his business.
“ has been our best year, âhe said. “Last year the company closed 168 deals, this year it is 231 so far.” As a result, he opened his third office, got new software, hired new agents, and worked 12-14 hours a day to keep pace. âWe didn’t have the madness, $ 100,000 more than list price sales, but we sold list price overnight, and we had a significant oversupply in that area. We have to take it for what it is; a once in a lifetime thing.
Jennifer Jones and her sales team at Exp Realty Brokerage in Barrie, Ont., Also had their best year ever, in part because even though fewer homes were sold, the prices are so much higher. With mostly digital screenings and a generation of online customers, its 30-person sales team has successfully doubled production and expanded its reach into cottage country Ontario. With all of this new business comes advice on what to do with it.
âFor our team, we organize a lot of investment seminars because we believe in buying a property. The question should be when you go out to list a property, “Is this something you should list or buy?” â, Ms. Jones said. âIt’s about knowing how to buy that first property; how to build more equity and move on to a second. And then buy a property, a duplex or a home improvement mortgage. This is how to plant an orchard of investment property.
The digital switchover was uneven, however, and not all agents exceeded their annual sales targets by mid-year.
âFor people trying to rely on this ‘belly-to-belly’ and door-to-door business, these realtors have had a hard time,â Ms. Jones said.
âIt’s party or famine,â said Andre Kutyan, broker at Harvey Kalles Real Estate Ltd. in Toronto. âAs hot as the market is, there are some well-known agents in parts of the city who were doing good business, but doing nothing now. Many officers from older schools did not adjust very well.
âThe push towards digital brokerage transactions was really tough for a subset of the older population; it has accelerated retirements, âsaid Phil Soper, President and CEO of Royal LePage, the largest network of real estate agents in the country. âThe real takeaway from the pandemic is to look at what made you successful and hang on to some of these things: if you’re able to do virtual projections, and it took a quarter of the time, that’s huge cost savings. “
Another big change for Ontario real estate agents is the ability, starting in 2020, to form a Personal Real Estate Company (SIRE), a tax vehicle that was until now available to other professionals and real estate agents in other provinces.
âThe decision depends on different factors, but the main driver is, ‘Does the individual need all the money he earns to live? If they don’t, they can benefit from this tax deferral, âsaid Joseph Pagliaroli, KPMG’s tax partner in Canada who organized training sessions with the Ontario Real Estate Association.
As Mr. Pagliaroli says, if the top tax rate is 54% for those earning $ 220,000 and a PREC only pays 12.2% corporate tax, the Sheltering income from real estate in a PREC can allow you to defer tax on the money. you don’t now need to multi-year, or even use the company to hold investment assets for retirement.
The only downside is that you have to plan ahead: âIt’s a solution for the future. If you have earned the income so far, there is nothing you can do about it; it cannot be done retroactively, âhe said.
Not all veteran agents struggled. Josie Stern, who leads Stern’s eponymous sales team with Sutton Group-Associates Realty Inc. in downtown Toronto, has been in the game for 35 years through many ups and downs. His main advice to successful agents is simple: share the wealth.
âIt’s time to give back. Agents with a lot of business and extra income can save for a rainy day or improve their marketing materials or technical systems. Or they sponsor community events and get your name known like that and introduce you as someone who is interested in giving back, âMs. Stern said. This is also a tip that other officers have mentioned; Ms. Jones’ team sponsored women’s shelters and food banks.
But Ms Stern has also seen agents, whether new to the industry or without a strong network of existing clients, struggle this year, especially with the inability to help with things like open houses for meet new clients.
âExperienced agents are stronger than they have ever been before; they have the connections, the experience and the people. So it has become more than ever an industry for very successful and busy agents, âshe said.
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