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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (14576)	10/27/2003 8:26:41 PM
From: Mr. Sunshine	Read Replies (1) \| Respond to of 306849

Dafot, Saying the analysis does not hold up because it does not apply to the 0.001% of the agents who make more than $1M is really stretching it. I never claimed it was true in all cases. You missed one or two of my subtle points. I used numerous "waffle" words and emphasized how difficult it was to generalize. Obviously, I am referring to relative (i.e. a % of gross income) and not absolute numbers. Nontheless, I believe the numbers do hold. As you get into the larger gross commissions you will reduce some expenses as a percentage, but other numbers will increase. A low gross income agent will probably have very low staff and office expenses (he is given a desk at the real estate office or uses the dining room table and is his own secretary), but higher fixed expenses (e.g. MLS access fees, dept. of real estate fees). The higher income agents need more staff and will need a real office. Both are very, very expensive. They also spend a ton on advertising. You are right about the social security - on the other hand, they will pay higher marginal taxes at the state and federal levels. Think of it as any other business - and start thinking gross margins, net profit, etc. The concept is the same, and few businesses will end up with net profits more than 10-20%. As for the vacation, you completely miss. I am not talking about the cost of the vacation itself, I am talking to the cost of the vacation time. Most companies give the employees PAID vacation time and retirement benefits. Most executives who are making $1M or more get several weeks of Paid vacation time a year. That "time" is worth something. They also get significant retirement benefits. Think Grasso. I was conservatively estimating that the paid vacation time and the retirement benefits that the self employed need to pay themselves was worth 20% of the NET pay. (You tried implying that I was using 20% of the gross pay for vacation, when it was of net pay for vacation and retirement.)