Michael Kilner from Kilner Advantage shares his expert knowledge.
I’m thrilled to present Michael Kilner from Kilner Advantage. With his experience in overseeing operations for a highly successful real estate agent team and handling financial matters for an independent brokerage, he brings a wealth of knowledge to the table. His mastery of the real estate model, particularly within the realm of millionaire agents, is truly impressive. Today, he’ll be delving into the fundamentals, offering valuable insights that can help demystify key concepts.
Let’s start by discussing the “cost of sale.” Many people mistakenly associate it with the expenses of listing a property—things like signs, photos, virtual tours, and brochures. However, in the context of the real estate model, cost of sale refers to all the deductions from your commission before you receive it. This includes your split with the broker, the team’s share, referral fees, and client concessions.
The distinction lies between your gross commission income (GCI) and your gross profit. The money you actually receive represents the leftover after deducting these costs. I understand that this can be confusing, and I’m often asked about the first hire for a real estate business. My suggestion is usually to consider someone related to cost of sale, like an admin who charges a transaction fee only after a deal closes.
This approach works well for growing businesses because it aligns with variable costs, meaning expenses that are tied to specific transactions. As your business expands, these costs remain manageable. However, as you reach a point of stability and growth, fixed costs become more appealing. Fixed costs don’t increase with every deal, allowing you to scale your earnings without a corresponding increase in expenses.
If you have more questions about the millionaire real estate model or need help growing your business, call or email us. We’re here to help.