The Hidden Truth Behind Your Real Estate Profit

By Andy Mulholland

He has a background in leading a top real estate team for over a decade and an understanding of the critical role of clear financials, Andy, along with his wife Ellyn, a seasoned real estate CFO, co-founded Simple-Numbers.

Most team leaders I speak with believe they’re running a profitable real estate business. The numbers look good on paper. The income statement shows a healthy net profit. However, when we sit down for our quarterly review and examine their top-line revenue, cost of sales, gross profit, operating expenses, and net profit line by line, things often appear very different.

We break it down visually like a pie, where each slice represents part of the business. The question is simple: how big is the net profit slice, really?

The problem with traditional bookkeeping. Most of the time, the books you’re using weren’t built for real estate. They’re standard accounting setups that don’t reflect how your business actually runs. Your net profit on paper isn’t your real net profit. In most small teams, the team leader is still producing. You’re out there listing homes, closing deals, and bringing in revenue, but you’re not paying yourself a commission split like you do for your agents.

That means all of your personal production goes straight to the bottom line, which makes your business look more profitable than it really is. It creates a false picture of success.

What does adjusted net profit really mean? We use a measure called adjusted net profit. It’s a way to see the true health of your business. Here’s how it works: If you were to pay yourself the same way you pay your agents, on the same commission split, and then remove your personal salary and those indirect expenses you run through the books to lower your tax bill, what’s left? That’s your adjusted net profit.

It shows how your business would perform if you weren’t in production. It’s the difference between having a real business that makes money on its own and having a job that depends on you to keep it alive.

What do most team leaders discover? Once we make these adjustments, the truth becomes clear. Many find they’re just breaking even. Some realize they’re losing money once their own production is factored in. If you stepped out of production today and paid another agent to do your deals, would your business still be profitable? For many, the answer is no.

In that case, you don’t have a business. You have a job. Some team leaders even find that their personal production is paying for everything, including salaries, marketing, and office costs.

The fix. The only way to change that is by tracking your adjusted net profit. You need real estate–specific books that show the full story of your numbers. A standard bookkeeper can’t set up your chart of accounts or make the right adjustments for your own production. Without that clarity, you’ll keep guessing, and reaching your goals will take longer.

When you start measuring adjusted net profit, you finally see what your business is really doing. You can see where your money is going, where your margins are weak, and what needs to change for your business to grow without you doing every deal.

Stop letting unclear books hold you back from real growth. It’s time to work with a bookkeeping partner who understands how real estate businesses actually operate. We’ll help you see your numbers clearly, measure your adjusted net profit, and build a model that supports lasting success. Schedule a strategy call today and take the first step toward a business that runs profitably, even when you’re not in production.