There are many good reasons for you to open your own brokerage if you work as an agent under a licensed real estate broker. You will have the opportunity to explore new business opportunities, increase your profits, and run your own brokerage. This guide will provide you with all the information needed to start and grow a successful business in real estate brokerage.
7 Steps To Starting Your Own Real Estate Brokerage
Get Your Real Estate Broker License
This is the first thing you should do if you don’t already have a broker license. Like becoming a real estate agent, the requirements for becoming a broker vary by state. You must first gain experience as a salesperson or associate in most states before you can apply for a broker’s license. As a broker, you will usually supervise a salesperson who is licensed. States with a salesperson/broker structure usually impose these licensing requirements for obtaining a broker’s license:
- You must be at least 18 years old
- You should have 2 to 4 year’s experience as a salesperson.
- You must have a diploma from high school
- Broker licensing exam: Take the test and pass it
- Completion of the Broker Education Required
- Completing the broker license application, and paying the licensing fees
Create a Real Estate Brokerage Business Plan
Recent research revealed that 64% organizations that created business planning grew their businesses compared to only 43% organizations without one. A real estate business plan that is well-written will help you achieve your goals as a managing broker. A well-defined plan will help you align the goals and strategy of your business with your growth plan. A good business plan captures your goals and plans.
A good business plan will also include your goals, strategies and tactics to reach them. It should also address any potential obstacles you might encounter and how you intend to deal with them. The plan also includes a SWOT (Strengths, Weaknesses Opportunities and Threats) analysis and measurement strategies to measure your marketing and sales efforts. The plan should also include the roles and responsibilities for each member of your team. Your business plan should also cover:
Select a Name for Your New Brokerage: Picking a name to describe your new venture in real estate can be exciting. This process requires a great deal of thought. Your business name is the first thing that your potential clients will see. This can also influence whether they choose you or your competition. Avoid using numbers or letters and choose a name that’s unique and easy to remember. Here are some tips to help you choose a name for your real estate business:
- Include keywords relevant to your industry
- Choose shorter names instead of long ones
- Combining two words
- Use a noun + “Realty Services”
Financial Planning: Each business plan should include a cash-flow projection. Financial planning is an important part of any business plan. It covers everything from projected revenues to first-year expenses. Your financial projections should be realistic and accurate to allow for SWOT analysis, and the assessment of assets and liability within your business. If you plan to use your business model to secure funding, using inaccurate financial statements and inflating figures are red flags which scare off potential investors, partners and lenders.
Remember the following key components to a successful business financial plan:
- Included in the expense outlay are startup expenses, regular expenses, and future expenses.
- Statement of Financial Position: This statement shows your assets and liabilities. The assets and liabilities of your business are the basis for its balance sheet. These two variables can help maximize the value of your business.
- Cash flow projections – You should be able to predict your cash flows monthly, quarterly and annually. You can overcome financial challenges by projecting your cash flow.
Staffing Expectations You should also include the number of agents, broker, and other employees you expect to have in your office for administrative and daily business.
Brokerage Model When writing your business plans, it’s important to specify your preferred real estate brokering model. There are usually at least three different models to choose from:
- Hybrid Brokerage: The hybrid brokerage model offers a variety of services and replaces commissions by flat fees. This model offers some of the same services as the traditional model such as advice on price and negotiation. Hybrids will often reduce the listing commissions from 3% down to 1% or 2%, or charge a flat fee with commission rebate.
- Franchise Brokerage Model A franchise brokerage company is part of a bigger organization that has a brand. Brokers who start franchises sign a contract with a franchisor, and pay a fee to get the right of doing business under the brand name. Most franchisors require you to adhere to specific guidelines for marketing and price negotiations. You will have access to the training, technology and information that you need to be successful in your business venture. The cost of a real estate franchise can sometimes be cheaper and easier than starting your own brokerage.
- Independent Brokerage Model – As an independent broker you will be responsible for managing your own small business. You may also have agents or brokers working with you in partnership or under you. You are independent if you don’t work for a company that is above you. Also, you will not have to pay a franchisee to use their name.
Register Your Real Estate Business
After you’ve completed your business planning, the next step is to create a real estate investing LLC. Real estate LLCs are established legal entities that allow you to run your brokerage firm in a manner that shields you from liability. Steps to register an LLC for real estate investments can vary from state to state. The most common steps are:
- Step 1: Find out the state regulations for forming an LLC
- Step 2: Search for the name of your business to make sure it’s not in use.
- Step 3: File the “Articles of Organization document”
- Step 4: Create an Operating Agreement (Operating Agreement) for your Limited Liability Company. This agreement outlines how your company is organized and operated.
- Step 5: Publication of intent to file in your local newspaper
- Step 6: Obtain all business licenses and permits. You should also get a tax identification from the IRS.
Find a Brokerage Location
Your new brokerage’s location is crucial to its success. If your clients can’t find you, even if you have excellent products and services, you will not make any money. You can choose between a traditional office, a virtual brokerage, or a combination of the two. When choosing the location for your brokerage company, you should consider the cost, the location of your listings and the proximity to the market. You also need to take into account the infrastructure, accessibility and the competition. We recommend that you have your business listed on a B2B or online platform, which allows you to work with locations around the world.
Build Your Brokerage Team
You will need to hire help as your business grows. This will keep you organized and on track. To break even and help grow your business, it is important to have a great team to support your brokerage startup. A strong brokerage team can increase leads, income, specialization and skill development. A real estate team will typically provide your clients with the services of two or more real estate agents who are experienced in their field, without charging them more commission. If an agent is not available, a client can reach out to any of the other members of the team for help. The team members are also willing to help each other out and have a strong sense of unity. The positions that need to be filled include Marketing Director, Listing Manager, Transaction Coordinator, and Administrative Manager.
Find real estate agents to join your team by:
- Referrals and networking
- Affiliates and vendors of the real estate industry
- Social media
- Real estate schools
- Career websites (Linkedin, Indeed, Glassdoor)
Create a marketing & lead generation plan
A marketing plan that is effective must include methods to generate and identify leads. These leads can then be converted into paying customers. You should include the following elements in your marketing and lead generation plan:
In your marketing plan, you should include goals for how many leads you hope to achieve over a certain period. Include a conversion goal for a certain percentage of leads into paying customers. Your marketing plan’s goals will help you track the success of your efforts and how many leads you generate.
Describe your audience. A thorough understanding of the demographics in your real estate market will help you create an effective marketing plan. It will also allow you to develop a lead generation system that is robust. Your target market should be narrowed down to the consumers who are most likely to purchase after you have described your audience.
Analyze your competitors: Your marketing strategy should include an evaluation of your competition. Good analysis can help you create marketing messages that are unique and generate more leads. You should also look at the marketing messages that your competitors use to attract clients. It is also important to determine what media your competitors are using for generating leads.
Your marketing plan should include a section on lead generation. Some proven methods to generate leads for a brokerage firm, depending on the target market include partnering with other businesses such as insurance firms, utilizing social media and video strategies, creating a site and using CRM, leveraging local services to establish an established presence, and leveraging customer testimonials and reviews.
Sell your listings now!
After you’ve completed all the steps in this guide, now is the time to sell your listings. Success in real estate doesn’t happen overnight. You may need to wait a while before you find your first client. With a great marketing strategy you can soon expect to see more sales.
What is the cost to start a real estate brokerage?
Costs to open a real estate agency vary depending on what type you choose. If you want to start an independent real estate business, you will need at least $10,000 in startup costs. You will need to budget $200,000 for the start-up cost of a brokerage franchise. Your total cost will include the following:
- Pre-Licensing real estate classes: $300+
- Real estate license application fee: $325+
- Real estate broker fees: $25-$500+/month
- Membership dues: $200+/year
- Marketing costs: $1000+/year
- Real estate Continuing Education: $50-$300+/year
- Business expenses: Vary
Earning Potential as a Brokerage Owner
According to industry statistics, the real estate market is worth $155 billion. A 2019 survey found that the median annual income of broker-owners who run their own brokerage firms was between $86100 and $105,000.
This guide will help you take the first steps to opening your own brokerage. Check out our Agent Essentials Page for more expert advice on how to grow a real estate business.