In this article, I’m going to talk about tips in opening a real estate brokerage.
Now most of the information pertaining to this is my experience in opening a real estate brokerage in the state of Florida. The fundamentals will be comparable to your area but check with your governing entities for specifics before starting your own real estate brokerage.
But first… Why Are You Starting A Real Estate Brokerage?
If you are planning on staying small and just selling real estate yourself and not recruiting real estate agents, then it may not make sense to proceed in opening a real estate brokerage.
Think about it… Why take on the liability and overhead if you are just going to sell real estate? There are many options out there like 100% commission offices where you pay a small monthly fee and a small transaction fee on every sale.
So as long as you have that brokerage name on your marketing, you can still market your brand very effectively.
But… If you are still considering becoming a broker / owner of a real estate brokerage, keep reading.
Real Estate Broker Manager or Real Estate Agent
The next step is to figure out if you want to be a manager, agent or both.
When my sister and I opened our real estate brokerage in 2006 we intended on being small and hustle our own deals. It wasn’t until around 2008/2009 when the real estate market crashed and a lot of real estate brokerages were going out of business.
This is when our business changed and we assumed managerial roles as real estate brokers.
The market crashed and real estate agents who wanted to remain in business were seeking out other real estate brokerages to work for which is how we unintentionally got started with bringing real estate agents into our real estate brokerage.
BUT… An important lesson learned was the amount of responsibility and liability that came from opening a real estate brokerage and taking on agents.
Real Estate Manager
When you assume the role of a manager of real estate agents, they become your clients. They consume your time with business planning, real estate coaching, contract review, contract disputes and sometimes even the occasional therapy session.
Someone has to spend this time and assume this role.
You also assume all liability for your agents. This means every action they take you are responsible for. If they screw up your real estate brokerage will likely be named in the lawsuit.
Opening A Small Real Estate Brokerage
Now… If you are looking to open a small real estate brokerage and it is essentially you and a partner or two who are strictly working on the business of listing and selling real estate then great.
If this is the case, look at your past sales and figure out where they are coming from. This will be imperative to figure out especially if you are assuming the expense of brick and mortar for your new real estate brokerage.
But keep in mind. Many states allow you to run your real estate brokerage out of your house. And if you do not want to work from home, all inclusive executive suites these days can be incredibly cheap.
I just recommend being very lean in your first few years when starting your real estate brokerage. Use those additional monies to go toward marketing that generates more sales
We will talk expenses here shortly.
Opening A Real Estate Brokerage As A Competing Broker
Now if you are going to do both, which is that of be a competing real estate broker and a manager of real estate agents you must figure a plan moving forward.
Competing broker just means that you have agents in your brokerage but YOU still actively sell real estate. This is what we did initially.
My recommendation is to do one or the other. Now… Having agents in your brokerage is a great way to leverage and create revenue.
Eventually we had enough revenue coming in that we got to the point where we hired a manager to recruit and coach our real estate agents.
At the end of the day, I think one of the best scenarios would be to seek out a superstar manager (even outside of the re business). Someone great at communication, networking and recruitment.
And partner with this person to recruit and train agents.
Opening A Real Estate Brokerage – Independent vs Franchise
Next you will want to figure out whether to be an independent or buy into a real estate franchise when opening your real estate brokerage.
And by the way, if you are really undecided or on the fence, go independent as when you enter a franchise agreement it is a fairly simple add on with your corporation as it is a DBA – Doing Business As “ReMax In The Trees”
The costly aspect to this is rebranding with new signage, business cards, etc.
We remained independent as I really liked my independence. However, that didn’t prevent me from learning about the Real Estate Franchisors that are out there.
We even got approached by ReMax and I was flown out to LA at one of their large annual conferences and also got a 30 minute sit down with Dave Linigar (Founded of Remax).
I got the sit down with Dave, mainly because the recruiters of ReMax guys came to my office, saw a white board with all of our existing agents in my office including all the agents I needed to follow up with to recruit.
They liked that a lot.
ReMax makes their money mainly on the monthly fee per active agent in the brokerage.
I can say many of the franchisors out there do offer great tools, training, resources and even leads.
So… Don’t be afraid to inquire and see who is offering what. Worst case, you walk away with some good education and contacts.
Raw Costs Of Opening A Real Estate Brokerage
Below you will find an estimate of costs that I have personally experienced opening our real estate brokerage. Ongoing and start up costs.
Also this takes into consideration having around 60 real estate agents within our company with 2 brick and mortar offices.
In any business, YOU MUST KNOW YOUR NUMBERS.
|Office Rent #1||$1,300 (Subleases)|
|Office Rent #2||$750 (Subleases)|
|(2) Culligan Drinking Water||$40|
|(2) Commercial Printer / Ink||$45|
|(2) Internet / Phone||$250|
|Part Time Secretary||$2000|
|Errors and Omissions Insurance||$150|
|General Liability Insurance||$75|
|Lead Gen Marketing||$1000|
|Agent Meetings / Gatherings||$250|
**This doesn’t take into consideration any salary for owner operators or managers for accounting, recruiting, training, etc.
I suggest ensuring you have a certain buffer of cash in the bank to cover 6-12 months of overhead before opening your real estate brokerage.
Initial Real Estate Brokerage Startup Costs
|Office #1 (First, Last Sec)||$3,900|
|Office #2 (First, Last Sec)||$2,250|
|Build Out Both Offices||$15,000|
|2 Commercial Printers||$5,000|
|Furniture Both Offices||$5,500|
|Phones, Supplies, Misc||$2,500|
|Initial Board / State Fees||$2,100|
|Initial Marketing / Branding||$6,000|
High Traffic Real Estate Office Suggestions
So let’s talk about some creative ways to have an office in a high traffic visible area for cheap when starting your real estate brokerage.
I wish I would have figured this out before opening our first location and investing the money into the build out. The second location has been a hit with walk in traffic due to getting creative like the following below.
Now this isn’t something you are going to find on Loopnet under offices for lease. This is something you are going to go out and create!
Here are some creative office scenarios with high walk in traffic in starting a real estate brokerage.
- Inside of a hotel / motel
- Inside of a local restaurant
- Inside of a residential community. (Many time large communities have unused common areas in clubhouses).
- Unused space in a mall or inside of a shop in a mall.
- Inside of a grocery store
- Inside of a coffee shop
- Outdoor mall
- Inside of an industry related company – Mortgage, Lawfirm, Insurance
- Inside of ANY high traffic business that had additional space.
As you can see, starting your own real estate brokerage can be very lucrative and rewarding. But it can be very risky.
Be sure to check IT OUT HERE!!