Starting a Real Estate Brokerage
About 92 percent of homes in the U.S. are sold using a real estate agent or a broker. Starting a real estate brokerage can be a great business idea. However, it takes a great deal of work to start this kind of business and get it up and running. So how can you build a successful brokerage from the ground up?
FROM REALTOR TO BROKER
Every real estate agent shouldn’t necessarily be a broker. You can be a fantastic and very successful Realtor and without the right assistance, can fail as as the owner of a real estate brokerage.
INDEPENDENT BROKER OR FRANCHISE
The first thing you should decide is whether you choose a real estate franchise or become an independent broker. If you choose to become a real estate franchise, it will cost you more money but will provide you with a structure and a brand to start marketing. Good real estate franchises will have digital marketing options, recruiting processes and proven training as well as back office assistance.
When you purchase a franchise, you pay a relatively large upfront cost to get “onboarded”. In addition, franchisors will charge a royalty of each real estate transaction. Many real estate franchises also charge a marketing fee — where you pay a pro-rata share of marketing based upon your total revenue. There are some new real estate franchise models that are substantially reducing the amount of upfront costs associated with opening a franchise such as 1 Percent Lists and Realty One.
If you choose to start an independent broker, it is substantially cheaper, but you must create all of your own set of tools and services to provide to your agents. In addition, you will not be starting with a well known brand such as Remax or Keller Williams — you real estate brokerage might be Smiths Real Estate.
When starting a real estate business, proper planning will increase your chances of success. Considering the stiff competition in this field, you will want to carefully develop and refine your idea. Think about your skill set, your target customers, the purpose of the business, your goals and how your strengths differentiate you from the competition. You may also want to identify the right niche for your company.
Take time to understand the real estate market you are about to enter. You need to identify your direct competitors and find out what makes them successful. You should learn more about your target clients as well as the overall real estate market. This includes their likes and dislikes, their current rent or mortgage and what they consider when purchasing real estate. With this information, you will know how to position yourself in the market.
WRITE A BUSINESS PLAN
Once you know what you are up against, you should clearly define your goals and create a roadmap. A business plan allows you to formalize your goals and direction. Writing down your business and financial goals will encourage you to stay focused and motivated as you work towards achieving them.
OBTAIN A REAL ESTATE BROKER LICENSE
To start a real estate brokerage, you must meet the relevant requirements in your state. Part of this involves acquiring a brokerage license. Oftentimes, to get this license, you will need to have a real estate license, be experience and complete the necessary pre-licensing education. You must also pass the broker licensing exam and pay any applicable fees.
DECIDE YOUR LEGAL BUSINESS STRUCTURE
Determining your legal structure is an important step when opening a brokerage. Your business structure will determine how you register the company, your tax obligations and the financial liability of your brokerage. There are four main legal business structures you can choose from: sole proprietorship, partnership, limited liability company (LLC) or a corporation. Once you choose your legal structure, you can proceed to register the business.
Starting and running a real estate brokerage is not cheap. As such, you will need to raise the necessary funds to help you turn your dreams into reality. You can decide to use your own savings, get help from family or take out a loan to start the business. In addition to raising funds, you should have a plan on how to manage your money and ensure your operations are profitable.
SET UP SHOP
When it comes to setting up shop, you can choose to use a physical office for your brokerage or opt for a virtual setting where agents work from home. Before making a decision, you need to understand the advantages and disadvantages associated with each model. It would be equally important to determine your staffing needs and hire the right people.
Creating a strong brand identity is critical for the success of your brokerage. A brand represents how people know your business and affects how they perceive you. Your branding strategy should focus on having a simple business name, a unique logo, a memorable tagline, a great website design and an active social media presence. You can also boost your brand visibility using marketing materials like business cards, postcards, flyers, brochures and real estate signs. In the end, you should have a strong brand presence both online and offline.
CONSIDER BUYING A FRANCHISE
If you are not established in the real estate industry, starting an independent brokerage can be challenging. This is why you may want to consider buying a franchise. A franchised brokerage is an easy way to have all other details taken care of because most of the work needed to launch the business idea will have already been done. You will not have to worry about issues like branding, marketing or preparing a business plan. It will be easier to secure financing, not much experience is required to start, and you will get support from a larger network of businesses.
Once your brokerage is operational, you will have to find ways to beat the competition and grow your business. This may involve developing a solid marketing plan that includes networking, digital marketing, asking for referrals and managing your reputation to build credibility.