How Do I Start My Own Real Estate Brokerage?
August 2, 2018 |
Starting your own real estate brokerage can prove lucrative. Around 6.2 million Americans purchased a home in 2017, and they all used a brokerage in some capacity to make these moves. Setting up a new business is never easy. But with careful planning, you can increase your chances of success. Here are the steps for creating your own brokerage.
1. Meeting Your State’s Broker Requirements
Assuming you already have your real estate agent license, meeting brokerage requirements will be your new challenge. Be sure to check your states specific rules for meeting brokerage-level expectations. For the most part, each state requires:
- Work experience
- Pre-licensing education
- An exam
Study with care! These tests are known to be lengthy and all-encompassing. Use all exam prep tools at your disposal.
2. Getting Capital for Your Real Estate Brokerage
Even before you analyze your options for financing, plan out what your expenses will likely be. Unsurprisingly, you’ll need to consider your startup expenses. This includes items like initial website construction, branded signs, business cards, and other advertising and branding elements that you will want on hand as soon as your doors open. Think about what work you’re able to do yourself versus what you will need to outsource.
As with any business, building capital can seem like an arduous task. But you have options. An option to consider is self-funding. Though a challenge, this could be a viable option to save up for. Remember to maintain enough money for your family to live on as well as the first six months of capital for your new business. Going into business with someone, via partnership, is a great option for the entrepreneur hoping to split costs and operational tasks with a capable ally. Another traditional option is to apply for a small business loan. Remember, it is a bad idea to borrow money without a clear plan to repay the amount. But, if all goes well, this option should provide what you need to cover initial expenses.
3. Independent or Franchise?
It’s important to consider if you want to operate an independent brokerage or become part of a larger franchise. As you would expect, the initial costs to join a franchise is cheaper than the startup costs of an independent brokerage. But that does not include the reoccurring fees associated with a franchise like:
- Monthly promotion fees
- Monthly management fees
- Annual dues
- Transaction fees
- Renewal fees
- Transfer fees
But there are many benefits to the franchise option. They will often train you, provide ready-to-go contracts, and name recognition. Name recognition is a key advantage to gaining the trust of potential customers.
If you value flexibility and complete strategic control of your company, an independent brokerage could be your best option. Depending on what works for you, shouldering the startup costs could be well worth the fees you would be avoiding.
4. Determining Your Legal Structure
Your five choices for legal structure include:
- Sole proprietorship
- S corporation
- C corporation
- LLC (limited liability company)
When running your own business, it is a given that you should carry errors and omissions insurance. To go along with that, an LLC structure is the highest recommended legal registration solution to protect yourself from personal liability. Further, LLCs don’t require a formal business structure like other corporations do. This way, you’re able to divide your profits however you choose. There is also most flexibility with how you’re taxed in an LLC. After choosing your structure, remember to register your business as a legal entity in your state of business.
5. Writing your Real Estate Brokerage Business Plan
To map out the direction of a business, every entrepreneur has had to develop a business plan. You’ll need it to analyze the demand in the market and plot the strategic movements of your business. Be sure to include items like an executive summary, company summary, and mission statement. These will outline the general structure of your business, your purpose for starting your business, and how you plan to operate and grow.
Next, you’ll want to add your services offered, a current market analysis, and a financial analysis. Your services offered will include information on your customer base, the services you’re providing to them, and the employees that will help you do that. A current market analysis will discuss your strategic plan for entering the market as it currently stands- the end goal being to differentiate. Think about market trends, the size and growth of the market, and customer segments you’re looking to target. For your financial analysis, you’ll estimate operating expenses, develop a loan repayment plan, project your cash flow, and create a break-even analysis. Finally, a SWOT analysis (strengths, weaknesses, opportunities, threats) will help keep your strategy focused and organized on all aspects of your endeavor.
6. Setting Up Systems
Now is the time to start thinking about what systems will help run your business day to day. Specific examples include customer relationship management (CRM) and transaction management software products. A CRM is imperative to you manage your contacts, nurture leads, and keep the referrals coming. Have your team help pick one out, as they will be using as much as you if not more often. A transaction management software helps close deals and have handy features like custom document creation, e-signatures, and secure storage. When possible, it’s helpful to have the latest technology available- within reason. Incorporating these elements will keep your business up to modern standards, increase productivity, and even minimize your reliance on paper.
7. Strategy and Recruiting Plans
This step focuses more internally, involving the general structure of your real estate brokerage, support team budget, and commission structure. In the beginning, you will, be looking for agents to stick with your team in the long run. But it’s also important to know when to hire new employees further down the line. Consider prospective employees carefully and know what qualities you’re looking for. Continuously motivate employees with a substantial commission structure and encourage a positive culture.
8. Launch and Promote Your Real Estate Brokerage
Marketing is truly the path to success for your business. Simply put, you need to let people know your business exists. Look into traditional means of marketing like the classic park bench and billboard. But don’t underestimate a digital marketing strategy. Search engines, like Google, and social media platforms, like Facebook, are a gold mine for targeting customers looking for the services you offer.
There are multiple moving pieces to starting your own business. But if this is your calling, this level of success could elevate your career and income to new heights! Hondros College of Business offers an Associates Degree program, so you can get the education you need to start your next adventure.