If you are a self-starter with an incredible work ethic and can truly bring out the best in other real estate agents—making them successful—you may be the perfect candidate to start your own real estate brokerage. However, there are a number of steps you need to take, like creating a business plan, before you can call yourself a broker-owner.
1. Ask Yourself If You Have What It Takes
The truth is not everyone is cut out to be a broker-owner, and those who start their own brokerage need to be prepared to work long hard hours in their real estate business without guaranteed monetary rewards. This is why you should ask yourself a few questions before taking another step toward being your own boss.
Remember to answer honestly and truthfully. If you don’t take a good look at your strengths and weaknesses, you could lose a lot of money or possibly tarnish your real estate reputation.
Are You a Leader or a Boss?
If you are a leader (a person who guides and communicates well with others), then you have the first building block to being a successful broker. However, if you are the “bossy type” who likes to bark orders, tell others what to do, or believe that only your opinion counts, then being a broker is not for you. A successful broker needs to lift up their agents, be in their corner, and most importantly, be available for guidance.
Do You Need to Be in Control at All Times?
Agents are not robots or clones. They must be able to be given the freedom to be themselves. This does not preclude agents from straying from legalities or proper real estate protocols. As a broker, I am always excited when one of my agents exceeds my expectations during a transaction. I equate it to feeling like a proud parent.
Do You Have Access to Funding?
When opening up your own brokerage, you must have working capital for startup costs. You also must consider that you may make less money while opening up your office due to other job responsibilities and not being able to sell real estate. In general, startup costs are between $10,000 and $15,000.
Do You Want a Partner?
If the answers to some of these questions are giving you pause, you don’t necessarily have to start a brokerage on your own. You may be better off finding a partner to help manage the team or absorb a portion of the expenses. However, this does mean that there will be more than one decision-maker involved in the process.
When I opened my brokerage, I chose to embark on this journey on my own. I wanted to be the only one to make decisions, take on the debt, and have the opportunity to be successful financially. This path has not been the easiest with the ever-changing market, but it has been the most rewarding with the most growth.
2. Ensure You Meet State Requirements
You must have a broker’s license in order to start a real estate brokerage, which means taking additional courses and passing the exam broker unless you have already upgraded your license. Expect to take courses on real estate principles, real estate practices, escrow, real estate finance, legal aspects of real estate, real estate office administration, real estate economics, and real estate appraisal as part of this process.
If you do not already have your license but are ready to become a real estate broker, many states allow you to complete your coursework online and at your own pace. If you’d like the convenience of studying from the safety of your home, but still enjoy a group learning setting, consider McKissock Learning, as this school offers tools for peer collaboration as well as options for one-on-one instruction.
Upon completion of these courses, you will then need to take a state board examination. In California, a real estate agent must conduct real estate for a minimum of two years prior to becoming a broker. However, all states have different rules, so please check for your specific state requirements.
For more on this step, visit our article outlining the requirements of becoming a broker.
3. Prepare a Business Plan
In real estate, a successful roadmap is called a business plan. To give your brokerage the best odds of success, you must determine “the game plan.” The business plan will give you an opportunity to write down and focus on the goals that you would like to accomplish. With this process, you will determine your overall business and financial goals broken out into long- and short-term categories.
If you want help preparing this documented road map for your business, check out our more comprehensive article on how to create a real estate business plan. However, other things to keep in mind when preparing your business plan are:
Name recognition is extremely important. This is not the time to be cute or funny with your office name. When choosing the name of your brokerage, you must make sure to also check with the Counter Recorder’s Office, especially if you are going to be using a DBA (Doing Business As). You want to make sure that your name is memorable and relatable to real estate.
Having trouble coming up with what to call your brokerage? Take a peek at our article on real estate company names for inspiration.
Target Market & Branding Strategy
Unless you will be the only brokerage in town, your brokerage will benefit from taking the time to identify your ideal client to better focus your efforts. Would you prefer to work mostly with clients with high-end budgets, those who appreciate paperless transactions, or homeowners trying to downsize? Targeting a niche is a great way to start planning your branding strategy.
Your branding strategy is what you will do to keep your company “top of mind.” In other words, anytime someone who matches your target market is in need of a real estate agent, your brokerage’s name is mentioned. One way to do this is to create a compelling real estate logo.
4. Choose an Office Location
Trying to figure out what type of office works for your brokerage and agents could possibly be considered like choosing vanilla or chocolate ice cream. Some of us like vanilla, some of us like chocolate. As a broker, you need to give your agents options to work in an environment where the agent can be successful, feel safe, and be productive.
Your choices are:
- Brick-and-mortar: Physical office
- Virtual setting: Agents work from home
If you choose to use a physical location for your brokerage, you must also then decide how large of an office space it should be. In addition, a physical office comes with other expenses to consider, such as furniture, computers, copiers, office supplies, phone systems, and employees—all of which can be costly. However, this setup can validate a higher commission split between broker and agent.
A virtual setting, where all agents and staff work from home, can be less expensive. Agents could be financially responsible for their own computers, phone, and furniture. With this arrangement, commission split would be lower between broker and agent. To have employees work from home, costs incurred for computers and phones would need to be considered.
When I became a broker, I thought I wanted to build a large office. However, I realized quickly that having a smaller office with up to 10 agents was more manageable. This is because the smaller size allowed me to be available to answer questions and give guidance on situations that came up on a particular deal.
5. Determine Your Staffing Needs & Hire Accordingly
Just because you have started a brokerage doesn’t mean you have to immediately hire a team. However, as a broker, you are able to earn income from the agents who work for you, which makes it an attractive option. If you do intend to hire agents to work under you, you must also then decide if you would prefer to hire seasoned agents or newly licensed agents.
Why You Should Hire Seasoned Agents
Seasoned agents come in with their own database of clients and need less “hand holding,” which means they can quickly build a brokerage’s reputation and help the brokerage be lucrative financially. That said, when choosing a seasoned agent, you must remember that they may come with a different work style than you.
Why You Should Hire Newly Licensed Agents
Newly licensed agents are often hungrier for success and willing to try new things or work longer hours. However, if you choose to hire newly licensed agents, you will need to have a training program in place as well as a team leader to teach it. Therefore, expect to spend more resources upfront with newer agents.
You may choose not to hire any agents right away. However, that doesn’t mean you won’t have a reason to start thinking now about how you want to staff your business as it grows. In addition, you may also want to think about hiring administrative support staff to help you stay on top of records and listings while you are in the field, or a marketing assistant to help you generate new leads. You can learn more by visiting our article on how to build a real estate team.
Pro tip: No matter how you structure your team, choosing the proper work environment is crucial for success. Pay attention to personality and values when hiring your team, as I’ve found that teams with similar business ethics make for a more cohesive office. Your agents should also support each other even though they are friendly competitors.
6. Create Marketing Collateral
Once you have determined your company name, branding strategy, location, and staffing plan, it is time to start creating excitement about your new brokerage. You can do this in a number of ways depending on your marketing plan. For example, you may want to host a grand opening event or take out radio, newspaper, or Google ads. However, you will also want to create longer-lasting digital and printed marketing materials like the following:
- A professional website
- Business cards
- Postcards, brochures, or flyers
- Real estate signs
- Open house signs
If you don’t already have a local printer in mind, check out ProspectsPLUS! This service offers more than 100 real estate-specific templates that you can easily modify with your brokerage’s name, contact information, and listings. You can learn more by visiting their website.
7. Establish a Lead Generation Strategy
As an agent, you may have discovered a number of organic ways to generate leads and might have an established network of contacts you can count on for referrals. However, as a broker, you will likely be expected to provide additional sources of leads in order to support your agents, whether they be new or seasoned, in building their business.
Lead generation companies exist to help agents identify potential sellers and buyers they might not have discovered on their own. For example, you may offer your agents access to tools like Zillow Premier Agent, which allows them to be featured next to listings. A service called Parkbench helps agents and brokers establish themselves as experts in their community and connects them with vendors as well as potential clients. Each tool has different programs that can be personalized to the agent’s budget.
No matter which tools you use, you’ll also need to determine a strategy for follow-up, as it is important to touch base quickly with the buyer to determine their needs. Customer relationship management (CRM) can help you manage your leads, and a popular CRM for brokers with a proven track record is Top Producer. To learn more, consider visiting their website.
Pro tip: While using real estate software is a great way to find leads fast, or stay on top of existing inquires, these programs often charge by the contact or include features you may not need. This is why you should take the time to watch the tutorials and learn how to use the programs. Make your investment work for you.
8. Plan for Retention & Storage of Legal Documents
Keeping a complete transaction file is critical for a brokerage. As the broker on record, all the responsibility and liability is on your shoulders. Agents must be instructed to adhere to a checklist of documents that you, as the broker, require. Thankfully, with technology, there are cloud-based tools such as Dropbox, where documents can be stored. These documents can be retrieved on your phone, laptop, or tablet.
Did you know? In the State of California and per the Department of Real Estate, documents must be retained for three years from the date of closing. Please verify the length of time to retain real estate documents with the Department of Real Estate in your state.
9. Define Success
Now it is time to consider the benefits and risks of embarking on this journey. What does success look like? What will it take to be financially stable? It is also a good idea to ask yourself if you intend to be a managing broker or a competing broker.
A competing broker means you will continue to work directly with buyers and sellers. You might earn more, but by making this choice, you could find yourself up against your own agents for a listing. How might this be perceived by your agents? Make sure there are no blurred lines. When completing independent contractor agreements with your agents (which include commission splits and office guidelines), expectations must be set with no ambiguity.
Pro tip: While it is important to “watch your pennies” when starting and running a brokerage, you should always have access to an attorney and an accountant who have the expertise to guide you while building your brokerage. Set a budget to hire vendors and consultants who have the expertise to implement systems. “Today’s investment is tomorrow’s profit.”
We all know the old adage, “hard work pays off.” Opening my own brokerage was truly a testament to long hours, sleepless nights, missed time with my family, and poor financial decisions that cost me money. However, with the balance of business and pleasure—where my priorities are God, family, and business—I would not change a thing.