If you are a self-starter with an incredible work ethic and can bring out the best in other real estate agents, you may be the perfect candidate for starting a real estate brokerage. You will be required to have real estate experience and complete additional training, and will also need to develop business plans, build a team, create your own brand, and organize finances. This will establish you as a broker-owner.
Before you read the eight steps of starting your own brokerage, make sure you’re up to the task by taking our quick quiz:
Are you ready to start your own real estate brokerage?
1. Determine if You’re Ready to Start a Brokerage & Understand Your Why
While opening a real estate office can be a rewarding experience in your career, real estate agents need to determine if they’re ready to embark on this journey and understand why they want to take on this next venture.
There are significant benefits to starting a real estate brokerage, but also there can be a lot of downsides if you’re not prepared.
PROS | CONS |
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Being your own boss | Time and effort investment |
Higher earning potential | Potential losses/expenses (especially in the beginning) |
Hiring own staff/agents | Managing other’s time and workload |
Flexibility to call the shots | Failure is on you |
Before weighing the pros and cons of starting a brokerage, agents should uncover their own personal motivations. Below are some questions real estate agents must ask themselves before starting an independent real estate brokerage:
- Are you a leader or a boss? Successful brokers are leaders who guide and communicate well, not bossy types who dominate and ignore others’ opinions. Leaders inspire trust and respect, fostering a productive and positive work environment.
- Do you need constant control? Brokers should allow agents freedom within legal and protocol boundaries, encouraging independent problem-solving without needing constant approval. This autonomy boosts agent confidence and fosters creativity in serving clients.
- Are you organized? Operating both front- and back-ends requires strong organization and systems for smooth business operations while allowing flexibility for agents. Effective organization also ensures that client needs are met promptly and efficiently.
- Do you have strong communication skills? Effective communication with agents, staff, clients, and peers is crucial for guidance, mentorship, and strategy sharing. Clear and open communication builds strong relationships and ensures everyone is aligned with the brokerage’s goals.
- Are you passionate about real estate? A successful brokerage demands time, effort, and passion for real estate to overcome challenges and setbacks. This passion is contagious, motivating your team and attracting clients who value your enthusiasm and commitment.
- Do you have a unique vision for your clients? In a competitive real estate market, having a unique value proposition is key to long-term success. Your vision should address specific client needs and market gaps, setting your brokerage apart from competitors.
- Could you achieve similar success by forming a team within another brokerage? Starting your own comes with financial and operational challenges. Agents seeking to focus on real estate with a team might find it more practical to join an existing brokerage, reducing overhead and operational complexities while focusing on client service and team dynamics.
When asking yourself these questions to understand your personal motivation to start a business, the reason behind why you want to start a real estate brokerage will be a guiding motivator to taking the first step.
2. Meet Your State’s Requirements for Starting a Real Estate Brokerage
An essential step in how to start a brokerage firm is ensuring you meet your state’s eligibility requirements. Typically, real estate agents who want to learn how to start a real estate brokerage must take additional classes, practice for a specific number of real estate hours, and pass the broker licensing exam. Education requirements range from 24 to 336 hours, depending on your state.
For example, California and New York have substantially different requirements for agents to get their brokerage licenses. See the differentiating factors between the two below:
Requirements | California | New York |
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Age | At least 18 years old | At least 20 years old |
Background | Conviction of a crime may result in the denial of a license | Conviction of most felonies is an automatic disqualification |
Licensing Prerequisites |
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Additional Education | 135 hours of coursework and passing exam score | 75 hours of coursework and passing exam score |
Once you obtain your broker’s license, you must also comply with all state regulations regarding brokerages. For example, some states, like Nebraska and New Mexico, will require brokers to have a specific type of insurance or a physical office location. These requirements can change constantly, so all brokers must stay updated with the changes in their state laws.
Kaplan course demo (Source: YouTube)
Another way to stay current with changing state regulations is through continuing education courses. Brokers can take continuing education courses through online providers like Kaplan. It offers traditional learning, online learning, and self-paced course formats. Continuing education courses can be purchased in bundled packages or as individual courses, depending on how many credit hours you need.
For specific information on broker licensing requirements in your state, visit our article How to Become a Real Estate Broker in 6 Steps.
3. Conduct Market Research
Once you’ve pinpointed your motivator for starting your own real estate brokerage and completed licensing requirements, research your location and competition to evaluate the success rate of opening a brokerage in your desired area. Understand whether the area you’re located in is saturated with too many real estate brokerages and if there is enough housing demand to supply you with business to sustain your team.
To begin your research, agents can look at the data for the area they are interested in opening a real estate brokerage. Use Google or the National Association of Realtors directories to search for members or state and local associations.
It’s also necessary to evaluate if your brokerage will be able to cater to the chosen target market in your area. For example, you want to open a luxury real estate brokerage, but you discover the supply of luxury properties is limited in your area, which should cause you to reconsider your position. Understanding the target markets allows you to build your business and refine your marketing message.
Another consideration is the option between opening a franchise or an independent brokerage. Purchasing a franchise brokerage, like Keller Williams or Coldwell Banker, will give you pre-established features like branding, training, and marketing. However, buying a franchise can have starting costs of around $200,000.
The cheaper option is starting an independent brokerage. This will give you more control over your business, and you’ll be responsible for establishing your brand through advertising, marketing, and lead generation efforts. Although it will take longer for you to establish yourself in the community, and starting out will be tough, you will have complete autonomy over your business.
For more market insights, read through the following articles:
- 20 Most Crucial Real Estate Statistics in 2023
- 18 Essential Real Estate Lead Generation Statistics 2023
- 17 Vital Real Estate Marketing Statistics 2023
4. Develop a Real Estate Brokerage Business Plan
Developing a real estate business plan for your new brokerage is a crucial step to starting a real estate brokerage. This business plan will help you identify your goals, predict any challenges that may occur, and determine where the business opportunities are. This business plan will position your brokerage for long-term success and help you manage business growth. Here are a few important components you should take note of in how to open a real estate brokerage:
- A mission and vision statement: These statements outline your company’s purpose, values, and long-term goals.
- Develop a SWOT analysis: SWOT stands for strengths, weaknesses, opportunities, and threats. The strengths and weaknesses are an internal assessment of your brokerage, while opportunities and threats take into account external factors.
- Identify your competitive advantage: It’s important to clearly outline why and how your business differs from the rest of the competition in your market.
- Create a marketing and sales strategy: This outlines how you will attract clients and promote your business for financial growth.
- Identifying your niche: This will help you establish your expertise and draw attention from clients looking for someone who specializes in that niche.
The biggest difference between a real estate agent’s business plan versus a brokerage business plan is the expected finances of running a real estate brokerage. Outlining these financials clearly will help you align with your financial goals. Here is a breakdown of the expenses it’s essential to include in your plan:
Types of Expense | Description |
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Startup Costs | Expenses you'll incur before your business starts generating any money. These startup costs can include:
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Revenue Streams | Identifies sources of income for your business. Your revenue will typically include:
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Expenses | Your expenses are the costs associated with running your business. Examples of expenses will include:
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Cash Flow | Cash flow is the amount of cash that flows in and out of your business over a given period of time. You’ll want to make sure you have enough cash coming in to cover your expenses, especially if you find your brokerage is busier in the summer versus winter or if you plan on spending more on marketing at a certain time of year. |
Break-even Analysis | A break-even analysis helps you determine how much revenue you need to generate to cover your expenses and break even or have no profit. |
For a deeper understanding of creating a real estate business plan, check out How to Write a Real Estate Business Plan: Elements, Examples & Free Template (+ Goal Calculator). Agents can apply the same concept to their brokerage business as to their individual agent business.
5. Locate an Office Space for Your Team
When building a brokerage, brokers must decide whether they will have a brick-and-mortar office location or a virtual office. A physical office location makes it easier to develop a team culture and oversee your brokerage operations, whereas agents who choose a virtual office will save on overhead and office expenses. There are many pros and cons to each office type.
Ultimately, the decision to have a physical office or virtual office will depend on the type of brokerage you want to have and if you have the budget for it. You could consider a hybrid option with a smaller space or a space within a coworking building. Before finalizing your decision, make sure you’ve considered factors like location, size, costs, and amenities for each office option.
6. Determine Your Staffing Needs & Hire a Strong Team
As a brokerage owner, you must provide your team with careful planning, strategic recruiting, and ongoing support and training. Brokerage owners must give their team tools to support their individual agent’s business efforts, like access to lead generation software, customer relationship management (CRM) software, email, etc. With larger responsibilities, you must also build a team to delegate some of your responsibilities.
Some of the employee roles within a brokerage include the following positions:
- Real estate agents
- Operations
- Accounting
- Listings manager
- Trainer/Development
- Transaction manager
- Marketing
- Administration
- Technical support
- Customer relationship management (CRM) system manager
- Recruiter
Hiring New vs Experienced Real Estate Agents
Recruiting and retaining great agents will be the key to building a successful brokerage. Since real estate brokerages make money based on their agent’s deals, you want to make sure you have the right agents in place who will continuously contribute to your business income.
During the hiring process, consider factors like experience, skills, and fit with your business culture. You want to hire real estate agents for your team who share the same vision and value as your company. Some brokerages offer incentives to help hire and retain top talents, like increased commission splits, a team structure, training, and support from a dedicated admin.
Brokerage owners should consider whether they want to hire new talent or experienced agents. Here are some pros and cons of hiring new versus experienced agents:
New Agents | Experienced Agents | |
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Pros |
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Cons |
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Hiring Full-time vs Part-time Employees
Unlike real estate agents who are independent contractors, full-time employees work at least 40 hours per week. They receive benefits such as health insurance, paid time off, and retirement savings in compliance with state regulations.
Part-time employees may not have access to all these benefits. When hiring, consider your budget, needs, and growth plan. Full-time employees offer stability and commitment, ideal for roles requiring a high level of expertise. However, part-time employees can offer flexibility and cost savings, beneficial during growth phases.
One solution to manage a team’s productivity is by implementing a robust customer relationship manager (CRM) like Top Producer. The platform helps agents connect with their leads through workflows and task reminders. The system also offers shared access to contacts, communication, and calendars so brokers and team leaders can view their team’s sales pipeline. Top Producer does have a real estate transaction management solution to help teams stay organized and store transactional information post-deal closure.
7. Market Your Brokerage
Now that you have a brokerage name, an office, and team members, you want to market your brokerage so everyone is aware of your new business. Successful brokerage owners with a strong brand identity and great reputation can turn that into generating leads for their businesses. Agents should create a real estate marketing plan to help guide their marketing efforts and increase market awareness.
Below are some elements to effectively market your brokerage and increase your exposure:
- Develop a brand: To set your business apart from other brokerages in similar markets, brokerages should have their own brand identity. This includes having a creative brokerage name, defined logo, color scheme, and clear messaging that reflects your value and service offering.
- Build a website: Ensure a strong online presence with a website that highlights your brand, products, and services, catering to your target audience. A search engine-optimized website improves visibility, attracting prospective clients and potential agents.
- Leverage social media: Utilize platforms like Facebook, Twitter, and LinkedIn for exposure, ensuring your profiles reflect your brand. Share content and engage with prospective clients on these social media platforms.
- Network and collaborate: Attend local and industry events to grow your network and discuss your business. This helps in generating leads and brand exposure. Always bring business cards and follow up with contacts after the event.
- Invest in advertising: Use channels like online ads, billboards, and print mailers to generate sales leads. Ensure budget allocation toward effective mediums and track lead sources for optimal spending and a better understanding of where your leads come from.
- Provide excellent customer service: One of the best lead sources in real estate is through referral business. Make sure to always ask your clients for referrals. When you provide great customer service, your clients will want to share the same experience with their own personal networks.
Marketing your new real estate business with a mix of branding, digital marketing, networking, and customer service will give your brand exposure and bring in new business. Use ProspectsPLUS! to execute timely mailers with their targeted mailing lists or by using your contacts. The platform has a campaign feature that allows you to send a series of mailers at set times, so you don’t have to remember to manually send them.
8. Generate New Business Leads
As a final step in learning how to start a real estate brokerage, you must provide sources of paid and organic leads to support your agents. This is especially important if you have new and inexperienced agents on your team who do not have an established sphere of influence.
Brokerages that provide leads or provide platforms that offer lead generation can have a larger commission split to the brokerage to help cover those costs. If you have an established CRM that can route and identify leads according to lead source, that will help you determine which splits to include for each closed deal.
Each lead generation tool has different pricing options that can be personalized to fit your budget and the needs of your agents. Most brokerages will tend to have multiple platforms that provide agents with leads. These lead generation tools provide a valuable supplement to your existing marketing and networking efforts:
Software | |||
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Best For | Implementing marketing automation | Generating leads via social media | Build lead generation websites |
Key Features |
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Starting Price | Average price per lead is $25 to $35 | $299 per month or $699 per month plus the cost of your ads | $80 per month for National Association of Realtors (NAR) members; $100 for non-NAR members |
Learn More |
Frequently Asked Questions (FAQs)
Yes. Understanding how to start a brokerage reveals that it is challenging due to financial, regulatory, and market-related hurdles. It demands a profound real estate market knowledge, considerable upfront capital for startup costs, and a comprehensive business plan. Entrepreneurs embarking on this journey must navigate complex legal and regulatory frameworks that vary by state to ensure compliance. Additionally, establishing a reputation and building a client base in such a competitive industry requires dedication.
Yes. Brokerage firms can be highly profitable, but their success depends on various factors such as market conditions, the firm’s business model, and operational efficiency. Profitability is influenced by the firm’s ability to generate consistent commission income, manage expenses, and adapt to changing market dynamics. Successful brokerages often have a strong client base, offer diverse services, and utilize technology effectively to maximize operational efficiency and client satisfaction.
Pinpointing the richest real estate broker is challenging due to the private nature of individual wealth and the fluctuating real estate market. However, high-profile figures like Stephen Ross, founder of Related Companies, and Gary Keller, co-founder of Keller Williams Realty, are among the wealthiest individuals in the real estate industry. Their wealth is not solely from brokerage operations but also investments, development projects, and ownership stakes in various real estate ventures.
Bottom Line
How to start your own brokerage can be tough and rewarding at the same time. By knowing what starting your own brokerage entails and carefully planning and executing strategies, real estate brokers can feel confident they have the tools to create long-term success in the real estate industry.