You’ve been building experience in real estate for years, and it’s time to take your career to the next level. Figuring out how to start a real estate brokerage from the ground up can be daunting, just as starting any business can, but it is completely possible with the appropriate research and preparation. Here’s how you can begin the process.
Learn How to Start Your Own Real Estate Brokerage
Take your career to the next level and earn more in real estate by becoming a real estate broker.
Step 1 – Obtain the right licenses.
You probably already have the required real estate license if you’re considering starting a brokerage, but make sure you have the appropriate paperwork in order before you begin. Depending on the state, you will need a real estate agent license and a broker’s license. These are obtained through a series of general education, specialty courses and exams. Check online for exam locations and times in your area.
Step 2 – Meet with a broker in your area.
Before starting the process, consider the steps and challenges of starting a brokerage and talk to industry professionals who have successfully started brokerages themselves. They might have insight about the process that can only be encountered through experience and will know the nuances of the area. If you’re uncomfortable talking to a broker within your market area, find one from out of town who is willing to give you some tips of the trade.
Step 3 – Consider the competition.
Depending on where your brokerage will be listing or purchasing properties, it is reasonable to check out the competition. Gauging the market in the surrounding area might be a deciding factor in the part of town where you decide to set up shop, so make sure to research both the market and the other major players in real estate.
Step 4 – Budget.
Budgeting for a brokerage is crucial, as you should be able to finance one before going any further. Can’t afford to pay for everything yourself? That’s completely normal! Securing a small business loan or partnership with an investor is a way to pay for your company as you’re getting it off the ground. Consider the following financial responsibilities as a new business when negotiating funding:
- Employee wages
- Security deposit for office space
- First month of rent
- Unexpected daily expenses
Step 5 – Decide between franchise and independent.
There are two main types of brokerages:
- Franchise: Like any chain, a franchise brokerage provides standard training, sister franchises across the country for support and a standard protocol for financial decisions like commission splits between agents. RE/MAX is a great example.
- Independent: You can think of an independent brokerage as a boutique. They offer increased flexibility, more control over operations and don’t have the fees attached to bigger franchise brokerages. With that freedom comes more individual responsibility to keep the business afloat.
Step 6 – Choose a brokerage model.
There are a lot of different ways to structure a brokerage. Factors to consider include agent compensation, legal organization and franchise in comparison to independent. Reviewing a salary guide of what agents typically make in your location could help you to determine how you’ll split compensation with your agents and what your revenue projections could be.
Step 7 – Find an office space.
It’s time to find an office space! Whether you are working from an office building or from a spare room at home, it is important to have a designated space for work. Being able to bring potential employees and clients to a vibrant work environment allows them to take your brokerage seriously, and for you to take pride in your work.
Step 8 – Build a superstar team.
Your team represents your brokerage, so make sure you assemble a group of professional and well-liked agents. Before reaching out to agents, you will probably want to secure other key members of your team to help. An assistant and a listing specialist would be good first additions to keep things running while you are on the hunt for the best agents to bring on to the team. Once your team is set, put all of your focus into forging relationships with the surrounding community.
Step 9 – Register as an LLC.
Short for “Limited Liability Company,” registering as an LLC is the standard way to protect yourself when starting a brokerage. An LLC can be owned by a single person or multiple, and its main purpose is to ensure that your business is only taxed when appropriate and to protect it from lawsuits. Legally, a brokerage can fall into other categories, but the most common is LLC. Other legal registrations include:
- Sole Proprietorship
Step 10 – Spread the word.
Advertising your new brokerage comes next, and you should expect to spend a chunk of money doing so. It’s estimated that a business should spend about 10 percent of revenue on advertising, and for a brand-new brokerage, you should be putting noticeable effort into raising buzz around your company. Venture into your target area with business cards, buy ads in local publications or even put your face on a bus bench. It all contributes to brand awareness.
Alexis Petersen is the director of Content at Real Estate Express, a national leader in online learning for pre-licensing, continuing education and professional development. For the last six years she has been educating real estate professionals on how to successfully launch and advance their career. She’s also a seasoned marketing veteran, with nearly 15 years of experience.