You’re ready to get your broker’s license (or perhaps you already have one). It feels like the time is right to start a brokerage of your own. But if you don’t know how to start a real estate brokerage, it can seem like a daunting task.
How do you go about creating a real estate business from scratch?
If you’ve become a successful real estate agent, you already have the skills that you need. While running a brokerage is different, it’s hard work, preparedness, and networking that will continue to drive your success.
In this post, we’ll cover everything you need to know to start a brokerage in eight steps.
If you would rather watch or listen to this content, check out the video or podcast below!
Do You Really Want to Create a Real Estate Brokerage?
Before you look into how to start a real estate brokerage, you should consider why you want to.
Why do people create a brokerage? Sure, it’s a lot of money. But it’s also a lot more involved.
As an agent, you might look at the brokerage as a sort of tax. It might seem your broker does nothing for you except take a cut.
In reality, your broker is doing a lot. Your broker is cutting deals, networking, building infrastructure, and — well — maintaining a business.
A real estate agent is a solo practitioner responsible for one person. A broker can be responsible for dozens or even hundreds. That’s the reality of the real estate business.
So, you need to ask yourself whether you actually want to start a real estate brokerage.
It’s not like “being a real estate agent” multiplied. It’s an entirely different ball game. You’re going to be managing a business with a multitude of employees. There will be more legal and tax consequences. Everything will be bigger and faster.
But you are also going to be making a lot more money.
If that sounds good to you, let’s take a look at how to start a real estate brokerage — in eight (not so easy) steps.
“The key to being a good broker is networking. I have a wonderful relationship with other agents, which in this business you must have.” — Jade Mills, Coldwell Banker.
1. Create a Comprehensive Business Plan
No business should be started without a business plan.
Before you even break out those examinations, you need to have a strategy for your real estate business.
How many listings are there in your market? And how many agents do you think you can support? How expensive is a rental location going to be? How expensive will your infrastructure be?
This is where you make all your preliminary plans. You draw up a budget, project your income, and make sure that you can break even. To start a brokerage, you should expect that you may have negative cash flow for at least a few years.
Will you be able to support yourself?
Brokerages fail because they scale too quickly and because they have too many costs. As a real estate professional, your income is erratic. But on the other hand, your costs are almost immaterial. Now you’ll have salaries to pay.
Create a plan for scaling up slowly. Don’t dive in too deep. A brokerage can be grown slowly. It can start with a handful of people (or even a family) and grow from there.
Make sure that you have the cash at hand to support your goals before you even get started.
2. Pass the Relevant Broker Examinations and Get Your Broker’s License
Every state is different. But it’s likely that to become a real estate broker, you’ll need two components. You’ll have to take some continuing education classes. These will teach you the ins and outs of being a broker vs. being a sales agent.
Then, you’ll have to get your license. It’s a state-by-state system. But often, you’ll have to have some experience within the industry, the continuing education classes, and pass a test.
You can’t become a broker with a regular real estate license. You need to have a broker license to have other agents under you. So, this is a priority. Some people get their license before they’ve created their business plan.
Once you get your broker license, you can become an employing broker. And, hopefully, you’ll have learned enough from your own managing broker that you’ll be able to grow swiftly.
3. Develop the Intangible Aspects of Your Brokerage
The next step in how to start your real estate brokerage is to create your brand.
As a sole proprietor, you likely had a niche. Did you love helping new families find a “forever home”? Did you help investors find rental properties? Or did you work primarily with commercial real estate?
Your brokerage will have a mission, values, and focus. This is what separates your brokerage from other companies.
If you can’t express why someone should go with your brokerage rather than others, you need to think more about what makes your real estate company special.
Anyone can make a brokerage firm. But it takes a talented professional to create an independent brokerage that can thrive.
Branding itself is complex. It’s not just about your brand identity, but also your brand voice. Think about your ideal customers; the customers that you loved working with as a sole proprietorship.
Who were they? What do they connect with?
From there, you may need to hire professionals to develop your actual branding, including your company’s logo. Think about the name of your brokerage and what your real estate career means to you.
At the same time, you should be developing the legal infrastructure of your business. Is it a Limited Liability Company? Who are the partners? Have you properly incorporated within your state?
“People get very excited when they hear you’re in real estate: at dinner parties, might as well be standing on the table giving dances, that’s how much people want to talk about real estate.” — Peter Grazioli, Associate Broker.
4. Find an Office and Build Your Infrastructure
Now you’re getting down to the nuts and bolts of really creating a business.
You need to find offices. You need to furnish and design them. This should be the easy part. As a licensed real estate broker, you’ve probably already found many rental properties and staged them, too.
But you also need other things. You need to iron out your utility services, such as your telecommunications lines and internet lines. Also, you need to install security systems. And you’ll have to find the right real estate technology platform — a tech platform that will help your staff close deals.
The real estate industry is more “online” than ever before. Do you want dedicated offices? Or do you want flex space and for your agents to operate remotely? Do you want to be in the heart of the city? Or are you better suited to the suburbs?
Being a broker rather than an agent means making a lot of these types of decisions. As a business owner, you need to find the right vendors, build the right office, and focus on your ultimate goals.
Today, the real estate market is shifting quickly. Many are finding that the market is moving more toward virtual services. A listing agent isn’t just using the MLS. They’re also using Twitter. A buyer’s agent is looking on Craigslist and Facebook.
5. Hire the Right Employees
Why do people go to a brokerage?
Well, apart from needing a sponsoring broker, they want support — primarily administrative.
Your brokerage needs to hire the right employees, beyond just trying to attract the right agents.
That includes administrative staff, office managers, HR departments, IT departments — everything required to keep a business up and running.
You don’t need to grow too fast. Hiring too many staff members can be a major mistake for a newly licensed broker. You can get in over your head.
But at minimum, you need an office manager. Often, you also need a sales team.
Your agents aren’t the only ones that are bringing work into your business. A sales associate, usually unlicensed, is spending 40 hours a week just selling. They’re bringing people in for the agents to talk to.
That’s how you earn your cut of each real estate transaction.
So, you need a talented team before you even start talking to agents. You need a real estate salesperson, a solid office administrator, and an IT support team — at minimum.
In addition to that, you need a team of outside contractors that you can go to for support. This could include a Managed Services Provider (MSP) if you don’t want an internal IT team, a Certified Public Accountant (CPA) if you don’t want an internal bookkeeper, and a real estate lawyer.
Over time, you may be able to develop your IT staff and your accounting staff. When starting out with your new real estate broker license, it may be better to outsource as much as possible.
Outsourcing lets you tap into talent that you couldn’t otherwise afford while also giving you the ability to easily scale upward and downward as needed.
6. Hire the Right Agents
Once you have the right employee team, you need to start attracting agents.
You can try to attract new agents, experienced agents, or a blend. Each has its advantages and disadvantages.
But from the outset, you should think about what type of agent you want to work with. Who do you want to be representing your brand? If they don’t align with company culture, it will be difficult to make a name for yourself in the industry.
A new Realtor won’t have much experience and may not have any connections. But they’ll also be easier to get. If you can foster a new Realtor’s career, you can ensure that they will stay with you long-term. You can also make sure that their career grows alongside your core mission statement and values.
An experienced Realtor can bring in a big book of business, and their reputation can help you grow your business. But they will be more challenging to get. A good commercial real estate agent may have demands to negotiate with their principal broker.
There are a lot of things you can offer to make yourself more competitive. Administrative services, for instance, can help a Realtor improve and speed up their business. Subsidizing things like seminars, real estate courses, and other continuing education can also help.
Often, you’ll be pulling real estate agents you already have a personal history with. You know that they’re good at real estate sales, and they’ve expressed an interest in moving on from where they are. But many brokerages are going to start with a mix of inexperienced and experienced agents because it can be very difficult to pull experienced agents from the start.
Hiring is an Ongoing Process
Of course, getting the right agents is a continual process.
You may find that eventually, an agent finds it better to switch their designated broker to one that aligns more closely with them. You may also find that a big real estate investor comes in — and suddenly, you need more agents that specialize in real estate investing rather than residential properties.
As a broker, you’ll need to be constantly bringing in business as well as finding new talent. This is how your business entity can grow.
“Real estate is the basis for wealth.” — Theodore Roosevelt.
7. Jump Start Your Marketing Plan
There’s a major advantage in the real estate industry: All your “employees” are salespeople.
From the very start, your real estate agents are going to be hard at work trying to bring additional customers in. But that doesn’t mean that you aren’t working, too.
A marketing plan is not an advertising plan. It’s a comprehensive strategy. Are you going to send out mailers? How will you reach out to your own book? What marketing materials do you need? Where will you advertise first? How will you track how effective your advertising is?
Once you launch your brokerage, the marketing will begin and will not end. You will need real estate content such as YouTube videos and blog posts for your website. In addition, you’ll need information shared through your social media sites. You will also need paid and organic advertising campaigns.
Sending out physical mailers and door knockers may also be a good idea. And you may need to connect creatively with your existing network. You will also need to actively seek out those who are interested in real estate investment.
If you have a dedicated sales team, what will they be doing? Are they cold-calling? What are their scripts?
You will be doing everything you used to be doing but ramped up to 1,000. Your marketing campaign will need to be studied and controlled, so you can improve on it.
Over time, you’ll grow your book of business. You’ll find more buyers who can buy from your sellers, and vice versa, to improve your rates of dual agency. But at first, there’s going to be a lot of pounding pavement and investments in advertising.
8. Create a Complete Lead Generation Funnel
The last step in how to start a real estate brokerage is to create a sales funnel. How do customers come to you? What is your buyer’s journey?
As you create your marketing campaigns, you should also be developing a lead generation funnel. This funnel should describe how buyers and sellers find your services, how they are connected and engaged with, and how they are finally brought to a commitment.
Your sales funnel will control how quickly your organization will be able to scale. Your sales funnel is how you fine-tune and optimize the customers you engage with — and how you ensure that you’re providing enough value to your agents.
As previously mentioned, today, a lot is done digitally. You have multiple online channels that you need to track for your lead generation. But you also need to engage buyers at every turn.
Your lead generation funnel can be modified and improved upon regularly. Online marketing is always changing, and the real estate business is steadily evolving. But you do need to start with a lead generation funnel so you can make controlled, intentional changes to the process.
Starting Your Real Estate Business
Once you have the appropriate real estate license, you’re not far off from starting your own real estate business.
One of the fantastic things about the real estate market is that it has a very low barrier to entry. But it’s easy to enter and difficult to master.
The more preparation you do for your real estate business, the more likely you are to succeed. Not only do you need a complete plan, but you need the right connections.
Ask yourself if:
- You start a brokerage today, which agents would you bring with you, and why?
- A client asked why they should choose you over another broker, what would you say?
- An agent asked what you have to offer a Realtor that another brokerage doesn’t, what would be the answer?
A Realtor needs to be able to differentiate themselves. So, too, does a real estate business. It’s about more than just a real estate license. It’s about building a sustainable, scalable real estate business that can survive even the most erratic markets.
If you’re wondering how to start a real estate brokerage, the biggest mistake you can make is going in unprepared. The second biggest mistake is scaling too fast.
FAQs on How to Start a Real Estate Brokerage
What’s the difference between a real estate broker and a broker associate?
Associate brokers have already passed the broker exam and have a broker license, but they haven’t opened their brokerage yet. Rather, they’re still working under another broker. Many broker associates do this so they can learn the ropes before trying to build their own firm.
How do you get started in the real estate business?
If you’re wondering how to start a real estate brokerage, the first step is to get your broker’s license — then you can have other brokers work under you. After that, it’s all a matter of finding the right brokers and giving them the right support regarding administrative efforts and sales teams.
Can you start a brokerage online?
Some brokerages today only work online. But you still need licensed agents working under you from the state you’re licensed in, and you can still only broker sales in that state. Still, an online real estate business won’t have the overhead of a brick-and-mortar business — and an online real estate business can still reap the benefits of online marketing.
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Get All The Details Here
As an expert in real estate brokerage with a deep understanding of the industry, I can provide valuable insights into the concepts discussed in the article about starting a real estate brokerage. Here are key points related to each step mentioned in the article:
Create a Comprehensive Business Plan:
- Importance of having a business plan before starting a brokerage.
- Considerations for budgeting, income projection, and breaking even.
- Emphasis on scaling up slowly to avoid potential failures.
Pass the Relevant Broker Examinations and Get Your Broker's License:
- Highlighting the state-specific requirements for obtaining a broker's license.
- Stressing the need for continuing education classes and relevant experience.
Develop the Intangible Aspects of Your Brokerage:
- Defining the brand, mission, values, and focus of the brokerage.
- Importance of expressing what makes the brokerage unique.
- Emphasizing the legal infrastructure and business entity setup.
Find an Office and Build Your Infrastructure:
- Decision-making regarding office location, design, and infrastructure.
- Consideration of online presence and virtual services in the evolving real estate market.
Hire the Right Employees:
- Importance of building a talented team, including administrative, HR, and IT support.
- Caution against rapid growth and the necessity of hiring strategically.
Hire the Right Agents:
- Considerations for attracting both new and experienced agents.
- Balancing the advantages and challenges of hiring different types of agents.
- Ongoing process of talent acquisition to align with business growth.
Jump Start Your Marketing Plan:
- Clarification of the difference between a marketing plan and advertising plan.
- Comprehensive strategy for advertising, online presence, social media, and networking.
- Continuous effort in content creation, advertising campaigns, and outreach.
Create a Complete Lead Generation Funnel:
- Development of a sales funnel to control and optimize customer engagement.
- Recognition of the digital nature of lead generation in the current real estate landscape.
- Need for regular modifications and improvements to the lead generation process.
The article emphasizes the importance of preparation, planning, and strategic decision-making in starting a real estate brokerage. It highlights the challenges and opportunities in the industry while providing a roadmap for success. If you have specific questions or need further details on any of these concepts, feel free to ask.