How to Build a Real Estate Brokerage That is Profitable
Is owning a real estate brokerage profitable?
Owning your very own real estate brokerage can be an extremely rewarding business venture for real estate agents who are looking to upgrade their income and build a life of freedom. For realtors, starting and running your own brokerage is one of the most common ways to build a business for yourself that is large enough and profitable enough so that one day you can become insignificant to your business, exit the industry, and retire to go enjoy the dream lifestyle that you have created for yourself and your family.
Building a real estate brokerage can be an extremely lucrative business, but it also takes a lot of hard work and dedication to actually make it successful.
In fact, a research done in 2021 shows that most real estate brokerages aren’t even that profitable for the owners.
Do real estate brokerages make money?
Running your own brokerage is no easy task. It is the same as running any other business. You are risking your time, money, and reputation to build an organization that has multiple components, each of which is crucial to creating and maintaining your success.
Most real estate agents, even team leaders, are simply entrepreneurs and not necessarily business owners. Although realtors are independent contractors that are responsible for their own success, they typically don’t have a lot of experience running a large organization with many moving parts.
That is why so many brokerages fail. Because they were started by agents who kept their same mentality of “independent sales agents” from their days of selling houses. Although the skills of a real estate sales agent are extremely important, starting a brokerage and actually owning a business requires many other skillsets that most realtors are not familiar with.
Leadership, time management, capital allocation, risk mitigation, recruiting, hiring, etc. These are all skillsets that one must develop before they are able to operate a profitable business such as a real estate brokerage.
In order for you to start a profitable brokerage, you first need to learn how to set up the correct systems in your business that can help you run and manage a large organization without needing you to be present at every moment.
There are four critical systems that you need to set up your brokerage for success. These systems are sales, marketing, finance, and compliance.
If you can get these systems working correctly, your brokerage will be on the path to profitability.
In this article, we are going to break down exactly what it takes for you to build a profitable real estate brokerage and the 4 key components that attribute to the success of every great business.
Table of Contents
What it takes to build a successful real estate brokerage: How do I start my own brokerage company?
In order to start a successful real estate brokerage right off the bat, you need to do your research and put in the hard work.
As we mentioned earlier, running a real estate brokerage takes more than just being good at real estate. You also need to have strong business skills in order to be successful. This includes things like marketing, accounting, management, and operations. If you’re not familiar with these topics, you’ll need to learn about them and expand your skillsets before starting your own brokerage.
In order to measure the true profitability of a real estate brokerage, the owner/broker must take away all of the revenue that was generated by themselves personally through your own production. This means that you must be able to step away from your personal production at any time and your brokerage must still be profitable solely from the production of your agents.
Real Success vs Personal Success: How do successful real estate brokers grow?
Building a real estate brokerage requires you to not only have personal success but real success. Personal success is the measurement of how successful you are as an individual through your own efforts while real success is the measurement of whether or not you can translate that success into an operational organization that is larger than yourself.
Many real estate agents experience an abundance of personal success as individual single-person businesses but never translate that into the real success of running a multi-person business such as a real estate brokerage.
Remember this cardinal rule of owning a real estate business: The success of your agents determines the profitability of your business.
As a broker/owner, you are no longer catering to the clients, your new clients are agents, everything you do must be for the agents at your company and their success.
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How to set up the correct systems in your business
If you want to set up a profitable real estate brokerage, it is important to make sure you get the right systems in place.
Every real estate brokerage has key systems that manage and processes the operations of the business for both the owner and their agents. These systems include lead generation, appointment setting, CRM follow-up, recruiting, training, and marketing. These systems will help your agents build their businesses and sell more real estate while also helping you create the values and principles that your brokerage operates under.
You’ll want to start by picking which of these four systems is going to be the most important for your business at this time because it’s important not to overload yourself from day one.
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How to Build a Real Estate Brokerage: The 4 Critical Systems of Any Business:
1) Sales
2) Marketing
3) Finance
4) Legal and Compliance
1) Sales
The first system of any successful business is sales.
Setting up a sales system in your real estate brokerage is important so you can give your agents some direction in improving their skillsets. A well-designed sales system can help your agents achieve their sales goals and objectives.
Your sales system should be expressed through the training that you provide your agents at your brokerage. By teaching your agents new sales methods, you are able to help them increase their production and therefore, your profitability.
There are many different types of real estate sales systems that you can incorporate into your brokerage’s training and coaching systems to help your agents land more clients and close more deals. Some of the most popular trainings include:
-Door Knocking
-Cold Calling
-Straight Line Method
-Prospecting and objection handling training
-Closing techniques training
You need to find and tailor your sales systems to the needs of your agents and the type of brokerage you are running.
There are a couple of different options for you to create and implement a sales system in your real estate brokerage.
You can either create your own sales system, or you can use a sales coaching firm to help design your sales training program.
Many franchise brokerages choose to implement the same sales systems in their business that their franchise provides. Although convenient, make sure that the sales system that the franchise is providing your agents is actually aligned with your vision for your brokerage. If not, it is always better to take the time to create your own system or to find another third party to outsource to.
Remember, the most important step is to have some sort of system put in place for your agents. If they do not know what their goals are and how to reach them on a daily basis, then your business will suffer greatly.
However, just because you have a certain sales system does not mean every agent in your brokerage needs to follow it. Not every agent at your brokerage will want to follow your sales systems; there should be agents that have their own sales methods and tactics and use them to increase their business. After all, agents are independent entrepreneurs and should make up their own minds on how to run their individual businesses.
The key is for you, as a business owner, to create a high-performance sales system as a defining core for your brokerage that agents can follow and take from if they need to.
Reduce Liability, Increase Scalability. Learn More About How You Can Build a Global Real Estate Organization Without The Risks and Liabilities of Owning a Brokerage!
2) Marketing
The second key to a successful and profitable brokerage is marketing.
Your brokerage’s marketing system should consist of marketing materials, websites for your agents, CRMs, and other marketing tools for your agents to attract and follow up with clients.
By designing the systems that are right for your brokerage, you are able to attract more agents to your brokerage and help them generate more leads in their businesses.
For example, you should provide all of your agents use a certain CRM software so they can keep track of their leads and follow up with them on a consistent basis. This can help you not only attract more agents to your brokerage but retain them as well.
Setting up a marketing system is important when it comes to maintaining consistent lead generation and closing ratios for your agents. Maintaining consistency in these areas ensures that your agent’s business is growing and moving forward at a steady pace instead of sputtering out or simply remaining stagnant.
Some easy ways to incorporate marketing into your real estate brokerage are to provide your agents with a marketing center where they can design business cards, door hangers, postcards, or flyers.
Also, you want to make sure that you are providing your agents with a website. These are usually going to be provided from a third-party software such as KVCore.
Again, just because you are providing these marketing systems to your agents does not mean that they have to use them. These are simply the systems that you need to have at your brokerage so that agents can expect consistency as they join your brokerage.
For broker/owners who want to take the extra step, you can also create certain specialized marketing training systems for your agents so that they can exploit a certain strategy to generate business such as social media or video marketing training systems.
Having a specialized marketing system in place at your brokerage will help you attract more agents, especially those who are looking to expand their businesses since you are able to teach them a skill to help them get more sales
Reduce Liability, Increase Scalability. Learn More About How You Can Build a Global Real Estate Organization Without The Risks and Liabilities of Owning a Brokerage!
3) Finance
When it comes to running a business, finance is an essential part that keeps your company moving forward. Without properly set up systems for you and your agents to check on financial accounts regularly, you will not be able to keep track of where your companies money is coming from and how it’s being spent.
Accounting: How much does it cost to start a real estate brokerage firm?
The first step in creating a financial system for your brokerage starts with the initial setups at your brokerage. You need to set up all of the accounting ledgers so you know exactly what is going into each account every month including the bank account numbers.
To determine which accounting system you should use at your brokerage, you need to know how much time you want to spend on keeping track of your finances, and how comfortable you are outsourcing certain tasks that might include some of your personal or sensitive information.
Some brokerages choose to have an accountant perform their bookkeeping services while other brokerages choose to do it themselves with an accounting software such as QuickBooks.
Having the ability to monitor your finances means that you are able to hold yourself and/or your agents accountable for their business performance since you will have a clear picture of where they stand financially.
Payment Processing
Also, one of the most important systems that you will need to be very clear on is how your agents will get paid for their closings and transactions. Your agents should know exactly when they are getting paid and what the process is for their commission distribution after each sale.
The way that you distribute your commissions will depend on which brokerage model you use at your company, whether it’s 100% commission where the agents pay you a fixed fee at closing or a split model where the agent pays part of their commission to the brokerage. How you decide to distribute your commissions should be detailed in an Independent Contractors Agreement between your brokerage and your agents so there won’t be any confusion as to how everything works.
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4) Legal and Compliance
One of the most overlooked yet most important systems that a brokerage must have in place is the legal and compliance department. As a broker, you are not only responsible for your own actions in real estate practices, but also your agents’ actions as well.
This means that whenever your agent makes a mistake, you are at risk of being sued!
The legal and compliance departments are responsible for making sure the brokerage and its agents follow all applicable state laws relating to real estate practices.
Can you own a real estate brokerage without a license?: How to Start a Real Estate Business
Each state has unique license requirements, but generally speaking, licensees must complete a certain number of continuing education courses every couple of years in order to renew their licenses and maintain their status as an agent or broker.
If you don’t want to obtain a broker’s license for your brokerage consider alternative options such as hiring a managing broker through your LLC or partnering your business with eXp Realty.
The compliance department ensures that these rules are followed by everyone in the firm. Additionally, compliance is responsible for monitoring customer complaints against brokers or agents and tracking any lawsuits against the broker or their agents. If a pending case becomes a final judgment against a licensee, the compliance department will make sure discipline is enforced according to company policy.
In order to have a fully operational compliance system within your brokerage, you need to have a way for agents to systematically submit all of their contracts and paperwork to you for final review before every closing.
From there, you or a managing broker can review all your agents’ contracts on a regular basis to ensure they are still compliant with both the state real estate laws and company policy.
There are a couple of different options for brokers to set up a compliance system in their business. One option is to hire a managing broker who is familiar with the state real estate laws whose job is to review contracts and make sure the agents at your company are all within compliance.
Another less effective option is for you to be the person to review all of your agents’ contracts. Since you are a licensed broker and are responsible for your agents’ actions, you have the authority and responsibility to review their contracts to make sure they are not breaking any laws.
As a broker, you will also need to consider hiring a full-time legal team just in case you ever get sued by an agent, competing brokerage, or a client. You can either hire a private legal counsel for your brokerage or outsource it to a third-party company that is familiar with real estate law.
See How You Can Outsource Your Brokerage’s Sales, Marketing, Finance, and Compliance Systems to Industry Leading Experts in Each Field for Only $85 a Month!
Bonus: Tips and tricks for real estate agents looking to start their own brokerage
Now that you know the 4 critical systems of any successful real estate brokerage and what it takes to set them up, here are a few tips and tricks for you to consider as a new brokerage owner to fast track the process of setting up these systems so that you can eliminate any headaches!
Consider Buying a Franchise:
Just like any other business, some real estate brokerages also operate as franchises. By purchasing a franchise instead of starting an independent real estate brokerage, you are able to plug into business systems that are provided to you from day one and can get some guidance as to how you can set up your brokerage so that you are not left alone to fend for yourself.
The downside of owning a franchise brokerage is that you will have to pay hefty franchise fees in order to open a brokerage under their brand. You will also have to pay royalties to your franchise company which will eat into your real estate brokerage owner salary.
Make a Plan Before You Start:
If you don’t know where you are stepping, it is easy to fall down. Starting a brokerage is not a walk in the park. Make sure you have a carefully drawn-out business plan for exactly what you are going to do and how you are going to do it before you even take the first step to starting your brokerage. Take the time to sit down and write down on pen and paper your business plan for your brokerage.
Look For Alternative Opportunities:
Building and running a real estate brokerage takes a lot of hard work. You will need to invest a lot of time and money into your business before you can see the fruits of your labor. Most real estate agents choose to build their own brokerage because they want to one day exit the business and have a business that pays them a residual income stream every month so they can enjoy the life that they created for themselves and their families.
Although owning a brokerage can help real estate professionals reach that goal, it is not the only way. If your goal is to live a residual income lifestyle that will allow you to have time and money, there are alternatives to owning a real estate brokerage that can provide you with the opportunity that you need.
If You Are Looking for A Way to Live a Residual Income Driven Lifestyle as a Real Estate Agent or Broker But Do Not Want to Go Through the Painstaking Process of Opening Your Own Real Estate Brokerage, Click the Button Below to Learn About an Incredible Time-Sensitive Real Estate Business Opportunity.
Ready to Start Your Own Real Estate Brokerage and Level Up Your Business?
Running a successful real estate brokerage takes more than just being a good sales agent. In order to make your brokerage profitable, you need to set up the correct systems in your business and know how to operate them effectively.
Setting up these critical components in your business will allow you to grow your brokerage without needing to be there every minute of the day.
After all, isn’t that why you started your real estate brokerage in the first place? To have the luxury of being able to step out of your business and build a lifestyle that you never need a vacation from?
If you want to learn how to start building a thriving real estate brokerage or how to start a virtual real estate brokerage with systems that have already been created for you so that you can create the lifestyle that you have always wanted for you and your family. Click the Button Below and Schedule a Private No Obligations Consultation with the Fastest Growing Real Estate Team in the World!
Build Your dream brokerage today without the headaches!
Reduce Liability, Increase Scalability. Learn More About How You Can Build a Global Real Estate Organization Without The Risks and Liabilities of Owning a Brokerage!