Is owning a real estate brokerage profitable in 2022? Do real estate brokerages make money?
Owning a brokerage can be a very lucrative business for those who do it right.
If you’re going to invest your time and money into owning your own real estate brokerage, you’ll need to know what it takes to succeed in the real estate industry not just as a real estate agent, but as a serious business owner.
Do you have what it takes to run your own business? Do you think that starting an independent brokerage is for you? If so, then let’s find out more about this sector of the industry. Do real estate brokerages make money? What does it take to be successful in real estate today? We will answer these questions in this article by explaining how much time and money you need to invest into your own real estate brokerage business to make it a profitable opportunity!
Table of Contents
Questions to Answer
Do real estate brokerages make money?
Do you need to invest in your own brokerage for it to be profitable?
Do you have the skills necessary to run a successful business?
Do you want to work long hours and deal with difficult clients on a regular basis, or would you rather do something else with your time and energy?
These are all important questions that should be considered before purchasing or starting up your own real estate brokerage.
The answer to this question can depend on a variety of factors, but in general, owning a brokerage can be a very lucrative business venture.
But it is not easy.
You’ll need to invest an incredible amount of time and money into your business, but if you’re able to grow your company and attracts both solid producing real estate agents and clients, then running your own real estate brokerage might just be what you need to do to build an income that will allow you to create a lifestyle that you never need a vacation from.
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1. Do real estate brokerages make money in 2022?
Do real estate brokerages make money? The answer to that question is actually a little complicated.
Is Owning a Real Estate Brokerage Profitable?
On one hand, if you’re looking at it strictly from a numbers standpoint, the answer is, as shocking as it may sound, no – most real estate brokerages don’t make much profit.
In fact, most real estate agents who are decent producers ($10 million + in production) make more money than their brokers actually do.
The reason most real estate brokerages don’t make much money is because they have extremely high overheads and extremely low monthly revenue.
A real estate brokerage’s main job is to attract good, talented agents to work at their company so that they can earn a percentage of the real estate agent’s commission on every closing.
That being said, brokerages need to make their compensation plan and company benefits extremely attractive to realtors so that they can recruit and retain those agents to their company. Most real estate brokerages need to do this in 2 ways:
- Allow the agents at their company to make more money through a more lucrative compensation plan that allows the agent to take home more of their commissions, thus leaving the broker with much less.
- Give agents the support they need to run their businesses efficiently by providing them with the latest software in real estate and an armada of staff members that can help agents close more deals.
With each closing that one of their agents’ completes, a broker only gets a small percentage of the commission from that agent’s sale. A common commission split between agent and broker is 75/25. 75% to the agent, 25% to the brokerage.
On top of receiving only a fraction of each commission paid at closing, brokerages need to use a portion of that generated revenue to pay for their monthly overhead expenses such as rented office space, software for their agents, office staff, office supplies, marketing, advertising, etc.
As you can see, running a real estate brokerage is a business that provides the owner with a very slim margin of profit.
However, if you’re looking at it from a long-term perspective, owning a brokerage can be a very lucrative business venture.
Owning a real estate brokerage allows you to become a business owner and real estate agent at the same time.
It allows you to generate an income through commissions generated from your own sales and the sales of your agents, counterbalancing the high overheads and low revenue you are generating from solely your brokerage’s income in the beginning.
This allows you to run a business that is cashflow positive by combining your active income through your own sales with the production income from your agents for enough time to pass in order for you to attract enough agents to your brokerage to make it profitable for you even if you no longer sell real estate personally.
And, as previously mentioned, once you have built up a large group of talented agents that are producing big numbers each month, then you can start generating a significant amount of revenue through the commission splits coming in every month from those agents.
But it is not easy.
You’ll need to invest an incredible amount of time and money into your business, but if you’re able to do so, then owning your own brokerage can provide you with the stability and income that can give you the life that you want.
It’s not easy to start up and maintain a thriving real estate brokerage, but if you’re able to do so, the potential income you can generate is significant.
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2. What does it take to be successful in real estate today? How to make a real estate agency profitable
If you want to start your own real estate brokerage, you need to ask yourself: what does it take to be successful in real estate today?
The answer to the question: Is owning a real estate brokerage profitable? Relies on your ability to succeed in the real estate industry not just as a sales agent, but also as a business owner and CEO of a large company with different systems and operations.
The skillset for success in real estate as a brokerage owner depends on your ability to not only be a real estate agent, but also a marketer, salesperson, mindset coach, influencer, and recruiter.
As an owner of a real estate brokerage, you need to be able to run an entire business operation successfully with many systems.
You need to be able to market yourself and your brand to both agents and clients, sell real estate yourself to make your business profitable in the beginning, coach your agents to have the right mindset so they can become successful independent agents themselves, create enough influence in your marketplace for people to notice you, and you need to be able to actually convince real estate agents to join you and your brokerage by solving a problem for them in their business.
You’ll also need to be able to manage your finances and understand the numbers behind your business. And, lastly, you’ll need to have a good understanding of how to scale your business and put the right systems in place so that one day you can exit the business and live your dream life.
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3. How much time and money do you need to invest into your own real estate brokerage business to make it a profitable opportunity?
You need to invest a lot of money and time into your real estate brokerage business to make it successful. Probably more so than you even expect to.
Owning a real estate brokerage is not something that you can do part-time.
You’re running a business with lots of different moving parts, and it requires your complete dedication to learn all the skills required to be successful.
Can you own a real estate brokerage without a license? Can you be your own real estate broker?
Some states require real estate brokers to take continuing education classes in order to maintain their licenses after they’ve passed the licensing exam. As the owner of a real estate brokerage, you can decide to be your own broker or hire a managing broker to use their license, which will be another expense for you.
So if you want to own your own real estate brokerage, it’s important for you to understand exactly what you need to invest into your business so that you can determine if owning a real estate brokerage is profitable for your lifestyle goals.
Some investors choose first to start their career as an agent first before starting a new or buying an existing brokerage to get the experience and exposure of being in the real estate industry.
In fact, the majority of real estate brokerage owners first started out as real estate agents or at least have a partner in their business who used to be a real estate agent.
Money: How much does it cost to start a real estate brokerage firm?
Owning a real estate brokerage is not a cheap endeavor. You’ll need to invest a lot of money into your business to make it successful.
In fact, most real estate brokerages fail within the first few years because the owners don’t have the financial stability to keep their businesses running.
Consider the points we touched on earlier in this article on how real estate brokerages can attract and retain real estate agents.
You’ll need to invest a lot of your money upfront into providing your agents with office space to work in, hiring enough staff members in each department so that your agents have people to turn to for support and help on specialized knowledge such as tech support, hiring your own team of accountants and lawyers to protect you and your finances, and consider what additional benefits you can offer your agents such as real estate software, websites, CRMs, and training.
Also, if you decide that instead of starting an independent real estate brokerage you want to purchase a brokerage from a franchise company such as Remax, Keller Williams, Exit Realty, or Century 21 to plug into systems that are already pre-made for you, you will need to put aside at least an additional $100,000 for the upfront franchise and licensing costs.
You should plan for these costs before you even consider starting or buying a brokerage.
Remember, you have to recoup all of this money from somewhere! And the only place it will come from is from the commissions your real estate agents make when they sell homes or list properties for sale.
The more agents you have, the more money your brokerage makes. And the more profitable your brokerage is, the higher of a salary you can offer yourself as its owner/founder!
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Time
Being involved in every step of running your business will eat up most if not all of your free time outside of work!
Many brokerage owners are working past midnight into early morning hours several times per week just trying to keep their business afloat, build relationships with clients, and support your real estate agent agents.
Brokers are constantly on call 24/7 to help their agents, so you’ll constantly be getting phone calls and emails even after-hours from agents who are looking to close deals urgently.
In fact, many brokerage owners relate their jobs to running an “adult day-care”.
And if you think that owning a brokerage means more free time than working as an agent in the real estate industry, you couldn’t be more wrong.
In fact, most of your agents and employees will have more free time than you do!
Remember that an agent’s only job is to sell homes, which requires only 20% – 30% of their time depending on how active they are in their business.
Owning a brokerage is like having another full-time job on top of any other jobs you might already have, such as brokers who are still actively selling real estate.
You need to work on and in your real estate brokerage in the beginning, so that it has the potential to make money… not necessarily right away, but over time as long as you do things properly.
If you prefer freedom and flexibility in your lifestyle, then this is definitely NOT the opportunity for you!
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Residual income vs active business income
Real estate brokerages primarily generate either residual or active business income. The difference between these two types of revenue is how much work goes into earning each dollar.
If you are planning to actively sell real estate and only need to spend 20% – 30% of your time selling homes (the individual service they provide to clients), then the rest of your free time can be spent working on improving your real estate brokerage by building relationships with clients, networking with other real estate professionals, building a business website from the ground up, outsourcing tasks to virtual assistants so you can focus on more important tasks in your day-to-day operations, and looking for new leads in real estate.
By selling real estate to earn money you are creating a strong active business income, not a residual income.
If you want to build residual income, you need to focus on the growth side of your real estate brokerage.
Residual income and having a lifestyle where you can have both time and money freedom is why a lot of real estate agents choose to start their own real estate brokerages at some point in their careers.
They understand that as an agent they are trading their time directly for money and that if they ever stop working, they are no longer able to generate any income.
For most real estate agents, building a team of real estate agents and starting their own brokerage is a clear way to leverage the knowledge and skillsets that they have built in their careers to create a business that can generate residual income for them and give them the life and freedom that they actually want.
But as we explained clearly in this article, building a real estate brokerage is not an easy task.
It takes time, effort, passion, focus, and a whole lot of patience to grow your real estate brokerage into a business that is profitable enough for you to live off of.
If you’re not ready to commit the time and energy required to start an active real estate brokerage business that requires you to learn new skills, invest your money, take major risks both financially and legally, be there for your agents 24/7, and sacrifice your own free time, then starting a real estate brokerage isn’t the right opportunity for you.
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4. Do you have what it takes to run a successful real estate brokerage business?
So now that you know both the pros and cons of owning a real estate brokerage, whether owning a real estate is profitable, and what it takes to run a profitable real estate brokerage, it’s time to figure out if you have what it takes to start, build, own, and run your very own real estate brokerage.
Is owning or starting a real estate brokerage right for me?
You are reading this article because you are most likely passionate about real estate.
But unfortunately, passion is not enough to be successful in running a real estate brokerage business.
If you are looking for an opportunity that’s simple, passive, and easy to run so you can enjoy a lifestyle of freedom right away… running a real estate brokerage isn’t what you’re looking for.
You need the grit, hustle, determination, resourcefulness, resilience, and persistence to take on a challenge that requires a consistent work ethic day in and day out.
Want To Build Financial Freedom as a Real Estate Agent But Don’t Want the Headaches of Running a Brokerage? Let Us Show You How! Click a below to Learn More About the Opportunity to Partner with Our Incredible Group That Is Helping Real Estate Agents Around the World Build a Lifestyle They Never Need a Vacation From!
5. Questions to Answer before purchasing or starting up your own real estate brokerage.
Before deciding if owning a real estate brokerage is right for you or not there are four questions that can help guide your decision:
Do I have the patience to grow my investment into something profitable over time?
When it comes to owning a real estate brokerage, patience is key.
It can take time, effort, and a lot of patience to grow your real estate brokerage into a profitable business.
You need to be willing to commit the time and energy required to make it successful, and you also need to be patient as you see your business grow.
With hard work and patience, you can make your real estate brokerage a success.
Do I have what it takes to start from scratch with zero clients and agents?
Many real estate brokerage owners start their businesses from scratch, with zero clients or agents.
This can be a difficult task, but with persistence and perseverance, it is possible to grow your business and make it successful over time.
It is important to remember that success does not happen overnight, and it takes a lot of time, effort, and dedication to making a real estate brokerage profitable.
Do I have a plan for how to make money with my real estate brokerage?
Do you have the time to commit to my real estate brokerage, or is it just a side hustle?
You need to be willing to put in the work necessary to make your real estate brokerage successful.
If you don’t have the time required, then having a real estate brokerage may not be for you.
Also make sure that you have a clear business plan outlining exactly what your financials are, how much profit you plan on making, and how you plan on getting to that goal.
What are my other options?
If you’re not sure if owning a real estate brokerage is the right opportunity for you, or if you’re not ready to take on all of the risks, liabilities, and responsibilities that come with owning a brokerage but would still like to build a real estate organization that can provide you with enough residual income to give you the life and freedom you want, then you may want to consider starting a real estate team at eXp Realty.
A real estate team can be a great way to get started in real estate without all of the risks and responsibilities that come with owning your own brokerage.
Plus, our team-building model offers all of the benefits of being an owner without the headaches of management, financial risks, time liabilities, legal risks, and upfront investments.