A Review of the Basics of Starting Your Own Real Estate Brokerage
If you’re not familiar with the steps to become a broker, the first thing you need to know is that in addition to a real estate license, you’re going to have to get your broker’s license also. Regulations vary by state, so you’ll want to do your research to find out the rules in your state.
See If You Can Find a Mentor
See if you can meet with people who are already in the business and are willing to share their experiences. The biggest challenge in opening a new business is the time and money it’s going to take to get established in real estate. Once you start your own business, expect it to take up most of your time and energy for quite a while. Very few businesses make money in the first couple of years; most fold within five years. That being said, it’s in your best interest to not only find an experienced mentor but to also get in a brokerage program to gain even more knowledge in the industry.
Scope Out the Competition
A quick look around your area should get you familiar with the kind of competition there is. If your area is saturated with brokerage services, you may want to research what the other brokerages in the area offer. You may find your business has a unique niche that you can exploit in your advertising.
Set Your Priorities
Take time to not only sit down and draw up your business plan, but also to prioritize your ideas. It won’t take you very long to realize that you won’t be able to implement all of them at once. Having a list of priorities will help keep you on track, and may keep your business from failing by taking on too much too soon.
You might already have an idea of what people you want to hire but take into consideration whether those people are already working somewhere else. Do you want the hard feeling caused by stealing valued employees from another business? Perhaps it might work best for you to take less experienced people and develop them.
Stick to Your Budget
A basic budget should account for such basic items as office space, furniture, supplies, utilities, and rent. Don’t expect the money to just start rolling in. Getting your name out to the public takes time and effort. You may have to pound the pavement handing out cards and flyers or set up a booth at fairs and festivals to get your name in front of people; you won’t be able to man your booth alone.
The Two Types of Brokerages
There are two types of brokerages: one is a franchise model, where you buy the right to run a business locally under a national name. This model has the advantage of advertising and publicity already in place. You’ll also get some support from the home office. The downfall is having to comply with that company’s existing rules and procedures.
A boutique brokerage is one that you establish completely on your own. It’s more flexible than a franchise, and you’ll have more control over the operations. But you’ll be completely responsible for the finances and advertising that keep your business afloat.
Decide On a Business Model
Now, you need to make a decision about the business model you wish to follow. An LLC, or limited liability corporation, means you’re not personally liable. This model cannot go public, and you’ll have ongoing fees to maintain eligibility.
With an S Corp or C Corp, you’ll have to have a board of directions and you’ll have less management flexibility. Any shareholders pay on income received.
If you choose to be a Sole Proprietor, you’ll be on the hook for any business liabilities. You’ll also not have any personal liability protection. However, there aren’t any startup fees or paperwork to get established.
Above all, expect starting your own business to occupy most of your time for quite a while. Any profits will also be a while in coming. Running a business requires that you stay focused on the goals you set in your business plan.