Do you want to start a real estate brokerage business? If YES, here is a detailed guide on how to start a real estate brokerage business with NO money and no experience plus a sample real estate brokerage business plan template. If you are thinking of starting a business with huge returns on investment, then one of your best bets is to venture into the real estate industry.
Of course, there are several money spinning business opportunities in the real estate industry and one of them is to start a real estate brokerage business. It is a common practice for an intermediary to provide real estate owners with dedicated sales and marketing support in exchange for a commission. In the united states of America and in other countries, this intermediary is referred to as a real estate broker (or realtor), or a real estate agent in everyday conversation.
The real estate industry involves the buying, selling, or renting of lands, buildings or housing facility. Real estate agency or a real estate agent (broker) is a person who acts as a middleman between the sellers and buyers of real estate/real property. They are involved in searching for sellers who sell properties and buyers who to buy properties.
You can start your real estate agency from a small town in the United States and if you are consistent and creative, it won’t be too long before your brand becomes a nationally recognized brand especially if you go into franchising.
20 Steps to Starting a Real Estate Brokerage Business
1. Understand the Industry
The Real Estate Sales & Brokerage industry in the US comprises of businesses that engage in residential sales, commercial sales, residential rentals, commercial rentals and transaction, advisory and other services. The real estate sales and brokerage industry is a major contributor to the growth of the economy of many nations of the world.
As a matter of fact, a real estate agent can become a millionaire ‘overnight’ from just one real estate deal; little wonder the industry is responsible for making many millionaires. The Bureau of Labor Statistics projects 11.1 percent job growth for real estate sales agents between 2012 and 2022, which is about as fast as average. During that time, an additional 38,000 jobs will open up.
A real estate agency (brokerage firm) usually receives a payment called a commission for successfully matching a seller’s real estate with a buyer’s real estate need; such that a sale or rent/lease can be made. In most cases, the commission generated is shared with other real estate brokers or agents who played their parts in ensuring that the property are sold or rented out as the case may be.
The Real Estate Sales & Brokerage industry is indeed a very large industry and pretty much thriving in all parts of the world. Statistics has it that in the world, there are about 973,600 licensed and registered real estate sales & brokerage agencies directly responsible for employing about 1,170,125 employees.
The industry rakes in $165 billion annually with an annual growth rate projected at 4.8 percent between 2014 and 2019. It is important to state that no establishment can boast of having the lion share of the market in this industry.
A recent report published by IBISWorld shows that the Real Estate Sales and Brokerage industry is closely aligned with the health of the residential and commercial real estate markets in the United States. Industry revenue is directly correlated with property prices and real estate transaction volumes, and agents are typically paid completely on a commission basis and receive their fee only when they close a deal.
Additionally, the residential market accounts for more than two-thirds of industry revenue, making the industry especially sensitive to fluctuations in housing prices and existing home sales. In 2014, increasing per capita disposable income and historically low interest rates helped increase home affordability, which bolstered demand for real estate brokerage services.
It is important to state that in the United States of America, each state has its own unique laws that clearly define the types of relationships that can exist between real estate agencies (professionals) and property owner (clients). Nonetheless, it is always a win – win for both because real estate brokers and their salespersons (commonly called “real estate agents” or, in some states in the US, “brokers”) usually assist sellers in marketing their property.
The real estate sales & brokerage industry is highly regulated in the United States of America and anyone who aspires to become a real estate agent must apply and obtain a license before they can legally receive remuneration for services rendered.
But as a lawyer, you can handle real estate deals in some states in the US and make your commission without operating as a licensed real estate agent. In order to obtain a license as a real estate agent in the US, you are required to write and pass your state’s real estate exams.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who do business with real estate sales & brokerage agencies cut across individuals and businesses. The truth is that when it comes to purchasing, leasing or renting properties, there is indeed a wide range of available customers. In essence, your target market can’t be restricted to just households within your location, but to all the businesses in and around the city where you have your business presence.
3. Decide Which Niche to Concentrate On
It is safe to say that there is no niche area in the real estate business, every player in the industry engages in residential sales, commercial sales, residential rentals, commercial rentals and transaction, advisory and other services.
So, if you are looking towards starting your own real estate business, then you should clearly define your market so you will know how to get to them. On the other hand, a real estate brokerage agency may decide to major on any of the under listed;
- Residential sales
- Commercial sales
- Residential rentals
- Commercial rentals
- Transaction, advisory and other services
The Level of Competition in the Industry
The competition that exists in this business goes beyond competitions amongst real estate brokerage businesses in your location; you are expected to compete with other businesses who are also into property leasing and rental. So, it will be right to say that the competition in the industry is tough.
The truth is that no matter the level of competition in an industry, if you have done your due diligence and you brand and promote your services properly, you will always make headway in the industry. Just ensure that you deal in high demand properties, you can deliver excellent customer services and you know how to reach out to your target market.
4. Know Your Major Competitors in the Industry
In every industry, there are always brands that perform better or are better regarded by customers and general public than the others. Some of these brands have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading real estate brokerage agencies in the United States of America and in the globe;
- American Tower Corporation
- Simon Property Group
- Annaly Capital Management
- CBRE Group
- Public Storage
- AvalonBay Communities
- Real Estate Maximums (RE/MAX)
- Century 21
- Keller Williams Realty, Inc.
- Coldwell Banker
- ERA Real Estate
- Sotheby’s International Realty
- The Corcoran Group
- Camden Property Trust
- Better Homes and Gardens Real Estate
If you want to launch a business and maximize profits, then you need to ensure that you get your economic and cost analysis right and try as much as possible to adopt best practices in the industry you choose to build a business in.
The real estate brokerage business is not a Green business. You will come across several real estate brokerage agencies and other players in the industry when you drive through town, search through directories and browse through the internet.
So, if you are mapping out your economic and cost analysis, you should carry out thorough market survey and costing of what is required to rent a space where you are expected to open your real estate business, your working capital and also the cost to successfully run the business.
Over and above, if you are considering starting a real estate brokerage agency, then your concern should not be limited to the cost of renting an office space, securing your license, and working capital et al but also on branding and on how to build a robust client base. The truth is that if you are able to build a robust clientele base, you are sure going to maximize profits in the business.
5. Decide Whether to Buy a Franchise or Start from Scratch
If you are looking towards starting a real estate brokerage agency, you would have to start from the very scratch because you can hardly get the franchise of a real estate brokerage agency.
Besides, starting a real estate brokerage agency from the scratch is less stressful when compared to other small – scale businesses which usually requires detailed groundwork before launching out. With real estate agency, you should just try as much as possible to get the right employees, build business relationship with key stakeholders and then leverage on every marketing tool within your disposal to market your services and properties.
Please note that most of the successful real estate brokerage agencies around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.
6. Know the Possible Threats and Challenges You Will Face
An increase in corporate profit generally leads to higher business confidence, which bolsters demand for property. With wider profit margins, businesses typically expand to new locations entailing the leasing or construction of new properties or facilities.
As business investment in real estate grows, demand for agents and brokers that service the commercial sector also increases. Corporate profit is expected to increase in 2019, but at a slower rate than the previous year, posing a potential threat to the industry.
If you decide to start your own real estate sales & brokerage agency today, one of the major challenges you are likely going to face is the presence of well – established real estate brokerage agencies and other players in the industry. The only way to avoid this challenge is to create your own market.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
When considering starting a real estate brokerage agency, the legal entity you choose will go a long way to determine how big the business can grow. You can either choose a general partnership, or limited liability company for your real estate brokerage business.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need board of directors, shareholder meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your real estate brokerage agency business; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and of course taxes.
If you take your time to study the various legal entities to use for your real estate business with the ability to sell franchise all across the United States of America, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your business so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company.
8. Choose a Catchy Business Name
When it comes to choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. If you are considering starting your own real estate sales & brokerage agency business, here are some catchy names that you can choose from;
- Teddy Gray® Real estate Sales & Brokerage Agency
- Luke Greene® Real Estate Brokers, LLC
- Tom Marriot© Real Estate Brokers, Inc.
- Kings Court® Real Estate Sales & Brokerage Agency, Inc.
- The Pinnacle™ Real Estate Sales & Brokerage Agency, Inc.
- Lowe Markson & Co™ Reality Group, Inc.
- Cole Newman© Real Estate Sales & Brokerage Agency, Inc.
- East Coast® Reality Company, LLC
- Vitus Jotham© Real Estate Sales & Brokerage Agency, Inc.
- Tim Pearce & Sons© Real Estate Sales & Brokerage Agency, Inc.
9. Discuss with an Agent to Know the Best Insurance Policies for You
In the United States and most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best insurance policies for your business.
Here are some of the basic insurance covers that you should consider purchasing if you want to start a real estate brokerage agency business in the United States of America;
- General insurance
- Health / Medical insurance for your employees
- Liability insurance
- Workers Compensation for your employees
- Property / Building Insurance
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
If you are considering starting your own real estate brokerage agency, usually you may not have any need to file for intellectual property protection/trademark because the nature of the business makes it possible for you to successful run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO.
11. Get the Necessary Professional Certification
If you want to make impact in the real estate brokerage industry, you should work towards acquiring all the needed certifications in your area of specialization. You are strongly encouraged to pursue professional certifications; it will go a long way to show your commitment towards the business.
Certification validates your competency and shows that you are highly skilled, committed to your career, and up-to-date in this competitive market. These are some of the certifications you can work towards achieving if you want to run your own real estate sales & brokerage agency;
- Real Estate Professional Assistant (REPA) Certification
- Certified Commercial Real Estate Advisor (CCREA)
- Chartered Real Estate Professionals – CREP
- Degree / Diploma in Real Estate and Building Related Courses
Please note that you cannot successfully run a real estate agency in the United States without acquiring professional certifications and business license even if you have adequate experience in the real estate industry.
12. Get the Necessary Legal Documents You Need to Operate
You cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hand of the law catches up with you. These are some of the basic legal documents that you are expected to have in place if you want to legally run your own real estate brokerage business in the United States of America;
- Certificate of Incorporation
- Business License (Real Estate License and Real Estate Broker License)
- Tax Payer’s ID / Tax Identification Number
- Business Plan
- Contract Document
- Non – disclosure Agreement
- Employee Handbook
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Company Bylaws
- Memorandum of Understanding (MoU)
- Franchise or Trademark License (optional)
Please note that a real estate agent is anyone who has earned a real estate license. A real estate broker is an agent who has also passed their broker license exam. The primary difference between a real estate agent and broker is that a broker can own a real estate firm or hire agents to work for them.
13. Raise the Needed Startup Capital
Starting a real estate brokerage agency is not capital intensive except when you choose to start on a large scale. Securing a standard office space in a business district, and raising working capital are part of what will consume a large chunk of your startup capital. If you choose to start the business on a large scale, you would need to source for fund to finance the business.
When it comes to financing a business, one of the first things you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for startup capital for your real estate sales & brokerage agency business;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for Loan from your Bank
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
14. Choose a Suitable Location for your Business
The location you chose to start your business is key to the success of the business; hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where there are high real estate activities. If you make the mistake of renting or leasing an office facility in a not too visible or hidden location simply because it is cheap, then you must be prepared to spend more in promoting the business.
Most importantly, before choosing a location for your real estate sales & brokerage agency business, ensure that you first conduct a thorough feasibility studies and market survey. The possibility of you coming across similar business that just closed shop in the location you want to open yours can’t be ruled out.
These are some of the key factors that you should consider before choosing a location for your real estate sales & brokerage agency business;
- The demography of the location
- The level of real estate activities in the location
- The purchasing power of residents of the location
- Accessibility of the location
- The number of real estate sales & brokerage agencies and other players in the real estate industry in the location
- The local laws and regulations in the community / state
- Traffic, parking and security et al
15. Hire Employees for your Technical and Manpower Needs
There are no special technology or equipment needed to run a real estate brokerage agency but you will definitely need computers / laptops, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves) amongst others and all these can be gotten as fairly used.
As regard leasing or outright purchase of an office facility, the choice is dependent on your financial standing, but the truth is that to be on the safe side, it is advisable to start off with a short – term rent / lease while test running the business in the location. If things work out as planned, then you go on a long – term lease or outright purchase of the property but if not, then move on and source for other ideal location for such business.
When it comes to hiring employees for a standard real estate brokerage agency with plans to have clients all across major cities in the United States of America, you should make plans to hire a competent Chief Executive Officer / President (you can occupy this role), Admin and Human Resources Manager, Head of Acquisition and Disposition, Field Officer, Accounting Clerk, and Front Desk Officer.
On the average, you will need a minimum of 5 to 10 key staff members to run a small – scale but standard real estate brokerage agency.
The Services Delivery Process of the Business
The way real estate brokerage agencies work varies from one company to another, but ideally, a real estate agency is expected to first and foremost build a robust company profile, have a network with landlords, property owners and developers before putting properties for sale, lease or rent; it will give them edge amongst their competitors.
Real estate agencies list properties for sale to the public, providing the seller with a real property condition disclosure (if required by law) and other necessary forms, prepares necessary papers describing the property for advertising, etc.; holds an open house to show the property, serves as a contact available to answer any questions about the property and schedule showing appointments.
They also ensure that buyers are pre-screened and financially qualified to buy the property. They equally negotiates price on behalf of the sellers and acts as a fiduciary for the seller, which may include preparing a standard real estate purchase contract.
Please note that real estate sales and brokerage agencies earn their money from commissions on properties leased, sold or rented out.
16. Write a Marketing Plan Packed with ideas & Strategies
Running a business requires that you should be proactive when it comes to marketing your goods or services. If you choose to launch a real estate brokerage agency business, then you must employ strategies that will help you attract customers or else you will likely struggle with the business because there are well – known brands that determine the market direction for the real estate industry.
Businesses these days are aware of the power of the internet and which is why they will do all they can to maximize the internet to market their services. In other words, a larger percentage of your marketing effort will be directed to internet users, and your website will become your number one marketing tool. These are some of the marketing ideas and strategies you can adopt for your real estate brokerage agency business;
- Introduce your real estate agency by sending introductory letters alongside your brochure to landlords, property developers, households, estate managers, corporate organizations, small scale businesses and other key stake holders throughout the city where your real estate sales & brokerage agency is located.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business so as to give your business an online presence
- Directly market your services
- Join local real estate sales & brokerage agency business associations for industry trends and tips
- Join local chambers of commerce and industry with the aim of marketing your services
- Advertise our business in community – based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of Word of mouth marketing (referrals)
17. Work Out a Reasonable Pricing for your Services & Products
One key factor that will help you sell/rent/lease properties at a price that is highly attractive is to ensure that you work with property owners who are reasonable and that you are not highly indebted. So also, it is important that you work directly the owner of the property as against working with third-party dealers.
Another strategy that will help you get the right price is to ensure that you cut operational cost to the barest minimum and channel your efforts towards marketing and promoting your brand name. Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your services.
You can also try as much as possible to work with independent contractors and marketers; it will help you save cost for paying sales and marketing executives.
18. Develop Iron-clad Competitive Strategies to Help You Win
Your business process and of course your pricing model are part of what you need to stay competitive in the industry. Another possible competitive strategy for winning your competitors in this particular industry is to build a robust clientele base and business network. Over and above, ensure that your organization is well positioned, key members of your team are highly qualified and your services can favorably compete with the some of the best in the industry.
19. Brainstorm Possible Ways to Retain Clients & Customers
When it comes to business, no matter the industry that you choose to pitch your tent in, one of the easiest ways to increase customer retention and perhaps attract new customers is to produce results and satisfy your customers always. If your customers are satisfied with your properties and services delivery, they can hardly source for alternative service providers.
Statistics has it that one of the major reasons why clients source for alternative service providers is when there is a drop in quality. Another reason is poor customer service. If you can continue to put up excellent and affordable properties for sale/lease/rent and your customer service delivery is top notch, then you won’t struggle to maintain loyal customers.
When it comes to managing your customers and building loyal clientele base, you should purchase a customized CRM software. With a customized CRM system, you can easily stay in touch with your clients (you can carry out quick surveys, you can introduce new products and prices to them without any hitch, you can felicitate with them on their birthdays and other anniversaries, you can keep track of their progress, you can send bulk sms and customized e – mails and above all, you can easily receive compliant and feedback from them).
20. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If you are in business and you are not deliberate about boosting you brand awareness and communicating your corporate identity, then you should be ready to take on whatever the society portrays your business to be. One of the secrets of larger corporations is that they are willing to spend fortunes to boost their brand and to continue to communicate their corporate identity the way they want people to perceive them.
If your intention of starting a real estate brokerage agency is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.
No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and boosting to continue to appeal to your target market. Here are the platforms you can leverage on to boost your brand awareness and create a corporate identity for your real estate brokerage agency;
- Place adverts on both print (newspapers and magazines) and electronic media platforms
- Sponsor relevant community – based events / programs
- Leverage on the internet and social media platforms like; Instagram, Facebook, Twitter, YouTube, Google + et al to promote your properties
- Install your billboards in strategic locations all around your city or state
- Distribute your fliers and handbills in target areas
- Contact families who are interested in acquiring a home, corporate organizations who are interested in acquiring their own property/properties, home owners who are interested in selling off their home, property owners who are interested in selling off their properties, foreign investors who are interested in owning properties in the United States of America, the government of the United States of America (Government contracts) and managers of public facilities within and outside the location where your company is located informing them about your business and the properties you have for sale
- List your real estate sales & brokerage agency in local directories / yellow pages
- Advertise your real estate sales & brokerage agency in your official website and employ strategies that will help you pull traffic to the site.
- Position our Flexi Banners at strategic positions in the location where your real estate agency is located.
- Ensure that all your staff members wear your branded shirts and all your vehicles are branded with your company logo.