Many people dream of the day when they could start a real estate brokerage of their own. The potential to build a business helping others and making a quality income at the same time is very enticing. When it comes to deciding on how to start a real estate brokerage for yourself, you need to first understand the various business models that are available to you and then decide which best suits your goals and personality. 

DIY

One option available to aspiring real estate brokers would be the do-it-yourself route. There are plenty of benefits to starting a brokerage on your own, for starters you can be your own boss! Owning your own brokerage means total autonomy in the way you conduct your business, and you’ll always have the final say in every decision pertaining to the brokerage.

Of course, all that responsibility might not be right for everyone. Wearing all the hats of owner, broker, and agent could be a bit much for some people to juggle. Owning a brokerage can be time-demanding since the owner typically needs to have a hand in all of the goings-on of the business. There are also the costs of starting a brokerage to consider as it can be expensive for a new brokerage to compete with established companies. Proprietary technologies are laborious and expensive to develop and depending on your target market, they may be necessary for you to be able to compete for quality listings and buyers. In land brokerage, for example, the pool of marketing and advertising options are relatively limited and costs to advertise on these platforms can be hard for a “mom and pop” style brokerage to handle. 

One of the limitations of the DIY style brokerage is obscurity. If your brand isn’t perceived as “big,” many sellers will look for a more well-known brokerage to handle their property. Building a brand takes many years and can be quite expensive. If you’re the kind of person who likes to wear all of the hats in your business, shoulder all of the financing responsibilities, and be in full control of the risks and rewards, then perhaps the DIY route is right for you!

Franchise Model

Maybe starting a brokerage all by yourself is too daunting a task. Then perhaps the franchise model is the right fit for you! Franchise brokerages are networks of licensed professionals who pay recurring fees or dues to associate with a specific, well-known brokerage brand. Typically, the professionals who join this type of brokerage are limited to specific territories and receive limited support from the company. That being said, franchises often offer attractive commission splits to make up for the additional expenses their franchisees will incur. 

Joining up with a franchise brokerage is a good way to establish yourself as a professional in the field, as you can use the brokerage’s pre-existing reputation to build your credibility. Be mindful though, that this brand should be able to carry your interests for your entire career as most franchises require long-term commitments of as much as 10 years in some cases. That being said, franchise brokerages often require regular fees and payments to remain associated with the company. Most franchises are territory-based and the offices are independently owned and operated which can cause brand confusion and competition with brokerages under the same brand. If you are a DIY-type person who wants the name recognition of a larger brand, then purchasing a franchise and paying the recurring fees may be right for you. It’s important to consider whether or not associating yourself with the brokerage’s brand is worth the financial investment.

Broker-Network Model

There’s a third type of business model that has many of the positive benefits of a national brand while reducing the burnout that results from wearing all of the hats in your business. This is the broker network model. This is a brokerage model where licensed professionals join forces to invest with a brokerage company. Together, they are able to develop the types of proprietary technology that DIY brokerages typically cannot afford and will make you competitive for the best listings. Broker network models “co-op” a team of business professionals to give their salespeople the support they need in marketing, advertising, accounting, operations, and human resources.  

Regardless of what type of model you choose, all of this behind-the-scenes work is required to be competitive and more importantly, it keeps you out selling and closing deals instead of doing business admin. Another aspect of the broker-network model that benefits both new and seasoned agents alike is the team mentality and collective knowledge that comes from working with an ever-growing group of real estate professionals who are not in competition with each other. Broker network-style businesses often invest heavily in the training and mentorship of their agents because the brokerage’s revenue is not based on recurring fees, but on the success of their salespeople. 

The larger a brand and the more real estate agents that work under it, the wider your network will be for giving and receiving referrals. Many agents overlook the amount of income that can come from having a strong referral network. Because the company sets standards for every office under the broker network model, you can rest assured that your referrals are receiving the same level of care that you would give them if they were in your market. 

If you are looking to choose how to start a real estate brokerage solely upon the metric of commission splits, you might find that broker network models may have a lower commission split than the other styles. Although this may seem unattractive, it is important to focus on not what your split will be, but on how much you will take home. Because you pay zero fees and have very little overhead and you have more time to spend in the field doing what you do best, we often see that brokers and agents who have switched from DIY or franchise-style brokerages take home much more than they did before. 

When it comes to your decision on how to start a real estate brokerage, it’s important that you look at your choices from a holistic point of view. Make a list of your goals and what you like to do day to day and where you feel you might be in 5-10 years. Choose the model that best fits the quality of the life you want to live as well as the income you’ll need to make that life a reality.