We’re going to be honest here – branching out on your own probably won’t be the best step for your career. Ouch! Did that hurt? Well here are a few more home truths to consider before you open your own real estate office.
Show Me The Money!
We’re going to get real now – for the first 5 years, you’re not going to see any profit. Anything you do make will go straight back into the business to ‘building the dream.’
When starting as an agent, we recommend that you have 6-12 months income saved in the bank because in reality, it can take that long until you see your first few settlements come through and a steady flow thereafter. When starting an office… well, how long is a piece of string?
Some points to consider:
- Are you going to work from home? Is this feasible if you want to grow your business?
- Are you going to rent office space?
- How much will it cost to fit out the office (luckily exposed brick and minimalism are in fashion right now!)
- What equipment will you buy or lease – computers, printers, scanners, photocopiers, multifunction machines, fax machines (apparently some people still fax these days!)
- Ongoing monthly costs such as power, water, phones, internet and cleaning
- Brand Development
- Property Management Vehicles and Fuel Cards
- Licensing Fees
- Professional Fees to Accountants and Lawyers
- CRM Establishment – time and subscription fees
- Portal and Institute Subscriptions
How are you going to afford this? You need to make sure that you have the cash flow to cover ongoing expenses and keep on top of your tax obligations. As a business you become a tax collector and the ATO don’t care if you’re having a quiet month or two. Just this year, we have seen several people go as far as putting their family home up for sale to inject more money into their business. Do you want to do this to your family?
Beyonce Real Estate Opens it’s Doors!
That got your attention didn’t it? Well, it would have if you know who Beyonce is. And whilst you may be beaming with pride as you take a selfie in front of your brand new sign with your name on it, that warm fuzzy feeling will soon disappear when the bills start to roll in… with your name on them too.
Building a brand takes time and money. The brand needs to have:
- Have instant (2 seconds) cut through in the market – so strong you’ll never need a business card!
- Have a true meaning behind it – that’s not your meaning, it’s what your brand means to your customer
- And the ability to deliver on everything that brand represents.
At Naked Real Estate, our brand stands for complete transparency.
- Complete transparency in our business model
- Complete transparency for our buyers and sellers in how we represent our properties
- Complete transparency in our office layout
- Complete transparency in our fees
- Complete transparency in our policies and procedures.
Property Management Success
“The Rent Roll bank rolls the business.” We’ve all heard this before but generally it comes from someone who has a rent roll of +200 properties… not one just starting out. You won’t see the fruits of your labour until you either reach 100 properties under management (and maintain this number for 3-6 months) or when you sell them.
Finding a fee structure that works for your business can also be difficult – do you go for the ‘all inclusive fee’ or do you charge a lower fee and then charge for all the incidentals on top. Which grows the rent roll faster?
At Naked Real Estate, our Property Management is completely separate – not just as (delete ‘s’) different department, but a whole separate company – We Love Rentals. This ensures that their complete focus is on building and running that business and a downturn in the sales market doesn’t have an effect on the running of their business, and vice versa.
You Can Do It Better
If you’re thinking that you’re going to give better service than anyone else then you have probably already lost. Great service is a given in any business these days. It has to be a whole lot more or you will become another real estate statistic.
Currently, 80% of businesses are barely keeping their doors open, despite their bravado. It simply is not possible to provide 6 star service economically.
And what about marketshare? Cutting your fees to get marketshare as the new kid on the block is not sustainable. You’ll become the Red Dot in your market place – the discount brand that is good enough when you’re looking to buy something cheap, but you don’t expect it to last.
License and Registration please…
Running a real estate office is not as simple as obtaining your triennial and signing off on the trust account each month. With continual changes in legislation and best practices, you need to keep up and so do your employees and anyone operating under you. Remember, it’s your bank account that the fines will come out of, not your staff members.
Annual audits are just the tip of the iceberg. Pro-active audits for both sales and property management can happen at any time so putting in systems and procedures to ensure your staff are on their game is a huge priority when setting up an office. It will be time consuming and will be trial and error which can lead to mistakes and stress.
Compliance with legislation relating to the running of a real estate office and conducting real estate transactions and managing of property on behalf of a landlord is just the beginning. You’ll need to have an accountant on board to set up the best structure for your business, and ensure you are complying with legislation for employment of staff, GST, human resources, money handling… the list is endless.
Can you Hire and Fire?
Just because you’re a good agent, doesn’t mean you’re the right person to run a business and manage employees.
The ability to be able to build relationships with vendors is one thing, but handling staff on a day to day basis is a whole other kettle of fish! Recruitment, conflict resolution, dismissal of staff, salary negotiation, setting KPIs, disputes, inter-office relationships… and this is all before you train them on ‘your vision for a better real estate office’.
Finding the right team members to get on board your real estate train is tricky. You need to identify strengths and personality traits that will work well together, not just deliver the results that you’re after. And once you have them on board they need to be registered and trained accordingly. Getting people to gel as part of a team is vitally important to the success of the company. Agents are a competitive bunch so you’ll need to have clear strategy around territories and how to handle in-coming enquiries.
What are my options?
1. Go Naked
Working with Naked Real Estate eliminates 95% of the above issues, and you get paid from 85-92% commission for every deal you settle. You’re working alongside like-minded individuals that work hard for their clients because they have the resources to do so. Your marketing and administration is taken care of and if you want to build a team, there is a structure and training in place to help you flourish in your market.
Do you already have an established name in your market? We are the brand that stands behind their agents. Naked provides the structure and support that will grow your personal brand and your business inside a business.
You have control over everything – name, colours, branding, location… but you also get the bills for everything. Starting as an independent is either expensive, or you look cheap because you haven’t invested. It can also be really lonely. Who will you turn to for advice? How will you be perceived by your market for going out alone?
3. Franchise an Office
A franchise will give you structure and experience to draw upon but on the flipside, you’ll also have to operate within their restrictions and you have to be happy to be banded together with the reputation of everybody within that franchise (good or bad). There will be times you won’t agree with decisions handed down from the top, but if you really don’t know where to start, paying the franchise fees on top of all of your other outgoing costs might be worth consideration – you’ll have someone there to hold your hand.
4. Purchase an Office
Much like a franchise, buying into an existing office buys you into the existing reputation of that particular office in that marketplace. You would hope that you would (delete) have the added benefit of an established rent roll which should provide some sound cashflow, but you’ll also typically have a larger debt than those establishing an office from scratch. And then you’ve got the minefield that is taking working with existing staff – will it be smooth sailing or will you be hit with objections and people who hate change?
So now what?
The simple fact is most people will earn more money and have less stress by sticking to selling real estate.
Think about it, if you had 50 sales per year with an average commission of $12,000 per deal, that’s a total of $600,000 in fees.
If you worked at Naked you would have received approximately somewhere between $510,000 and $552,000.
If you stayed working at your 40/60 split office, where you have no control and fight for leads in areas that you actively market in, you would have received around $240,000.
If you opened up your own office, that $600,000 you earned would have gone towards power, water, internet, wages, superannuation, tax, training your staff, equipment leases or upgrades… would you have any left to go towards you and your family?