How to Start a Real Estate Brokerage

start a real estate brokerage

Starting a real estate brokerage can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful real estate brokerage.

Importantly, a critical step in starting a real estate brokerage is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.

14 Steps To Start a Real Estate Brokerage:

  1. Choose the Name for Your Real Estate Brokerage
  2. Develop Your Real Estate Brokerage Business Plan
  3. Choose the Legal Structure for Your Real Estate Brokerage
  4. Secure Startup Funding for Your Real Estate Brokerage (If Needed)
  5. Secure a Location for Your Business
  6. Register Your Real Estate Brokerage with the IRS
  7. Open a Business Bank Account
  8. Get a Business Credit Card
  9. Get the Required Business Licenses and Permits
  10. Get Business Insurance for Your Real Estate Brokerage
  11. Buy or Lease the Right Real Estate Brokerage Equipment
  12. Develop Your Real Estate Brokerage Marketing Materials
  13. Purchase and Setup the Software Needed to Run Your Real Estate Brokerage
  14. Open for Business

 

1. Choose the Name for Your Real Estate Brokerage

The first step to starting a real estate brokerage is to choose your business’ name.  

This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your own real estate brokerage:

  1. Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
  2. Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
  3. Think about marketing. Come up with a name that reflects the desired brand and/or focus of your real estate brokerage.

 

2. Develop Your Real Estate Brokerage Business Plan

One of the most important steps in starting a successful brokerage is to develop your business plan. The process of creating your plan ensures that you fully understand the real estate market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.

Your business plan should include the following sections:

  1. Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your real estate brokerage.
  2. Company Overview – this section tells the reader about the history of your real estate brokerage and what type of real estate brokerage you operate. For example, are you an independent, franchised, or hybrid brokerage?
  3. Industry Analysis – here you will document key information about the real estate industry. Conduct market research and document how big the industry is and what trends are affecting it.
  4. Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
  5. Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
  6. Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
    • Product: Determine and document what products/services you will offer 
    • Prices: Document the prices of your products/services
    • Place: Where will your business be located and how will that location help you increase sales?
    • Promotions: What promotional methods will you use to attract customers to your real estate brokerage? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
  1. Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
  2. Management Team – this section details the background of your company’s management team.
  3. Financial Plan – finally, the financial plan answers questions including the following:
    • What startup costs will you incur?
    • How will your real estate brokerage make money?
    • What are your projected sales and expenses for the next five years?
    • Do you need to raise funding to launch your business

 

3. Choose the Legal Structure for Your Real Estate Brokerage

Next you need to choose a legal structure for your own real estate business and register it and your business name with the Secretary of State in each state where you operate your business.

Below are the five most common legal structures:

1) Sole proprietorship

A sole proprietorship is a business entity in which the owner of the real estate brokerage and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.

2) Partnerships

A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a real estate brokerage together. The partners share in the profits and losses of the business. 

The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.

3) Limited Liability Company (LLC)

A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a real estate brokerage include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.

4) C Corporation

A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a real estate brokerage is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.

5) S Corporation

An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.

Once you register your real estate brokerage, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.

 

4. Secure Startup Funding for Your Real Estate Brokerage (If Needed)

In developing your real estate brokerage business plan, you might have determined that you need to raise funding to launch your business. 

If so, the main sources of funding for a real estate brokerage to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a real estate brokerage that they believe has high potential for growth.

 

5. Secure a Location for Your Business

To find a location for your real estate brokerage, you should start by looking online. There are many websites that allow you to search for properties based on your specific needs and budget. You can also look for commercial real estate listings in newspapers or magazines.

Once you have identified a few potential locations, you should visit them in person and take a look around. Make sure the area is vibrant and growing, and that there are plenty of potential customers in the area. You should also be sure to check the zoning laws in the area to make sure that the type of business you want to open is allowed.

Finally, be sure to talk to local business owners and get their feedback on the area. They will likely be able to give you some valuable insight on what type of business would or wouldn’t be successful in that area.

 

6. Register Your Real Estate Brokerage with the IRS

Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).

Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.

Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.

 

7. Open a Business Bank Account

It is important to establish a bank account in your real estate brokerage’s name. This process is fairly simple and involves the following steps:

  1. Identify and contact the bank you want to use
  2. Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
  3. Complete the bank’s application form and provide all relevant information
  4. Meet with a banker to discuss your business needs and establish a relationship with them
If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Business Plan Template and complete your business plan and financial model in hours.

8. Get a Business Credit Card

You should get a business credit card for your real estate brokerage to help you separate personal and business expenses.

You can either apply for a business credit card through your bank or apply for one through a credit card company.

When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.

Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.

 

9. Get the Required Business Licenses and Permits

Licenses and permits that are necessary to start a real estate company vary depending on the state in which you plan to do business. Generally, you will need a real estate license and a broker’s license. You may also need to register with the state’s department of commerce or taxation and revenue department.

Nearly all states, counties and/or cities have license requirements including:

  • General Business License: getting your Articles of Incorporation as discussed above.
  • Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose.
  • Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.

Depending on the type of real estate brokerage you launch, you will have to obtain the necessary state, county and/or city licenses.

 

10. Get Business Insurance for Your Real Estate Brokerage

You need to have Errors and Omissions (E&O) insurance to operate a real estate brokerage firm. This insurance covers legal fees for lawsuits that could arise in the event of a mistake such as an error on a property listing. 

Other business insurance policies that you should consider for your real estate brokerage include:

  • General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
  • Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.

Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs. 

 

11. Buy or Lease the Right Real Estate Brokerage Equipment

In order to start a real estate brokerage, you will need some essential equipment. You will need a computer with internet access, a printer, a scanner, and a fax machine. You may also want to invest in a real estate software program to help you manage your business.

 

12. Develop Your Real Estate Brokerage Marketing Materials

Marketing campaigns will be required to attract and retain customers to your real estate brokerage.

The key marketing materials you will need are as follows:

  1. Logo: Spend some time developing a good logo for your real estate brokerage. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
  2. Website: Likewise, a professional real estate brokerage’s website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
  3. Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your own firm.

 

13. Purchase and Setup the Software Needed to Run Your Real Estate Brokerage

There are a few software programs that are necessary for a real estate brokerage. The first is a Customer Relationship Management (CRM) program to manage client information. The second is a property management program to track listings, closings, and other transactions. The third is a marketing program to create flyers and other marketing materials.

 

14. Open for Business

You are now ready to open your real estate brokerage. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.

 

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How to Start a Real Estate Brokerage FAQs

It is not hard to start your own brokerage with the right resources. In fact, there are many online resources and tools that can help you get started. The most important thing is to have a clear business plan and to make sure you are fully compliant with all state and federal regulations. Real estate is a highly regulated industry and you do not want to run afoul of the law.

However, it's also an ever-changing field that can give you many opportunities for career advancement and financial success if you know what you're doing.

You can launch a real estate business with no experience by first doing some research. Attend industry events and network with other real estate professionals. Join a real estate association and attend meetings and training sessions. Finally, start small by offering services to family and friends. Over time, build your business by getting referrals from existing clients.

Commercial real estate brokerage is the most profitable form of real estate brokerage. Commercial real estate transactions tend to be larger and more complex than residential transactions, so they provide a greater opportunity for earning a commission. Real estate brokers also often have more expertise in this area than residential brokers, which allows them to charge a higher commission.

Starting a real estate brokerage can cost anywhere from a few thousand dollars to a few hundred thousand dollars, depending on the services you offer and the size of your company. You'll need to invest in marketing, technology, and staffing, as well as office space, and equipment.

One of the biggest expenses for any new business is startup costs. This includes things like the cost of office space, equipment, furniture, and licenses. Legal fees are another big one if you choose to hire an attorney to help set things up. 

In order to make your business more successful, it's important to carefully plan your expenses and make sure that you have the resources you need to get your company off the ground.

The ongoing expenses for a real estate broker usually include the cost of business licenses, advertising, office space, and employee salaries. Other expenses may include equipment, utilities, insurance premiums, and continuing education costs.

A real estate agent typically makes money through a commission paid by the seller of a property upon the sale of that property. The commission is generally a percentage of the sale price of the property. Additionally, many real estate brokerages charge an hourly rate by the hour or a flat fee for certain services like showing homes, preparing offers, and fielding counter-offers.

Yes, real estate is a stable and growing industry. In addition, the commission rates for real estate agents are typically higher than those for other types of sales professionals. Finally, real estate brokerages typically have low overhead costs. This combination of factors makes owning a real estate brokerage a lucrative business opportunity.

Most real estate agents fail because they do not have a business plan in place. They also tend to rely too heavily on one income stream, such as agent commissions, and do not have a diversified revenue model. Additionally, many real estate agents do not track their expenses closely enough, which can lead to financial instability. Finally, a lack of leadership and poor customer service can doom a brokerage.


 

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