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How to Start a Real Estate Brokerage: The Start-to-Finish Guide

It’s easy to see the appeal of starting a real estate brokerage. Real estate is an attractive career because it is flexible, fast-paced, and allows you to broker exciting deals between buyers and sellers. For those with an entrepreneurial spirit, starting a real estate brokerage can be an even more lucrative and satisfying alternative to working for someone else.

However, while working as a broker for another organization can allow you to focus almost entirely on providing services and closing deals, operating a real estate brokerage is just like running any other business and comes with many of the same challenges. Instead of just focusing on providing services to your clients, you’ll need to oversee the full scope of the operations. The range of responsibility means you’re accountable for advertising and marketing activities, procuring the right tools to run a business, and ensuring compliance with the rules and standards that govern real estate brokerages. For most individuals, however, the first challenge is just getting started.

If you are considering starting a real estate brokerage, here are five key steps you will need to take.

1. Get Your Broker’s License (or Partner with a Licensed Broker)

Every real estate brokerage is required to have a licensed broker overseeing operations. This requirement means that if you want to start a brokerage, getting a license is one of the first things you should think about and plan for. In the U.S., broker licensing is administered at the state level, and each state’s real estate commission has its requirements for becoming a licensed broker. Prospective licensees typically have to complete a required set of courses and a set number of educational hours (these can range from 40 or so hours to hundreds of hours) before they may qualify. In some states, you may also be required to have worked as a real estate agent or to have a specific number of completed transactions under your belt before you may apply for your broker’s license.

Conversely, instead of getting licensed yourself, you may choose to hire a licensed broker of record to oversee your operations. One word of caution: it’s often essential to hire someone who will be working with your firm, instead of someone acting as a name for hire, or you may risk compliance problems down the road.

2. Decide What Your Ideal Brokerage Looks Like

There is no one standard type of brokerage, which is why it’s crucial to spend some time considering the kind of business that will be the best fit. When it comes to defining a brokerage, there are lots of options.

First, you will need to decide whether you want to launch your own completely independent company or if joining a franchise is a better fit. One of the advantages of opening a franchise is that they will have already invested in marketing their brand—meaning potential clients may already trust you because they’re familiar with your company name. At the same time, joining a franchise means paying initial franchise fees, ongoing royalties, marketing fees, and other costs. As a franchise, your business will also likely be subject to rules and guidelines established by the brand in addition to state-mandated brokerage requirements.

Conversely, if you go the independent route, you won’t face the same rules and fees, but you will need to build your new company brand and client base, which can also be costly and time-consuming. Starting independent can be a good fit for many, and it’s often an excellent fit for those with many years of experience in real estate. One advantage of being independent is that you can better define your business culture, process, and agent commission plans. 

However, becoming a franchisee or starting as an independent brokerage is not the only decision you’ll need to make to define your real estate company. It’s helpful also to consider the types of deals that your company will primarily focus on—such as residential, commercial, or relocation. Consider filling a local niche and understand how potential clients will feel about that focus. Additionally, consider whether you will function as a remote virtual office or if you will open a physical brick and mortar location. 

To help you make the necessary decisions, speak with experienced brokers who are willing to provide mentorship and who may offer help assessing the competition that exists from brokerages in your region. As your vision takes shape, use your decisions to develop an informed business plan, which includes market analysis, recruitment strategy, and financial projections.

3. Form a Legal Entity—and Get Your Business in Order

The next decision you will need to make is about the legal structure of your business. For this stage, a lawyer can best advise you on the pros and cons of all the various options. It’s crucial to fully understand how each can impact your ability to grow and scale. Once you have legally established your brokerage, you will need to register for taxes, open a business bank account, and begin to keep appropriate financial and compliance records.

4. Register Your Brokerage

Once you have a licensed broker of record and have legally formed your business, the next step is registering your brokerage. The specific paperwork and costs will vary depending on the state in which your business is located. Often, franchisees will have support through this process to ensure that you can get started correctly. 

5. Staff Your Brokerage – and Ensure Employees Have the Right Tools to Succeed

Once your brokerage is established, you’ll need to hire a winning team to start building client relationships and closing deals. We’ve compiled some winning strategies to help you lure the best real estate talent to come work for your new brokerage. You’ll also need the right tools: from tracking your marketing and advertising activities to building detailed client files, and later to ensuring smooth and compliant transactions, make sure you have everything you need to deliver seamless, detail-oriented service. It’ll help your brokerage win new business – and help reduce compliance risks that can cost you down the road.

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