The Costs of Starting A Brokerage

One of the biggest variables to consider when starting your brokerage is The Cost to Start a Real Estate Brokerage. While a successful brokerage can be very lucrative in the long run, getting started can come with a lot of expense. 

Understanding these costs before you start your brokerage can help you get on solid financial ground much faster. Here are some of the financial considerations you’ll want to make as you transition to starting your own brokerage. 

The Cost of NOT Starting A Brokerage

Before you start thinking about the tangible costs of starting your own brokerage, there’s something else to consider - what is the cost of NOT making this career move? Many people get so bogged down thinking about high startup costs that they don’t think about the potential benefits. 

When you’re working as an agent for another brokerage, you’re paying them fees, and your income is limited to what you personally can sell.  When you start your own brokerage, you’re no longer working for someone else - you’re in control of your business and have room to expand by hiring more agents and diversifying your streams of revenue.

Of course, this isn’t necessarily the right career move for everyone, and you’ll need to be realistic with your expectations. If you’re early in your career and are only selling a few homes a year, it’s probably better to focus on expanding your personal sales volume before moving on to the next phase of your career. Once you’re making more sales and have the extra capital to put towards a new business venture, that’s when it might be time to consider opening your own brokerage. 

An Evolving Market

One of the most important things to keep in mind when starting your own brokerage is that the world is constantly evolving and the real estate industry is changing along with it. As a result, you can start your own brokerage for a lot less money than you might expect. Here are the basic expenses to consider - and how you can save money on them without compromising the quality of your services.  

Workspace

One of the first things you’ll need when starting a brokerage is a space to work - but that doesn’t necessarily mean that you have to rent out an office. When you’re just starting out, you can work from your home. Working from home is more popular now than ever, and you can even take a home office tax deduction. All you’ll need is the right technology at home to manage your team. As your brokerage grows, you might opt to open an office down the road, but it’s not an expense you need to worry about in the beginning, unless you want to have a brick-and-mortar off the bat. 

Employee Cost

The next thing to consider is the employee cost of your business, and this is a huge factor to take into consideration. While your agents are ultimately the ones that are going to make you money, they are also going to cost you money when you start out. This is also true for the office staff, and any other roles you need to hire for. Your exact employee costs are going to vary based on your specific business model and the services you are providing for your agents. 

There are many different services you could offer to your agents, and each come with their own costs. Even if you’re not paying someone else directly for these services, you’re paying with your time. For example, you might offer marketing for them, help them manage their contracts and listings, or coordinate closings.

You’ll want to think about all of these services you’re offering for your employees and determine a per-employee cost. You can use this cost to budget as you’re starting your business as well as when you’re hiring new agents later on. 

Depending on the services you’re offering, these costs could be either fixed or variable. Either way, these are the costs you’ll use to determine your profitability threshold and how quickly it will take you to get there. Even though you won’t be profitable right away, you can use these numbers as a benchmark when you’re scaling your business. 

Accounting and Marketing

These are two essentials that any growing brokerage is going to need.  You may decide to outsource these services, but it’s important to make sure you find someone who’s a good fit and offers fair pricing. If you’re spending too much on either service, it’s going to make it very difficult to get your business off the ground. You also don’t want to spend too much time directing your accountant or marketing specialist, as that eats into the time you need to scale your business. 

Final Thoughts

While these starting costs can seem overwhelming, it’s important to play the long-term game. Although you’ll need to speed money upfront, starting your own brokerage gives you the opportunity to scale over the next few years and make more money than you could working as an agent for someone else. 

If you’re looking to start your own brokerage, consider how much it’s going to cost you, then figure out what you need to do to make it happen. We offer a 1st Class Brokerage franchise opportunity that saves you on the upfront costs and gets you to profitability quicker. This package includes things like accounting, marketing, and other essentials you’ll need to get started. You’ll also get access to our technology that helps you track every aspect of your business, including what agents are producing, what you’re spending, and how much money you’re bringing in overall.