The document discusses various considerations for starting a real estate brokerage business, including the pros and cons of ownership, developing a business plan, choosing a business structure such as sole proprietorship or LLC, naming and configuring the brokerage as an independent office or franchise, and determining the appropriate office size and model. Key factors involve generating income, managing costs, developing competitive advantages, and meeting the needs of clients and markets.

1. Unit 1: Starting a Brokerage Business

2.  The Real Estate Industry
• Pros and Cons of Owning a Brokerage
o Real Estate Brokers Can Earn a Good Income
 Pros: As will all real estate sales, your income is not
capped at an hourly wage or salary range.
 Cons: At first, the brokerage will probably be in the “red.”
Most new brokerage firms take a few months to get
started and income flow can be very unstable.
o Flexible Hours
 Pros: Although, it is true that real estate licensees do not
“punch a time clock”, they still must spend time
prospecting for clients and helping sellers and buyers.
 Cons: Real estate licensees do not work “9 to 5”; they
typically work according to the client’s schedule.

3.  The Real Estate Industry (continued)
• Pros and Cons of Owning a Brokerage
o You are the Boss
 Pros: As the broker-owner you make the decisions and are
in control of generating the business.
 Cons: You are the boss, so you are on your own to
manage and market the brokerage business and to
motivate your sales agents to list and sell properties.
o Keeping the Brokerage Profitable
 Profit Generators
• Have a Plan
• Review Your Financials
• Use Technology
• Recruit and Retain Good Agents
• Keep Up with New Ideas

4.  The Real Estate Industry (continued)
• Pros and Cons of Owning a Brokerage
o Keeping the Brokerage Profitable
 Profit Destroyers
• Under-Producing Agents
• Overspending
• Overpriced Listings
• Fixed Costs
• Brokerage Outlook and Trends
o Brokerages should address the following categories to
meet the needs of current consumers and real estate
practitioners:
 Operations: Brokerage operations should be paperless
wherever possible and agent training should be created
and delivered online or through mobile apps.

5.  The Real Estate Industry (continued)
• Brokerage Outlook and Trends
o Brokerages should address the following categories to
meet the needs of current consumers and real estate
practitioners:
 Offices: With more agents working away from the
brokerage office, plan to have more private areas where
agents can meet with clients and customers.
 Culture: Leverage new techniques and technologies to
facilitate networking and sharing of information.
Encourage use of private and public social networks,
virtual meeting platforms, and technology that allow
agents to connect and collaborate.

6.  Initial Planning
• Business Plan: written statement of business goals,
objectives, and plans for reaching the company’s goals
• Topics to Include in a Business Plan
o Vision and Mission of the Brokerage
 Vision Statement: creates a mental image of what you want to
happen in the future
 Mission Statement: briefly states the purpose or reason for
the company’s existence
o Defining your Competitive Advantage: something that places
the company above competition
o Market Analysis: understand current state of real estate
industry and local market trends; find out who are the
competitors and differentiate your business from theirs
o Managing Risk: understand theories of risk management

7. • Topics to Include in a Business Plan (continued)
o Financing the Business: calculate startup and operating
costs
o Operating the Business: includes location, equipment,
supplies, and systems
o Marketing Strategies: real estate brokers must have an
expertise in marketing
o Management Style: unique management style and
structure
o Growth Opportunities: organic and inorganic growth;
horizontal and vertical expansion

8.  Start Up or Purchase an Existing Brokerage
• Buy an existing brokerage or start up a new one?
o Benefit of purchasing an existing brokerage:
 Name recognition and potential for immediate cash flow
o Benefit of starting up a new brokerage:
 Amount of control you have from day one
o Disadvantage of purchasing an existing brokerage:
 Initial purchase cost
o Disadvantage of starting up a new brokerage:
 Requires capital investment

9.  Choosing a Business Structure
• Sole Proprietorship: unincorporated business owned by
one individual
o Fictitious business name: does not include the last name of
the owner
 Also known as “doing business as” (DBA) or trade name
o Advantages:
 Lease expensive business structure to form, organize, and
dissolve
 Owners has complete control; profits do not have to be
shared
o Disadvantages:
 Ownership is limited to one person
 Owner is individually responsible for all losses and has
unlimited personal responsibility for liabilities

10.  Choosing a Business Structure
• Partnership: relationship between two or more
persons who join to carry on a trade
o Joint and several liability: legal term used in reference
to a debt in which debtor is responsible for entire
amount of the debt
o File annual information tax return
o All of the income, expense, and gain or loss of the
partnership passes directly through to the individual
partners, which is reported on the partners’ personal
income tax returns

11.  Choosing a Business Structure
• Corporation: legal taxable entity formed by filing articles
of incorporation with the state Office of the Secretary of
State
o Advantages:
 Corporate “veil” protects the assets of the incorporators in
the event of a lawsuit
 Benefits provided for the employees are deductible
 Capital can be raised through the sale of stock
o Disadvantages:
o Requires more paperwork, time, and organization
o May result in higher income taxes
o Less tax flexibility
o Enduring entity

12.  Choosing a Business Structure
• Limited Liability Company: alternative business entity
that has characteristics of both corporations and limited
partnerships
o Advantages:
 LLC veil protects the assets of the members in the event of a
lawsuit
 Benefits provided for the employees are deductible
 Formation of a single member LLC is allowed
o Disadvantages:
 LLCs require more paperwork, time, and organization
 Little case law regarding how the LLC would be treated in a
lawsuit
 LLCs often have a life that is limited by state law
 LLCs do not have stock

13.  Naming the Brokerage
• A domain name is a unique name that identifies one
or more IP addresses on the Internet.
• Legal Issues in Naming a Business
o Sole Proprietorship: Many states require sole
proprietors to use their own last name as part of the
business name unless they formally file a fictitious
name statement.
o Partnership: Naming a partnership is similar to naming
a sole proprietorship, because a partnership is
presumed to be operating under the name of its
partners. If the partnership is going to operate under
a different name, a fictitious owner affidavit is
required.

14.  Naming the Brokerage (continued)
• Legal Issues in Naming a Business
o Corporation: Naming a corporation is a formal process.
The corporate name must be unique and must include
the words corporation, incorporated, limited or
company, the letters Inc., or Corp. or some other
phrase indicating that the entity is a corporation.
o Limited Liability Company: Like choosing a corporation
name, choosing a name for a limited liability company
is a formal process. A limited liability company's name
must be unique and must include the words limited
liability company, the letters LLC, or some other
phrase indicating that the entity is a Limited Liability
Company.

15.  Configuring the Brokerage
o An independent brokerage is a company that is not
affiliated with another local, regional, or national
company.
o A franchise is a form of business in which a firm
that already has a successful product or service (the
franchisor) enters into a continuing contractual
relationship with other businesses (franchisees)
operating under the franchisor’s trade name.

16.  Configuring the Brokerage (continued)
• Independent Office or Franchise?
o Independent Operations
 Quick response to changes in the local marketplace
 Money is used to promote the brokerage at the local level
instead of for franchise fees and national advertising
 Self directed – no outside influence dictating the way to
operate the brokerage
 National franchise model does not necessarily fit the local
market

17.  Configuring the Brokerage (continued)
• Independent Office or Franchise?
o Franchise Operations
 Reasons to Purchase a Franchise
• Brand name recognition, sales associates and management
training, market research, national referrals, corporate
relocation business, technology solutions, business
benchmarking, business synergy
 Types of Franchises
• Full service nationally and/or internationally recognized brand
franchise
• Discount commission franchise
• Revenue sharing (with agents) franchise
• Regional franchises
• 100% commission franchise
• Marketing franchise

18.  Configuring the Brokerage (continued)
• Independent Office or Franchise?
o Small or Large Brokerage?
 The number of agents and the physical size of your office
will depend on the amount of real estate sales you plan to
generate.
 You must take into account the amount of business
available in your market, your competition, and the
expected sales of each agent.

19.  Configuring the Brokerage (continued)
• Independent Office or Franchise?
o Traditional or Virtual Office?
 Bricks and Mortar Office: one with a physical presence
 Virtual Office: no physical office
 Bricks and Clicks Office: a combination of a bricks and
mortar business and virtual office