Brokerage Fee/Commission Structure

[Joseph Parker]

Over the last month or so, I took the required 90-hour broker pre-licensing course online, passing the course and also the Indiana state exam just last week.

My plan is to never quit my W2 job, as I have a good, steady income, insurance, 401k, profit sharing, etc. Additionally, I have a decent amount of flexibility at this job and experience large periods of downtime on a daily/weekly basis. Therefore, the goals I have for using my license are to fill in that downtime by acting as a broker. I've always been interested in real estate, have sold a couple of my own homes by owner, owned and managed a 24-unit apartment building with partners and own a couple of small commercial rental properties in town.

Here is where I need some opinions, advice or experiences from any seasoned agents & brokers...

I've spoken to two local brokerages this week about their general operations, fee and commission structure. Below is how each is structured.

#1 - Fees are billed monthly and would average roughly $1,200/mo. Commission split is 95/5. National company, locally owned franchise. I've known the owner/managing broker for over 20 years and she has always treated me like one of her own kids.

#2 - Fees are billed monthly, much smaller at roughly $200/mo. Commission split is 50/50. Local company. Not very familiar with the managing broker here but both agencies have good reputations.

Most agents looking to do this part-time are obviously scared of the obligation to pay the $1,200/mo regardless of how much volume they do. However, for someone who is confident they can sell above the breakeven point to cover those fees (which would be about $500k in volume annually in a region with average home prices of $100-120k), the income potential is much greater with the 95/5 split. There are numerous part time agents in this area doing in excess of $3 million annual volume.

I know this comes down to my own goals and risk tolerance, but do any of you have an opinion or advice when deciding who to go with? My personality type is one that would result in me being as active in real estate as some full-time agents are, and the busier I am the more efficient I become. I've lived in this city since I was born, know the area well and have numerous connections, so I feel like I'm set up to start off as well as anyone else would be.

At the end of the day, I also realize I'm not stuck at the first brokerage I choose and could always switch if one place is not working out as expected.