Partnering up with brokerage?!? The next step to growth??!?

Question

I'm looking for input on growing my real estate business. I normally deal with the same realtor for all of my transactions. We have a great repore. He does a lot of business in general and has worked for the same brokerage house for many years. I'm encouraging him to open his own brokerage and I'm wondering how I can potentially make this a mutually beneficial partnership which would make more money for both of us. I'm not sure what the options would be since I don't know much about that end of the business. Is this something that I should even pursue?

Has anyone done something similar?

Rich Weese · Answer

I agree with Dion. In the early 1900's (tic) I had brokerage offices in CO and CA. I was the owner Broker. I found that I wasted more time babysitting the 25 agents I had than the value I gained from having them! They took my productive time away from what I was really good at. There were some benefits in having agents that had contacts to invest in limited partnerships, but it came at a price. Rich

Ibrahim Hughes · Answer

Michael I wouldn't investigate a partnership with anyone's business unless I fully understood that business and how it could help and/or hurt my business. JMO.

I would analyze his business model and match it up with yours as well as your goals to see if everything is compatible. I'm assuming you're a rehabber. If you're looking to stay a rehabber and bring in more deals, then how will this partnership assist in that? Can he bring in more business for you as a self-employed broker than he can as a sales agent?  If he's going to be a broker with agents working under him then I doubt he will have much time to service your rehabs. Especially during the 1st year or two.

This is a tricky situation.  Despite the limited info you have provided, I personally don't think you as an existing business will benefit by partnering with a new business.  Maybe if the Broker's company was up and running. But he hasn't even gotten off the ground yet. There are too many 'birthing and growing pains' associated with starting and growing a new business that would lead me to believe that this is a good move for you at this time.

Taylor Green · Answer

@Michael X.

I agree with @Dion Depaoli. I think if you are supplying your realtor with enough volume and you had your brokers license it would be something worth pursuing.

I was wondering if you made a decision about opening a brokerage?

@Dion DePaoli

Joel Owens · Answer

Rich that has been my experience as well.I once had 50 agents with a 100% model with a 300 per transaction fee.

Lots and lots of headaches and babysitting.The agents license would get suspended for child back support payments,student loans being late in payment,the agent not completing continuing education requirements,not paying dues to thee commission,getting levy requests on the agents commission from the IRS on agents owing back taxes and on and on.

These agents were rusty working full time jobs and getting the occasional sale.I was left doing the transaction for them almost and getting a crappy 300.Waste of my time and energy.The goal of adding agents was to build up so large that a competitor would buy out that residential side from me.

Once I saw the headache involved I dropped down the number of agents.I have 5 now by choice.

I just do much better closing my own deals.Brokerages just like any other new business start up have  a high failure rate.

Michael X. · Answer

All good words of wisdom.  I'll be passing on the idea but you never know until you ask!

Thanks!

Ibrahim Hughes · Answer

Michael X -   I meant to say "There are too many 'birthing and growing pains' associated with starting and growing a new business that would lead me to believe that this is NOT a good move for you at this time. "

Dion DePaoli · Answer

These arrangements make sense only when they make sense.  There is a lot of work that goes into running a broker office.  Not only is it about being worth your partner's time but is worth yours if you have to help out?

Are you moving enough property to really make an impact in the business?

I have experience in this realm back from my days of retail mortgage origination and we teamed up with a large real estate broker and various developers.  The agents need support and that costs both time and money.  The business model you would have to think about as well.  What sort of splits will you offer folks?  Nobody has ever heard of ABC Broker, LLC but they know Centenary 21.  What will make you stand out and attract agents and clients?  Developers have that part covered since they build the houses that get sold, so in those relationships sometimes it make sense to team up.

RE brokerages do well with business volume, while pondering the what if's of the world look for a way to increase your business volume which sooner or later if it grows large enough it will make sense to open a brokerage and you can afford to open one.

Bill Gulley · Answer

Michael, you need to drop it, talking to a Realtor to jump ship is rather unethical IMO. First, you can't have an ownership interest in a real estate company unless you hold a brokers license. Secondly, you don't have any idea of the back room operations of a real estate company, it's highly regulated, not at all like an individual investor.

If you were a broker it is acceptable to invite other agents to an open house type of thing for enlisting new agents, brokers steal agents all the time. But your pushing this agent to leave really puts him in a position where he has to decide between his loyality with years of service and keeping his relationship with you. Since you are not in any position to carry the weight of such a partnership I don't think you influencing him is beneficial to either of you.

I think as you investigate the issue you'll find that it's not teh way to go. It takes very deep pockets to get a good RE company going in most areas as well as a reputation with other agents getting them on board. I suggest a different direction.....good luck...

Michael X. · Answer

Thanks for the replies Don Konipol and Ibrahim S.  You have both posed a lot of questions that I would need to address before heading into a partnership.  Many of your points I had not considered since I know nothing about the broker side of real estate.

Right now I'm researching more of a generalized "what are the possibilities" and if it would be worth pursuing.  I'm not convinced in anyway that this would be a good partnership but if any members have made something like this work I would be interested in what benefit it brought to their buy and hold or flip business.

Don Konipol · Answer

Are you talking about a a partnership between you and him in a real estate brokerage business?  What % of his gross commissions is he paying to his current broker?  Is he getting any leads thru his current affiliation or does he generate all leads on his own?  Are you thinking about a one person brokerage company or attracting other agents to join?  Who will do the administrative and compliance work?  Does your realtor hold a broker license or is he a sales agent?

Partnering up with brokerage?!? The next step to growth??!?

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