Are you at a transition point in your life and your business? You might be considering whether you should start a real estate brokerage or join eXp Realty in order to become more of a business owner. If you are, I’d like to offer some points to consider before making your next move.
Think about it–if you were investing in the movie business 50 years ago, should you have gone with Blockbuster or Netflix? Now the answer is pretty obvious, but, back then, would you have known? Today, it’s a similar toss-up with brokerages: should you start a brick-and-mortar brokerage or invest in an online, worldwide network?
Since the COVID-19 pandemic, it’s been harder than ever for in-person businesses to keep going. That’s why eXp Realty might be the perfect option if you’re trying to stay operational in the real estate industry long term.
Choosing eXp Or A Brokerage Of Your Own
A couple of years ago, I was in the same boat as you. I really wanted to start my own brokerage, but I wasn’t 100% sure it was going to work out. Then I ran across eXp Realty and the option to join an online network. I had to think hard about what I wanted to do, and today I’ll share with you the factors that led to my decision.
Start Up Costs
The traditional way to start a brokerage costs a lot. First of all, you have to get a broker license, which will cost plenty in itself. Then you have to get a building, which is going to come with a 5- to 7-year lease. If you want to buy a franchise that’s already started and running, it’s going to be around $50,000. And once you’ve got that settled, you still have to furnish the place and hire and train staff and employees. In the end, you’ll be spending a ton of money to get a brokerage going.
At eXp, on the other hand, there’s no big startup fee. In fact, it only costs $85 a month. Over a whole year, that’s only going to come to a little over $1,000. Really, that’s it. It’s a MUCH cheaper option in the long run.
Liability
If you’re in charge of your own brokerage, all the liability falls on you. That’s for you AND all the agents you hire. If you or your agents are hit with a lawsuit or something happens in the market and your business fails, the costs will be on you. Likely, you’ll lose that entire $100,000+ that you started with and will end up broke and ruined.
However, with eXp, all the liability rests on the eXp broker team and the brokerage as a whole. If something happens, they’ll take care of it. And with the extensive network of brokers and agents around the world, it’s a lot less likely that eXp Realty will go out of business.
Freedom
Traditionally, brokers carefully monitor their agents to ensure they don’t cause any of the legal problems mentioned above. If you decide to start your own brokerage and hire agents, you’ll have to do the work of many people. Basically, you’ll have to be the:
- Compliance officer
- Trainer
- Motivator
- Therapist
- Firefighter
- Recruiter
- Etc.
In the end, you have to take care of your agents, help them succeed, answer their questions, put out their “fires,” recruit more agents, and continue to sell. The agents you hire are not going to be as experienced as you are, so typically you’ll still be the top seller in your brokerage. It’s a lot of work!
eXp offers a great alternative to that heavy workload. If you decide to partner with eXp, you can recruit a team of agents and have them trained by the 600+ staffers on hand that eXp has already certified. With the fully online platform, your agents have access to all the resources they need, so you don’t have to be involved any more than you want to be.
Returns
In a traditional brokerage model, the returns are low. 80% or more of real estate agents fail in their first couple years, which means you’ll have to be constantly recruiting new ones. That also means that 90% of your income will come from just your top 10% agents. Ultimately, that’s a huge market loss. In productive years, you’ll probably only see returns of negative numbers up to around 20%.
If you start with eXp Realty, you’re guaranteed a 3.5% to 4.5% rate of commission per year on each agent with little to no expenses. Plus, you can form your own team and earn an additional 10% to 30% commission split from each member. In the eXp model, you are guaranteed some pretty high rates of return. Remember, you get all of this without much liability and upfront investment on your part.
Scalability
Brick and mortar brokerages, even those with a strong online presence, are geographically constrained. You’re not going to get a lot of interaction with agents looking to join you. If you hire a recruiter to help you, you’ll probably have to pay $80,000 or more per year for their services, which is an additional cost that will be difficult to make back. Even if you do hire the right recruiter, they’ll only bring you 0-10 agents per year.
The eXp way is a little different. Because it’s a fully online, international corporation, there will be tons of big market openings happening all the time. All you have to do to keep in touch is grow your own team, and you’ll have partners constantly recruiting with you. Plus, the office is fully virtual, giving you connection opportunities anytime and anywhere. There’s tons of room for growth in that environment.
Exit Strategy
It’s crazy hard to get out of the real estate brokerage business once you’ve started. When you want to retire, you’ll probably have to try and sell your business at a minimal multiple with an earn-out clause. Whatever you earn after you sell it will be dependent on how well the purchaser of your brokerage does. Of course, you could always pass it along to your family, but then you just have to hope they don’t run it into the ground. Not everyone loves the brokerage business.
The eXp model provides a better solution. Over the years, you’ll have multiple chances to invest in stock, so when you decide to retire, you can easily sell the stock and have a nice bit of money to enjoy in your later years. You can also will the revenue share you’ve earned to your family to provide for them when you’re gone. Regardless, it’s a win-win situation and much easier to leave than in a traditional brokerage model.
Making Your Decision
So, there you have it. When I was considering whether to start my own brokerage or join eXp, those are the factors I looked at. In the end, I went with eXp. It provided me a cheaper start, more freedom and flexibility, higher earnings, better growth opportunities, and a way to get out when I needed to. It seemed like an obvious choice to me.
If you’re still mulling over starting a brokerage and think eXp might work for you, I can help you build a strong business with all the benefits of eXp and FREE lead generation. Just get in touch with me today to get started.