Nothing works without “Start Up Capital”
The rental side of the business has many advantages for both brokerages and individual agents. In this series I am going to outline many of the benefits to both companies and agents. The first topic that will be addressed is the capital required to launch a company or an individual career in real estate.
The amount of capital required to start a sales brokerage is much higher than is required to launch a company that does both rentals and sales. A healthy business plan for a sales-only brokerage would include one year’s operating expenses in capital to start up, and revenue may not consistently cover monthly overhead for an extended period. In comparison, I have consulted with several start up brokerage companies with an initial emphasis on rentals and several of them have turned a profit in their second month. Quite simply, you don’t need nearly as much money to initiate a rental operation.
Low Barriers to Entry
The ability to hire strong potential agents is an absolute must for any brokerage. There is a measurable advantage recruiting agents new to the business if you offer them a viable option to do rentals while they learn sales. I have experienced this very real truth for years from both sides of the fence. It is much easier to hire good people when you don’t have to tell them that they aren’t going to make money for months and months. Given the option of renting property in order to make money almost immediately or eating up their savings or available balance on their credit cards, a smart ambitious person is going to choose rentals the majority of the time. The rental option gives a brokerage a tremendous competitive edge in hiring.
Entry into the real estate profession from a new agent’s perspective is much easier and one hell of a lot less scary with a viable option to rent property. The savings required is much less and there is a distinct psychological advantage for people when they know they can start out renting some property and making at least some money while they wait for their sales business to develop. I have found the “success rate” for agents starting in rentals to be substantially higher than agents without the option of renting property. The financial burden of a “commission” business combined with the amount of time that is required to make and close sales adds up to an excessive amount of pressure on new real estate agents. The ability to do rentals is a tremendous advantage.
About Greg Young
Greg Young is the owner and President of Broker Heaven NY, a real estate training and consulting firm located in Manhattan devoted to helping agents and companies reach their full potential. Greg has trained thousands of agents over his 30 year career and has created numerous rental and sales training programs.