Become a real estate broker in 5 steps
Have you ever thought about becoming a real estate broker and opening your own brokerage?
Many agents think that starting their own brokerage is a shortcut to saving money on their real estate fees. This couldn’t be further from the truth.
So before you dive into the sea of brokerage paperwork, here are a few things you need to know.
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What it takes to become a real estate broker in Canada
Starting a brokerage is a long-term investment that may not necessarily pay off unless you put a lot of work and money into it. But if you do it right, you get the freedom to do things the way you want along with unlimited income potential.
1. Understand the basics
First, you need to understand the difference between the following terms:
Real estate agent
A real estate agent is employed by a real estate broker in a registered real estate brokerage. Agents represent their brokerage and act as “intermediaries between people selling a property and those who want to buy real estate.”
Real estate broker
The real estate broker’s primary role is to manage and mentor their team of agents and make sure that all adhere to the applicable real estate rules and regulations.
Brokers can trade in real estate and/or assume a supervisory role at the brokerage.
Real estate brokers can work independently under their own brokerage or they can be a part of a bigger, franchise brokerage. But real estate agents have no choice — they have to work under a brokerage (otherwise they do not get their license).
A REALTOR® is a licensed real estate agent who belongs to the Canadian Real Estate Association (CREA). Not every agent is a REALTOR®. To become one, you have to join a local real estate board and follow a specific code of real estate ethics.
2. Learn how to become a broker in your province
In order to become a broker, you need to undergo further training in accordance with provincial regulations. Search online for “real estate broker requirements + [your province]” for details on the requirements in your province.
In Alberta, a real estate agent must have at least two years of licensed industry experience prior to becoming a broker.
According to the Real Estate Council of Alberta, you need to complete the Real Estate Brokers Program and be authorized for all real estate activities:
- Property management
Every broker needs to be assigned to a brokerage, which means you can open your own brokerage or take over an existing one.
3. Choose a brokerage model
Next you’ll want to choose a brokerage model. You have several options, each with its own benefits and limitations.
A franchise brokerage such as Re/MAX offers various kinds of support, training and assistance to local franchisees across the country.
The franchise model has standard protocol and policies — from branding to customer handling — you’ll be required to adhere to.
There are numerous benefits of starting a franchise brokerage:
- Franchises typically have a strong brand that’s already established
- Protocols have all been set for you, including pre-determined commission structures and policies
- They come with training programs
However, you need to consider the costs that come with signing onto a franchise brokerage. The starting costs can be in the thousands of dollars, depending on the franchise you choose, and may not include the management fees, transfer fees or license renewals.
Who should consider this model:
If you have a big budget and you don’t want to create everything from scratch, this is the right model for you.
Independent brokerages are created by individual real estate brokers. They are typically not as well-known as major real estate franchises and can be considered as boutique/niche brokerages.
However, that freedom comes with the price tag of assuming responsibility for every aspect of handling a brokerage. This is the model for you if you’re eager to:
- Manage your own marketing campaigns
- Create your own training programs
- Build your own brand
To become an independent broker, you don’t necessarily need to have a separate office. But you need to spend time filing paperwork, taking care of the finances, and doing the conveyancing yourself.
Therefore, you must be very organized. You have to think strategically because you will be managing all aspects of running the brokerage.
This option is time-intensive
Besides being very organized, financially responsible and keeping track of all the brokerage-related activities, you will need to find the time to serve your clients. You may need to hire someone to help you with all those tasks, and that can cost you more than the money you were trying to save on real estate fees.
You will also need to be an experienced real estate agent, as you won’t necessarily have the guidance of an experienced broker.
You need to be confident in your real estate skills and industry knowledge, and take responsibility for all your actions.
Unless you are already a well-known, respected agent in your area, you need to spend time building and creating awareness for your brand because people will not know who you are. People generally prefer to hire/work with well-known brands unless they are committed to you as their agent.
Who should consider this model:
An independent brokerage is best for experienced real estate agents who want to grow their own brand and are willing to take the additional risk of total financial and operational responsibility.
4. Plan for initial startup expenses
A real estate brokerage is a business, so it needs some time to grow before you see any profit. You need to determine if it’s financially feasible for you to open this business.
It’s smart to have savings for at least a year of expenses in case you need it.
If you do not have the funds, you can get a small business loan or partner with an investor who can help with your startup costs.
If you want to be an independent broker, you can work from your home office. However, if and when you start building a real estate team, you will need an office space that can be used by the agents and their clients for meetings.
Costs to plan for
While you are planning your real estate budget, consider the following costs:
- For Sale and Open House signs, business cards, online advertising to attract new agents, etc.
- Security deposit for office space and the first month of rent (if needed)
- Broker website
- Licencing fees and insurance
- Equipment, furniture, office supplies, printing
- Wages for a receptionist, assistants, administrators or brokers
- Accounting costs
- Monthly expenses (such as the internet, software, phone service, etc.)
This list is not all-inclusive, but it gives you a good perspective on the potential costs.
5. Write a real estate business plan
The real estate business can quickly get overwhelming if you do not have a plan set in place.
First of all, determine the legal structure of your business. Will it be a corporation or a partnership? If you are not sure, consult with a qualified accountant to see what’s best for your situation.
Here are some topics that should be included in your real estate business plan:
- Define why you are doing this (this will keep you motivated during the hard times)
- Your mission and vision statements
- Company ownership/legal structure
- Your marketing strategy (i.e. target market/niche, competition, positioning, branding, lead generation plan, social media strategy)
- A SWOT analysis (strengths, weaknesses, opportunities and threats)
- Financial analysis/budget/forecasting
- List of employees with bios for each
- Your brokerage policies
Read this terrific post for details on business strategy.
When to start a brokerage
When you choose to make the leap from real estate agent to broker will depend in part on the requirements in your province.
Start your brokerage when you have a great pool of referral-based clients and you’ve been in business for many years.
This is a situation where your name is more important than the brokerage you work for. You need to have an established strong personal brand and be well-known in the community before you open up your own independent brokerage.
The future is yours to choose
With all this information in mind, you can now make an educated decision on whether becoming a broker is the right thing for you. Starting a real estate brokerage requires:
- Learning what’s required to become a broker in your province
- Choosing a brokerage model
- Understanding and planning for initial expenses
- A solid real estate business plan
A real estate brokerage business can offer flexibility, control and substantial profits. And while it is not for the faint of heart, a brokerage can be both rewarding and successful.