Building a Real Estate Team the Right Way

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Transcript:

I just want to give you some thoughts on "The Ride". I wouldn't say this is a hugely difficult journey you're embarking on, but there is definitely a wrong way and a right way to do this. Most teams are built on a shaky foundation, and to me there is an order in which you go about this. You first get a top notch admin, then buyer agents, then ISA's, then more staff, and then finally a listing agent.

Most team leaders are held captive by their agents, and commission splits are usually too high. The 50/50 norm is crazy because it doesn't give you as the business owner any opportunity to make a return on your investment. Buyer agent compensation structures are also usually messed up, and agents commonly have more leverage than they should. 

So, if you want to build a team and run a business, then the buyer lead generation platform is your recruiting magnet! You have to get your systems in order before you recruit, because these will be bargaining pieces that will attract top talent to your team. These prospective employees should be impressed by these systems and want to work for you because of them.

Should you hire ISA's? I am really concerned at how quickly people are going out and hiring ISA's on their teams. I think this is a huge mistake for a bunch of different reasons, because ultimately it's you that has to master lead conversion. I brought on a buyer ISA when I had a bunch of production, and I think that year we did 250 sides. 

I don't think there is anything that I really would have done differently. I made a few bad hires when it came to agents, but that was just part of the process for me. Now we look for someone that's been successful before in other areas, even if it's not real estate. 

Agent Compensation

As far as compensation goes, you really need to understand why your compensation is what it is. In most markets you can show a path to a number, and for me it's $100,000. If you come on my team, I'll show you a clear path to $100,000 with no expenses. Less than 5% of agents in my market net $100,000. One of our agents even has a shot at breaking through $175,000 this year.

For our buyer side, our gross margin goal is 60% for my team, and we're running at 57% currently. Our listing business gross margin target is 75% and I think we're pretty much on target there. Our overall gross margin target is 65% to 68%. This means that every dollar that comes in, 65 cents is spent to pay expenses.

You can do the math, but we run a little less than $70,000 per month in expenses. This year has been pretty cool because we've had more and more sales every month since January and our expenses have decreased every month. This model is not for the faint of heart. You have to be able to do the cash flow forecasting and marketing ROI tracker. However, it's all worth it in the end.