As per trends and specialists, real estate professionals mostly choose to practice real estate independently rather than associating themselves with real estate franchises. However, it can be clearly seen that real estate franchises come with multi-fold benefits as compared to those who operate independently.
Real estate franchises manage various types of services around buying and selling of commercial and/or residential property. They help individuals, who are looking to excel in the world of real estate, with brand awareness, latest technological tools, training, supporting finances, marketing material, networking opportunities, establish trust with clients and so on. The idea behind buying a franchise is gaining access to a proven business model and tools needs to grow your real estate business faster while mitigating the risk. And due to all these benefits, the real estate franchise industry has grown over time. As per marketing researcher IBISWorld, the number of businesses has grown by 2.3% per year in the real estate agency franchises, from year 2015 to 2020. Year 2020 was seen as a year of significant real estate franchise renewals and new company additions.
A general notion around acquiring real estate franchise is that one has to sell property to be a real estate franchise. No, this is a myth! You do not necessarily have to sell or buy property to be a franchise. Property inspection is also a part of real estate franchise industry. And property here do not means just homes. It involves inspection of apartments, hotels, commercial buildings and warehouses too. As you dive deeper, other segments that are included in real estate franchise industry include – home flipping, home inspection, brokerage and sales, salon suite rentals, estate sale management, leasing or property management, marketing support for agents, and so forth.
While we can see the various benefits of buying a real estate franchise, it undoubtedly comes with upfront costs. Of course – nothing comes for free! While the exact cost depends on the real estate franchise, the franchises normally come with an upfront cost ranging from USD 10,000 to USD 50,000. This is in addition to the office build out and training costs. That means a median cost of opening a real estate franchise could be around USD 300,000. In addition to the upfront cost, franchises also have an associated royalty, that ranges from 3-5% of the gross commission as well as a monthly fee of USD 25 to USD 400 per agent.
Talking about renewals, the fees is typically around 50% of the initial franchise cost. This is important as you might want to factor the cost into your long-term investment and ROI goals.
Another important question that might come to your mind – are these franchise opportunities in my area? The answer is look for your franchise territory. A franchise territory is a boundary around a specific real estate franchise that doesn’t allow another franchise, within the same company, to open a centre near your existing franchise. This is crucial to handle the competition in the area.
The bottom line is there are lot of things you must consider before making your decision to buy a franchise. Do your research, find out the pros vs the risks, mark the costs and then make your prudent decision!
