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Author Topic: Stay with current commercial real estate brokerage or leave?  (Read 48 times)

Offline mslutsky

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Stay with current commercial real estate brokerage or leave?
« on: January 14, 2019, 10:11:51 am »
Context: I am 30 years old and have been a commercial real estate agent for 2 years. I have a strong background in sales and joined a very reputable commercial firm that is owned by my best friendís family. I am at a point now where I am looking for advice as to whether I should stay with the current company or go out on my own. I am not too interested in joining a competitor.

In 2017 I grossed over $460,000 in commissions and I received 55% ($253,000) as take-home pay. $91,000 of the gross commissions was a referral by the companyís CEO. $210,000 went to the house this year.

In 2018 I grossed $1,250,000 and I received 62% ($775,000) as take-home pay. $232,800 of the gross was internal referrals. $471,500 went to the house this year!

I am currently re-negotiating my split structure and the company will not go above 70% to me / 30% to them at $1,000,000 in gross commissions. The net to me breakdown is as follows:

55% - $0-$100k

60% - $100k-200k

65% - $200k-400k

70% - $400k-600k

75% - $600k+

I receive a 3.5% bonus on top of the 75% threshold once I hit $1.0M in gross commissions.

Itís important to note that the company pays for my admin, my office, computer, phone, marketing, etc. I have zero true out of pocket expenses.

Ultimately, the question is, at $1.0M in gross commissions, is paying the house $300,000 too much? I know I also have to look at the post-tax money aspect tooÖ I am just having a very difficult time paying the house so much money for business that I am mostly generating!

What if I am able to go out on my own and do $1.0M in gross and my costs are only $50k-$100k? I could be leaving $200k+ per year on the tableÖ

I also have to weigh the long term intangibles too though, I understand thatÖ

Appreciate the advice!

Offline javipa

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Re: Stay with current commercial real estate brokerage or leave?
« Reply #1 on: January 14, 2019, 01:38:21 pm »
That's a very interesting question.

There's a couple of things you didn't mention, including the goodwill that your brokerage has established in the market.  That may be one of the reasons you're able to generate this much business.  Your customers recognize the company's branding and trust them to do good work.

This just means you're benefiting financially and professionally from the company's branding. 

And then there's not having to screw around with the management of the office that is also helping you pull down over half a million dollars a year.  You may not see the whole benefit, because you're not seeing all the crap, confusion, and did I mention crap going to maintain the office.

Meantime, your office probably may not be covering all of it's overhead ONLY because of your contribution.  They're able to doing lots of extra things for you, because there's several sources of reliable income.

That is to say that your office management is likely dealing with personality defects and overhead of the less performance-oriented agents. 

I'm not saying you should stay, or that you don't deserve to keep 75% of what you generate, but the hassle-free management you've described, would seem to allow you to focus MUCH more of your energy on your bottom line.

Hope that helps a little.
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Offline mslutsky

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Re: Stay with current commercial real estate brokerage or leave?
« Reply #2 on: January 14, 2019, 09:31:08 pm »
Javipa - thanks for the detailed response, much appreciated!

I do try to take into account the factors that you mentioned, but if I were to go out on my own, lease small office space, and freelance out most of my advertising work, I suspect that I will spend only $50k-$100k per year tops. At $1M in gross commissions at my current firm, I will only be keeping $700k... Itís a tough pill to swollow knowing that I could potentially be giving up $200k per year for x amount of years... I donít want to build my own brokerage; it sounds like a pain to manage other brokers. I would purely leave and start my own one man shop.

I will also add that Iím primarily selling investment properties with no signage costs, etc. I also represent a number of buyers where I donít use much of the firms resources.

Ultimately, the question is, do I go out on my own with the attempt to save $200k per year or do I stay and try to reap the long term benefits of potentially investing in deals with the principles and not have to worry about costs and the downside if the market turns the other way? I constantly look back to the past two years and get frustrated that Iíve provided the house $650k+ in commission splits. I feel resentment over this...

Appreciate the advice!

 




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