Tips to Ensure You Invest Wisely
One of the most popular franchise choices for first-time franchisees is real estate franchises. Perhaps because it is something that we all have experience in – whether directly or indirectly, as a homeowner or investor.
Before you take the plunge into real estate franchise ownership, you must be confident that it is the best business to buy. In this article, you’ll learn about the different types of real estate franchises and how to assess whether this business is right for you.
Real estate franchise definition:
A real estate franchise is a business model where an individual or company licenses the use of the franchisor’s trademark and offers services to customers at a fixed location or through remote services.
How does a real estate franchise work?
There are two types of real estate franchises: brokerages and dealerships. A distinction is made between these two business models in terms of their relationship to the customer. A brokerage will typically have more interaction with the customer, whereas a dealership will usually only interact with potential buyers.
The franchisor gives their franchisee a list of what they need to do and how they need to be seen to be successful with this business. One of the advantages of becoming a franchisee is that you will have access to all the resources, marketing, technology, and support that you need from your franchisor for your success as a real estate professional.
Services that real estate franchises offer
There are a variety of services that you could provide as a real estate franchisee. You might help with buying and selling homes, assist with paperwork, negotiation, and closing deals. Four key areas in which real estate franchises operate are:
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Property management services
Property management services can be thought of as a full-service solution to the property owner, necessary to keep properties in good condition.
They are also important to ensure that tenants have a safe place to live. This is especially true when the property has a lot of expensive and sensitive equipment, such as elevators and heating systems. Tenants are more likely to report problems if they know that someone is checking up on them in response to their complaint or call.
Tasks associated with property management include:
Property maintenance professionals may also undertake maintenance and cleaning, arrange pest control, landscaping, and more. You may also be involved in finding and managing new tenants.
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Inspection services
Property inspection services are a crucial step in home buying because they allow buyers to better understand what they are getting into before committing to purchasing a property. The inspection also provides valuable information about what is included with the house or commercial space that will be purchased.
Property inspection services are used to evaluate the condition of residential and commercial real estate properties. They evaluate the physical structure of a property, check for any potentially hazardous conditions, estimate the property's market value, and provide an inspection report.
To offer these types of services, you will need to be licensed and insured in your state of operation.
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House-flipping
Flipping houses is a lucrative business that can be very profitable. However, one of the obstacles to flipping houses is that it typically requires a significant amount of capital to get started, and expertise to complete. House flipping services are available for people who want to start flipping but don’t have the funds or time to do it on their own.
This type of service can provide many advantages. For example, house flipping services typically already have the necessary equipment and expertise in place, with no purchasing requirements from the investor.
You may also provide training and mentorship for first-time flippers, so they learn from your experience and expertise to maximize profits.
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Home liquidation services
As a home liquidation service franchise, your job is to help people sell their homes fast. You’ll have a thorough understanding of the current market value of properties, and have experience in selling properties. You may be required to:
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Take care of all the marketing and social media needed to get a client’s home sold quickly
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Do all the necessary paperwork
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Follow up with all parties to ensure that everything is in order
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Provide clients with a customized plan to help them through the process of selling their home
You may also help with:
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Hiring professional contractors
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Negotiating with potential buyers
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Making a home more attractive for potential buyers
How much will you need to invest to buy a real estate franchise?
Your investment depends on many factors. However, in general terms, you should expect an initial franchise fee in the region of $10,000 to $50,000.
Your total outlay will depend on the franchise you buy, and the operating model it works under. The bigger the name, the more expensive the franchise will be, and your total cost could be in the hundreds of thousands of dollars.
Don’t forget, too, that you will have ongoing franchise fees: ‘royalties’ or commissions to pay. You should be prepared to commit to the business for between five and 20 years, and there will be renewal fees to pay. Like any business, you should plan for it to be a long-term investment.
How do I know if it’s a good idea for me?
There are three key questions you need to answer when considering whether to invest in a real estate franchise:
The real estate industry can be a tough industry. It has gone through a lot of changes in the past few years. Factors like the drastic changes in interest rates and technological advancements have changed the real estate landscape.
It is important to analyze the real estate market in your proposed location – individual locations rarely move in line with national outlooks. They are affected by localized economic conditions – for example, a large company moving into an area can cause local property prices to boom.
You should also ensure that there is the availability of any expertise you may need to help make your business a success.
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Is the franchise growing?
The American real estate industry is a highly competitive and capital-intensive one.
One of the things you should consider before buying a real estate franchise is how well the company’s brand and reputation are received in the market.
Real estate franchises do not come with risk-free guarantees. While the past is no indication of future success, understanding the history of the franchise and how (and why) it is currently growing will help you make a better franchise choice. It is also important for you to consider what kind of future they envision for their franchisees.
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What about the training and support you’ll receive?
Learning about what kind of training and support is offered can help you decide on the best real estate franchise opportunity. Even if you have specific expertise in real estate, the more training and support you receive from the franchisor, the more likely you are to be successful.
You should ask if training and support are only provided to you, or if it is also provided to your employees, and on what basis it is provided: one-off training or ongoing, for example. Ask, too, about the level of marketing support you will receive – it could be the difference that makes yours a highly profitable business.
Always talk to existing real estate franchisees
There are many good franchises available, but it’s important to do a little research and talk to the people who have owned them to find out how they were able to succeed.
They might not be able to answer all your questions, but they will be able to provide an honest review of what it’s like owning that business. If they had a good experience, then you probably will too. But if they have had a bad experience, then it might be worth thinking twice about making the purchase.
The first step to real estate franchise ownership is…
Investing in a real estate franchise is not a decision to make on a whim. There are many considerations that you need to make. Your success could depend on factors such as geographical location, the market, and the type of customers it attracts.
When considering buying a real estate franchise, the best thing you can do is to ask as many questions as possible during your initial meeting and then do your research.
However, as with all franchises, the most important factor is one I haven’t yet mentioned in this article. You.
Are you cut out to be a real estate franchisee, and would it be a good fit for you?
To answer this crucial question, take our franchise aptitude test now. It only takes a few minutes, and it will provide you with highly valuable and actionable insight.