Want to enter the property game? Here’s how to start a franchise
Brand strength, business support and core company values are key things to consider before buying into a real estate franchise. Then, of course, there is suburb research, your access to finance and how long it takes to start seeing returns on your investment, according to HomeTimes.co.za.
And here’s some advice from one of the best!
ARNOLD MARITZ, LEW GEFFEN SOTHEBY’S INTERNATIONAL REALTY, CAPE TOWN SOUTHERN SUBURBS:
Q Why did you choose to open a real estate franchise?
A Once the decision has been made to get involved in real estate, the choices are to start independently, or to go the franchise route. They both have pros and cons. The largest drawback of going independently is the length of time it would take to establish an independent brand. It is far quicker to get a franchise office established, and if it is a strong brand, it will immediately be recognised by the market. All the franchise systems become available, including referrals, and it is far easier to recruit agents to work with an established brand. It is thus far easier and faster to establish a business and to get it productive.
Q Why did you choose the company you did?
A Having looked at the various offerings, the strength and desirability of the brand, together with the systems and support offered made it a relatively easy choice.
Q Was the cost to purchase and licensing fees a major influencing factor in your decision?
A The franchise set-up and initiation costs were not very different for the various franchises on offer, and did not play a very important role in which franchise to choose.
Q What has been the toughest part of belonging to a real estate franchise?
A It can take longer to have corporate decisions taken when you are part of a franchise group.
Q If there is one thing you could change, what would it be?
A One of the greatest benefits of a real estate franchise group is the passing on of referrals, and we have a phenomenal internal platform for that. But it’s not utilised by all agents. If everyone in the group could grasp the magnitude of the benefit to all, if everyone effectively works with referrals when sending and receiving them, sales would increase even more.
Q What is the toughest part of starting a new real estate franchise?
A The success of a real estate franchise office depends largely on the quality of estate agents that work there, and the toughest part of starting a new real estate franchise is the recruitment of good agents, and the ability to then get them to function effectively as a team.
Q How long does it take to start seeing returns on your investment?
A Starting a new real estate agency franchise from scratch takes time, and as a consequence, is a capital-intensive exercise. It takes time to recruit agents and to establish a good sales team, and because of the nature of real estate transactions, it takes even longer to start receiving commission for concluded sales. It will usually take at least four to six months to start seeing the first returns, and probably at least 18 months to start seeing proper returns on your investment.
Q Did you self-fund your start up or did you apply for bank financing?
A We did apply to banks for financing, but the banks are very risk averse, and we ended up self-funding our start up.
Q Did you find the loan application process was easier due to belonging to a franchise or did this hinder you?
A Belonging to a franchise assists in the loan application process, but the banks still put a high priority or weighting on your previous track record in the industry.
Q What advice do you have for people wanting to start their own real estate franchise?
A Do your homework very thoroughly. Due diligence should include research into the market, the economic forecasts, the competition, speaking to as many franchisees as possible, and making sure that you have sufficient capital in order to source the business for at least six to 12 months from start up. Ensure you comply with all the necessary legal and statutory requirements as stipulated by the Estate Agency Affairs Board, including having all the qualifications in place for at least one Principal agent.