4 Processes Your Real Estate Business Should Be Digitizing

4 Processes Your Real Estate Business Should Be Digitizing

Is your brokerage still using outdated, analogous, legacy processes?

If yes, it might be time to consider upgrading, modernizing and digitizing your key processes.

You see, brokerages that embrace digitization can anticipate average revenue gains of up to 26%. That’s a big margin that can make a difference in any real estate business

In addition, digitization improves operational efficiency, cuts back on manual data entry, and promotes process improvement while empowering your agents.

If you plan on beginning the digitization journey, but don’t know which processes to digitalize first, you’re in the right place.

We’ve compiled a list of the top 4 processes you should be digitizing within your real estate business.

Process #1 Agent hiring

Do you have real estate recruiting targets but are currently limited in terms of budget? Don’t have the time to manually create job ads to post?

Well, good news.

Do you know that there is dedicated agent recruitment software that you can take advantage of to improve the real estate hiring process?

Example software includes Brokerkit, IXACT RecruiterTM, OnTask Recruiter, and ThirdPool Recruiting.

The hiring process is undoubtedly one of the most time-consuming processes. By digitizing it and relying on industry-specific resources you can scale without going through recruiting agencies or using crowdsourcing platforms.

Process #2 Property listings

Creating property listings to be posted in the Multiple Listing Service is no small feat. It’s a laborious task as the listing agent has to write detailed ads for the property being advertised.

What if we told you there was a way to digitize this entire process? You can use automated marketing resources such as Point2Agent and Z57 Solutions PropertyPulse.

In addition, you can also boost your listings with high-quality pictures shot and edited using apps such as iMovie.

Process #3 Closing procedures

How are you currently signing contracts and other documents? Are you still signing manually and in person?

Embrace technologies such as DocuSign and say goodbye to legacy contract management processes. In a COVID-world, take advantage of these convenient solutions.

When it comes to real estate transaction management solutions, DotLoop is one of the leading software on the market. It allows you to edit forms, eSign, and monitor compliance all on a single platform.

Process #4 Lead generation

In our digital-centric world, lead generation is such a pivotal aspect for any brokerage. Finding and qualifying leads can be exceedingly difficult if you opt to do things manually.

Fortunately, you don’t have to.

Using lead generation software the likes of BoomTown, FollowUpBoss, FreshWorks, and BoldLeads you can capture and qualify leads faster. 

Keen to discuss digitizing with a consultant?

Real Estate Back Ops (REBO) is one of the country’s most reliable brokerage service providers. We assist with commission structure design, transaction management, valuations, growth through M&As, and ancillary revenue plans. Contact us for more information.

 

5 Tips for Managing Your Real Estate Brokerage Cash Flow

5 Tips for Managing Your Real Estate Brokerage Cash Flow

Are you actively looking for ways to improve cash flow in your real estate brokerage business?

There is no denying that cash flow is the lifeblood of any business and it is always important to pay close attention to how the business manages its cash flow.

Before taking a look at how to improve you cash flow, let’s review what exactly cash flow is and the different types you need to be cognizant of.

What is cash flow?

The Corporate Finance Institute (CFI) defines cash flow as “the increase or decrease in the amount of money a business has.”

Before you can increase your cash flow, it’s imperative to understand which type of cash flow you need to improve from the four kinds of cash flow that exist.

  •         Cash From Operating Activities
  •         Free Cash Flow to Equity (FCFE)
  •         Free Cash Flow to the Firm (FCFF)
  •         Net Change in Cash

Cash From Operating Activities

This is money that comes from the brokerage’s core business activities.

Free Cash Flow to Equity (FCFE)

FCFE is the money that’s readily available after fixed assets have been bought, maintained, or improved.

Free Cash Flow to the Firm (FCFF)

FCFF refers to the state a brokerage finds itself in when it has no debt.

Net Change in Cash

This type of cash flow pertains to the change experienced between one accounting period and the next.

Armed with this information, here are our five tips to improve cash flow in your real estate brokerage business today.

Tip #1 Audit your cash flow

How often do you study your cash flow statement – the report that analyzes your cash flow? Without a proper audit, you don’t know where your money is going and how it’s being used. A cash flow analysis is simply vital.

By studying your income statements, balance sheets, and other financial metrics you get a clear overview of the state of your finances.

Benjamin Franklin is accredited with the maxim, “Small leaks can sink great ships.” This  idea should be applied to operations within a brokerage. Seemingly small expenses can compound leading to financial distress hence the need for proper tracking systems and regular investigations.

If you are interested in have a complete Cash-Flow Analysis performed on your brokerage reach out to Real Estate Back Ops today and we can get you set up for an initial consultation! Contact us here.

Tip #2 Reduce your operating costs

Following on the heels of carrying out a cash flow analysis is the idea of mitigating your operating expenses. By ensuring your back-end is lean, you can maximize cash flow.

Take a look around the brokerage. What can you downsize or purchase pre-owned or lease? Things that may be swapped out to save on expenses include cars and equipment.

Pre-owned cars mean less insurance, vehicle taxes, and interest payments.

Consider a home office too in lieu of leasing an actual commercial space. Outsourcing your administration requirements can also keep costs lower.

Tip #3 Charge a premium for your services

Many brokerage owners are hesitant to increase their fees. However, this could be setting you back considerably. 

Carry out a survey to establish what the current market rates are and adjust your pricing accordingly. 

Ideally, your prices should be competitive enough to keep your operations running, but not too low such that you struggle to stay afloat.

Not sure if your fees are competitive or worried that your agents will want to leave? Let Real Estate Back Ops review your current Fee Structure and show you what changes you can make that will keep your agents happy and improve your bottom line! Contact us here.

Tip #4 Become a title agent

Instead of having a third-party title insurer handle the title insurance of all the transactions you close, how about adding an ancillary business to your existing brokerage by offering title insurance to your clients?

Setting up a title services business is not as complex as most brokers think. 

In fact, with over 5, 432 firms across the country and a market size worth $16 billion, there is no reason why you should not be tapping into this lucrative cash flow avenue.

Earn hundreds of extra dollars on each transaction you’re already doing. 

Tip #5 Apply for real estate broker loans

Competition among real estate agencies in the U.S. can be tough as there are currently more than 100,000 real estate brokerages.

Securing a loan to inject much-needed cash into your business just when you need it can be the difference between closing shop and keeping your doors open until you get your commissions.

Fortunately, you can obtain real estate business loans from reputable institutions such as National Funding, Become. co, and SBA Loans

These loans can also be used and leveraged for acqusition of other brokerages as a growth strategy. We have helped hundreds of brokerages through mergers and acquisitions.

Do you need help improving cash flow?

Real Estate Back Ops (REBO) is one of country’s most reliable brokerage services providers. We assist with cash flow analysis, valuations, growth through M&As, commission structure design, and ancillary revenue plans. Contact us for more information.

How Administrative Mistakes Can Cost You as a Broker

How Administrative Mistakes Can Cost You as a Broker

What is the real cost of administrative mistakes? As a broker, your clients depend on you to handle things professionally. Administrative mistakes by a broker can have a domino effect and affect everyone involved in the deal. Let’s take a look at some administrative mistakes to avoid and how they can cost you as a broker.

1. Grammatical and typographical errors

Part of a broker’s responsibility is handling paperwork between clients. The correct use of grammar and punctuation is imperative. One misplaced character and failure to carefully proofread documents can cause untold damage. The following incidents are examples of the catastrophic consequences that may arise from such errors.

In 2006, a typo by Alitalia Airlines resulted in business-class flight tickets being sold for $39 instead of $3,900. The result? More than 2,000 people purchased the $39 tickets leading to a $7.2 million loss by the airline. Another incident, albeit more costly occurred in Tokyo when a typing error saw the shares of a renowned company go on sale leading to a $340 million loss. Moral of the lesson? Grammatical and typographical errors are administrative mistakes to avoid.

2. Poor advice and or unethical behavior

When a client hires you or chooses to work with you as a broker, they expect you to act professionally and do your job in terms of giving them good advice. They are paying for your expertise and experience. Doing a half-hearted job and failing to provide clients with honest, accurate, and fair assessments of their situation can result in you being sued if the client loses money in any way.

You may be surprised to learn that as many as 25% of homebuyers said they would never work with their broker or recommend them to anyone. Brokers do get sued for a variety of reasons – fraud, breach of duty, giving advice that’s not within their scopes (e.g. offering legal advice) negligence and breach of contract. These are all administrative mistakes to avoid.

3. Poor data management and failure to document

If there are two administrative aspects of being a broker that should never be overlooked, its documentation and filing papers properly. Poor data management can result in you not being able to find a critical document when it’s needed. There is no excuse for not having a defined records system. This is certainly high up in the list of administrative mistakes to avoid.

4. Hiring the wrong brokers for the brokerage

Do you have a strategy for hiring people? Not having a time-tested solution can result in you hiring the wrong person. This can be extremely inconveniencing not to mention expensive. You’ll want to avoid having to repeatedly post job openings and screen candidates. By following our advice on hiring better agents, you can improve your retention rate.

When you cannot afford administrative mistakes look no further than Real Estate Back Ops (REBO). We’re one of the leading real estate technology and consulting companies in the US. For the best brokerage services don’t hesitate to contact us.

Selling Your Real Estate Brokerage? Either Way, Get a Valuation

Selling Your Real Estate Brokerage? Either Way, Get a Valuation

If you’re planning on selling your residential real estate brokerage, a valuation is an obvious necessity, since no serious buyer would consider purchasing based solely on the word of the seller. A comprehensive valuation can help the broker to discern what actions can be taken prior to shopping their brokerage to increase its fair-market value. But what if you’re not selling? Is there any reason to get a valuation in that case? An annual physical with a doctor is recommended for your measuring and maintaining your health, and the same is similarly true of a residential real estate brokerage. It turns out, valuations offer several benefits to your brokerage even if you have no intention of selling anytime soon. As the old adage goes, if you can’t measure it, you can’t manage it. Valuations can allow brokers to analyze their brokerage from a different perspective and make changes accordingly to optimize their business.

DETERMINE EXACT RECRUITMENT EFFORTS NECESSARY

Valuations will show a broker somewhat of an ‘X-Ray’ of their business. It will outline each agent’s transaction count, average GCI per transaction, and compare this to business expenses allowing brokers to effectively determine exactly how many agents are required, (by applying average GCI/agent), in order to break even, or how much recruitment efforts would increase the cash flow and profit of the brokerage given measurable recruitment expenses and expected outcome.

SPLIT EXPENSES INTO OPERATING AND NON-OPERATING COSTS

Valuations will additionally provide an actionable guideline with regard to where exactly brokers can cut unnecessary expenses. Any expenses deemed ‘non-operating,’ (not contributive to the bottom line), likewise don’t contribute to the value of the brokerage, and cutting or reducing these costs will increase the value of a brokerage. Any broker thinking about selling their brokerage will definitely want to identify these costs and make cuts where necessary to get the highest possible fair-market value for their company.

IDENTIFY POSSIBLE CUTS IN FULL-TIME EMPLOYEE SALARIES

Valuations can bring to light the agent to employee ratio as it’s applied to profit generation, and spell out how this margin is directly affected by each full-time employee. This allows brokers to first, recognize which employee duties are considered either non-operating costs or extraneous to the brokerage operations, and second, exactly how much this margin will increase by making according cuts and how much that will increase the value of the brokerage.

ANCILLARY BUSINESS OPTIMIZATION

Brokers may elect to include other business models to the operations of their brokerage such as mortgage lending, home warranty services, property management, etc. Often times additional income from these businesses will convince brokers that the functionality of their brokerage is above average by industry standards if the profit analysis of these other businesses is muddled with that of their brokerage. Valuations can help to not only identify where immaterial expenses have crept into their brokerage as a result of these misleading values, but determine how the expenses can be cut, and how to better optimize those ancillary businesses.

IDENTIFY WHAT TRANSACTION COORDINATION EXPENSES ARE NECESSARY

If a brokerage has transaction coordinators employed full-time, (they will soon no longer be allowed to hire them as independent contractors), they are likely lowering their EBITDA during down months when transaction coordinators are processing fewer files due to this excessive expenditure, and thus, lowering the value of their brokerage. Valuations can help brokers to determine if this is the case for their brokerage, and whether or not it would be prescient to consider an outsourced transaction coordination service instead.

Valuations not only provide an accurate assessment of the current value of a brokerage, but can help to point out practical ways to increase that value, and therefore, the profitability, which is a good business practice regardless of a broker’s interest in selling or not. To learn more about valuations and how one could benefit you and your brokerage, contact payton@realestatebackops.com for more information.

The AB 5 Employment Law For Real Estate Agents and Brokers: Anticipate, Don’t React

The AB 5 Employment Law For Real Estate Agents and Brokers: Anticipate, Don’t React

If you haven’t been keeping your pulse on the changing landscape of the real estate industry and the likely future of brokerage structures, agent payment, and transaction coordinator employment status, you may not be aware of the Assembly Bill (AB) 5, the important legal statute passed by California Governor, Gavin Newsom, that just went into effect this month.

What is Assembly Bill (AB) 5?

AB 5 is a bill the Governor signed into law in September 2019 addressing employment status when a hiring entity claims that the person it hired is an independent contractor. AB 5 requires the application of the “ABC test” to determine if workers in California are employees or independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the Industrial Welfare Commission (IWC) wage orders.

The ABC test is intended to address 3 requirements:

  1. Is the worker free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact?

  2. Does the worker perform work that is outside the usual course of the hiring entity’s business?

  3. Is the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity?

How does this affect my real estate business?

As the real estate industry currently operates, agents and transaction coordinators are usually hired as independent contractors. Federal Law guaranteeing agents’ rights to operate as independent contractors will likely take precedence over AB 5, but the status of transaction coordinators will most definitely be addressed. Most brokerages hire transaction coordinators as independent contractors, and there’s an increasing trend of agents hiring personal coordinators as independent contractors directly. This will likely result in a tumultuous upheaval of business operations for brokers and agents alike for most in California, however, it presents a unique opportunity for those ahead of the curve to gain an edge on the competition. We’ll get to that soon, but first it’s necessary to go over the issue the unprepared brokers and agents will falter over.

What does this mean for transaction coordinators?

Of course, coordinators will no longer hold the opportunity to be hired as independent contractors directly by brokerages, but what about agents, (assuming they are afforded the privilege of maintaining their independent contractor status), who hire transaction coordinators directly? Independent contractors are responsible for paying their FICA taxes quarterly, (typically 15%), while employers of standard employees are responsible for paying half of these costs, and the employee the other half. Does this mean in the instance an agent contracts a transaction coordinator directly that the agent will now be responsible for half of the FICA fees incurred by the coordinator?

There’s no Federal Law in place advocating for the coordinator’s continued role as independent contractors, as is the case for agents, so someone, whether the agent or the broker, will now be paying this additional tax. If the broker has a degree of separation from these coordinators, since they hire agents as independent contractors, who then hire the transaction coordinators, the cost may very well fall to the agent.

How can brokers and agents capitalize on this impending shift?

While the future of employment status for agents is still an undetermined proposition at this time, there is good news for agents and brokers concerning the new requirement that transaction coordinators must be hired as employees. Outsourced transaction coordination services, like REBO, allow brokers and agents alike to circumvent these new incipient tax implications.

Transaction coordinators working for these services will uphold the new requirements as full-time employees, but they will be employees of these services, not of the brokerage or agent. Contracting these services, and allocating transaction coordination responsibilities from the broker and agent will effectively maintain broker and agent compliance with Assembly Bill 5, while passing the new tax costs to those services. It is apparent that these services are invariably the future of the transaction coordinator – agent relationship, and any broker or agent that resists this change breaks the law and invokes the wrath of the IRS at their own peril.

To learn more about adjusting the transaction coordination process of your brokerage or personal real estate business, contact REBO at payton@realestatebackops.com

3 Ways Real Estate Brokers Can Leverage Social Media Marketing

3 Ways Real Estate Brokers Can Leverage Social Media Marketing

Check out our interview with Brandon T. Adams on Social Media and Video Marketing then use the article below to get started! The advent of technology, especially social media has changed marketing dynamics for a lot of realtors. Social media has taken over and improved life for all involved – realtors, brokers, and buyers. One can reach a wider audience with more property offers and at less cost. Real estate agents are finding that social media marketing has indeed come at an opportune moment and is simplifying the entire buying and selling process. But to what extent is social media really being used by realtors?

Are real estate brokers really using social media to market?

According to the National Association of Realtors, as many as 77% of real estate professionals are now using social media in their marketing. 55% of realtors describe themselves as ‘comfortable’ using social media, 26% say they are ‘somewhat comfortable’ and 10% are ‘uncomfortable’.  And just which social networks are mostly used? Facebook takes the lion’s share with 79% use; Twitter comes in second with 48% use, LinkedIn places third with 29% use.  What’s clear to see is that social media marketing is fast becoming an integral part of reaching out to prospective buyers. Here are three ways you can use social media in your own marketing campaigns.

1.    Create demographic-specific ads on Facebook

Social media is not created equal. Some platforms are just inherently better suited for marketing than others and provide features not available on the other mediums. Take Facebook for example. Apart from being one of the most preferred apps, it gives you the opportunity to target your ads to a particular demographic. This is an excellent option as you can pay for your ads to be shown to people who are house hunting and ready to purchase.

2.      Use Instagram to draw attention to success stories

95% of people are emotional buyers. Clever use of social media marketing can help you tap into people’s emotional side. Who doesn’t love a heartwarming success story? Instagram is a picture-based platform which gives you free-reign to post as many pictures as you want. However, instead of simply showing staged property photos, you can use the app to document the stories of families who’ve found their dream home and the process. People are more likely to connect with you and reach out to use your services if they see other peoples’ success stories. 

3.    Use outsourcing platforms to keep marketing costs low

Creating social media profiles doesn’t cost anything. It’s free to create a LinkedIn, Facebook, Instagram, Snapchat, or Flickr account. However, opening an account is only the beginning of social media marketing as one of the key elements to this type of marketing is the need for constant engagement and interaction with people as you build your following. Now, if you don’t have time to grow your profiles organically you can outsource this aspect to freelancers. Online marketplaces like Fiverr.com and Freelancer.com will provide you with plenty of freelancers you can work with. You can get your marketing done at a fraction of traditional marketing fees. Want more advice on marketing and growing your real estate business or brokerage? Contact us today to see if we can help!