Real estate franchises are more like sweet grapes, which can actually become sour olives.
For the untrained eye, real estate franchises are perfect businesses which bring good returns.
However, the property market is not based on the desperate sellers and equally desperate buyers.
Only a small percentage of the property franchise clients need to sell houses immediately.
The reasons to buy a house is obvious. Most people want to live in their own place.
For others, it is a perfect investment.
However, the reason to sell houses are not always clear. In the past people were selling houses because of the economic hardships. Today, the biggest reason is probably caused by broken relationships. Thus, the high rate of divorces (and maybe the contractual employment) are the key elements to sell houses. This, of course, applies to a residential sector. However, there are many commercial properties which are equally valuable products for any estate agency franchise. Here, the industrial economic forces will drive in (or drive away) sellers and buyers alike.
According to the current statistics, there are 8500 registered real estate agents and real estate franchises in Australia.
Thus, although the property market is strong the competition to the pie is also substantial.
There are virtually hundreds of real estate franchises.
The question is: should I purchase an estate agency franchise or run my own real estate business?
Of course, everything depends on the money.
However, the established property franchise is a proven concept.
If you have $200K-$500K to spare, then you should invest into established real estate franchises. The real estate market works on the proven concept that more you advertise the more clients you get. The established real estate franchises have an excellent exposure to the public. These businesses are constantly launching massive advertising campaigns in newspapers, internet, direct mail, radio and even a television. Therefore, it is very difficult for an independent real estate agent to compete with these real estate franchises. In fact, most independent contractors use lower commission as the only argument against their established counterparts.
However, lower commissions have proven to be ineffective to fight those real estate Goliaths. Most sellers want an efficient sale, which has exposure to wider range of buyers. Unfortunately, only the real estate franchises have the buying power to ensure the maximised advertising. Not only this advertising is run through the media but also through franchisees' networking system. Thus, if you have the necessary finances then you should consider the estate agency franchise rather than the independent venture. Otherwise, you have to improvise a lot to win the clients.
A lot has been said about real estate franchises as the house-marketing businesses.
However, in cities and business centers there is a strong potential for the property management franchise.
In this case you do not sell but rather manage the lease of the property.
A lot of agents are afraid of this model.
However, bear in mind that this type of the system continue to bring revenue without investing resources into finding new clients. This is probably the safest method to keep uniform income throughout the year. As with the classic property franchise, the property management franchise is a better choice than the independent operation. Yes, the property management franchise will cost much more but the returns will also be higher.
There are virtually hundreds of real estate franchises. However, if you want to invest into the property franchise then the following are good candidates:
You need at least $300K to purchase a medium level estate agency franchise (for the big brands). In most cases, $500K will provide you with a decent outlet. Fortunately, the annual running costs are not necessarily budget breakers. Most outlets will need about $25K-$50K for renting and $40K-$80K for administrative salaries.