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The next big thing- retirement
Posted on January 10, 2010 by Diane in 4 real estate
The Next Big Thing for Real Estate- Retirement?
Heading to NYC- being around all of that intelligence- always triggers a shift to big-picture thinking. At the last Connect that I went to, the question bandied about was, “What will the next big thing in Real Estate be?’ The problem with that question is that the next big thing is going to leap in and sideswipe us, probably sneaking in as simply as the online MLS, and 20 years we wake up to an entirely different industry. No one realized all of the implications, or without a doubt there would have been a lot more dragging of feet.
My guess is that the Next Big Thing is already here, and is either waiting for someone to apply it differently (think twitter) or we just don’t realize the effect it will have (think business blogging).
What struck me today, thinking larger, is Real Estate retirement plans. The best in the industry speak about selling their “Books of Business,” and I wonder how often that happens and how effective it even is. We, as an industry, sell ourselves not on our professionalism, but on personal relationships. I NEVER have seen an agent pointing out their average listed days on market as opposed to local industry averages, or initial list price or sales price compared to the same industry standard. Why not?
I DO hear about sales agents being invited to past clients’ weddings, and sending baby gifts. And this is really nice, this blurring of the personal and professional. But this means that you can’t sell this Book of Business (even if there was someone to buy it) because it is, in reality, a book of friendships. It only works when you yourself are actively involved in maintaining the relationships, and transitioning an entire group is near impossible.
I looked at the retirement plan that is being promoted by one national real estate franchise. It might be somewhat workable if you devoted a large amount of time bringing in agents that are much younger than you are, instead of selling. But really. How many agents has the average sales agent brought on board to his or her company? For the average agent- or the above average one, for that matter- is it honest to suggest that this is any kind of retirement plan?
So, what is the average retirement plan for a real estate sales agent? Not retiring? Alternate income stream, and if so, what? The average age of a real estate agent is 51, according to the Wall Street Journal- and this was written in 2008. What is that- 15 years until retirement?
And there’s this from the same article:
The Globe points out that Gen X and Gen Y buyers don’t want the hand-holding of the typical agent/home-buyer relationship. Many of these consumers prefer to do their own house hunting and research online, and some are skipping buyer agents all together to complete the entire home search and home purchase on their own.
I think that because of informational transitions, there has to be a change in the way that real estate agents conduct business. In other words: it will have to be treated more as a business. I had asked a question online the other day, and Debbie Kirkland mentioned (and I am paraphrasing) that she sees brokerages becoming training grounds for new agents only, and that experienced sales agents will get their broker’s license and work independently. I think this is a trend that we will continue to see, with the small broker being less of a General practitioner and more of a Specialist, and being made up of not only the broker, but also a team of support and specialized sales people. It would actually be easier to sell a practice like this than to try to sell a nebulous Book of Relationships.
Agents- what about you? What is your retirement plan?
Real estate or social media questions? Find me ...On Facebook where you can access a home search ...All of my online links ...On LinkedIn ...Email me at diane@realtyman.com ...or call 978-840-4014
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Grateful to be part of a company that profit shares and provides career opportunity plus focuses on wealth building for its agent partners. The opportunity to build passive income streams of income in Keller Williams is unlimited. The leaderships written yearly goals includes the # of millionaires created. Refreshing to consider and I’m wondering how many other companies prioritize wealth creation for their agents. Does yours?
I have no plans to retire. I did a hundred bad corporate jobs (maybe one or two were important) to get to where I am today. Which is an ecstatic independent broker/owner. And I agree, the independent model is the future. Own your own shop and go with the flow! Change is great and I am ready for the future. I am 47 and plan to work indefinitely because I am successful but also VERY happy. This is a dream – don’t make me retire or wake up!
This is a really really great point. I remember in 2004-06 I pushed a number of my agents to really take a hard look at this, to start using traditional elements like SEP’s and IRA’s but when money was coming in like that many failed to listen.
I still believe that agents should be taking advantage of these tools (hell – they’re a tremendous tax break anyway) but as far as “what to do with your business” here’s the cold hard facts.
“Your Client Base is probably NOT a sellable element – and is not open to valuation”
Let me expand on this. 99% of agents in the world – the above is true. There’s the 1% (and I believe this isn’t due to the amount of volume you do) that have their business AS a business and it’s able to be valued. What’s the difference?
1. Do you have a “book of business” or a database. If someone opened this up tomorrow would they see names, dates, kids names, dogs names, homes owned, vacation spots, likes, dislikes, income, etc. etc. OR would they see name, address, phone? A book of business means that they would open it up and truly “know” the client from the data you have gathered.
2. Do you have systems in place that DON’T revolve around YOU personally. If you marketing is automated to an element where someone new could be trained in on how to run it, what goes to who, what type of data, what message, how often and what medium – then that’s transferable. Also you’re going to have to have analytics and metrics of these different campaigns.
3. Is your business branded as a “business” or is it branded to “you”? This is huge and is a blow to the ego of many. If you have branded your business as “MyName Realty” you’re pretty screwed IMHO. You cannot “walk away” or transfer this to someone else. You have branded yourself as the center of this business and they are expecting you to be part of it.
Ok – sorry for TOTALLY hijacking your post sweetie, but this is a subject I spend ALOT of time working with agents on. Hope it helps!
Matt
Great Question, good time of year to ask. I,unfortunately, am just trying to figure out how to make this year better than last year. But I have friends in the industry that are buying investment properties…if they have 10 by the time the retire, each netting $500/mo by the time they retire, they could be in a very good position. I agree that it is unlikely, we will have much to sell when we retire. Except possibly as a referal agent.
Hey Matt! Didn’t hijack it, honey- just augmented it. The points above are exactly why a doctor or a dentist can sell a business upon retirement and an agent can’t. I don’t know if the kids’ names thing is as relevant as the professional things, though. I am happy that my doctor knows my past medical history as opposed to allm of the personal stuff that is superfluous to a good diagnosis. I think that real estate- whether we want to or not- is being forced into more professionalism.
:) Looking forward to seeing you in NYC.
KImberly- No one is making you wake up and retire! There are a lot of things that are making me think of this, including working with several people- people every day in physical pain, who obviously wanted to retire- and couldn’t. And never will be able to. That is not a dream come true- that is life in prison waiting for the death sentence.
Sherrie- I understand the model. In abstract, it seems wonderful. But what does this really translate into- dollarwise- for the typical agent? And does it continue even after the agents that you sponsor retire themselves?
I am not trying to be flippant- I am trying to be realistic. What has this meant for you personally?
Deb- The few agents that I have seen truly think about retirement have a plan in place like you suggested. Agents are in a unique position to locate investment properties and are also knowledgeable about which ones are the easiest to rent in various locations. One of my friends was heartbroken when some of the loans that were ideal for purchase of these types of property went away.
Last year was the kind of year that I bet most of us are trying hard not to repeat- not through any fault of our own. I saw a link the other day stating that unemployment- if ALL sources were considered- is somewhere around 17%.
For me personally the agent profit share has been over $110,000. so far. It’s averaged out to over $15,000 per year and growing. Pure passive income, after 3 years an agent is vested, meaning they can go to a competing company or leave the business and still receive $. Yes, there is attrition over time as agents leave the business and there is also exponential growth as well. I have over 300 agents in my profit share and have never met many of them as it goes 7 levels deep. I have friends and partners whose profit share is over six figures every year. The biggest point is there is no $ investment, no risk or liability only opportunity created by an awesome business model. Not for everyone of course and only a part of wealth creation. PS – I know I’m biased yet haven’t seen anything elses out there in our industry that tops it!
I would find some sort of retirement plan a bonus if I was already interested in working with the broker. That being said, I have already taken matters into my own hands with my own IRA accounts that I created almost a decade ago.
The top agent in our area (#1 for over twenty years) just retired and she didn’t sell her B. O. B. I believe she set up a referral arrangement with a friend of hers and when clients call her she will send her friend who is still active.
I have seen the KW model explained (I was with them for a while) but had not seen anyone really work it. Sounds like it is working for you. I had heard another Nationwide brokerage explain theirs- one deep, and if you retire or go below a certain number of sales units per year, % drops.
That would be one benefit to a national brand– the sheer number of agents under the umbrella. I wonder what the answer from Independents would be.
If you can stand a little more from me on this subject. The CEO/Team Leader of each KW office is the one responsible to build an agents profit stream. We actually would rather the agent doesn’t try to do the recruiting, only build relationships and refer the agents they would like to be in business with to the Team Leader.
The subject of retirement income for the self-employed still goes back to basic financial principles of wealth/$. I recommend Cash Flow Quadrant by Kiyosaki & some of his other books. Investing in real estate or businesses with positive cash flow and being on the conservative side – spend less than comes in. Thanks for opening up the topic for discussion.
Good article, it stirs the thoughts and solicits the comments. Good job of writing Diane!
And let me add a Happy Birthday wish to you too! May you have a great time in the “Big Apple” celebrating with your friends! I’ll be watching for the photos of your good times! Take care!
I am really happy and thankful for the comments you have added, Sherrie.
Thanks Adam! What could be better than celebrating your birthday with all of your friends in the big city? :)
Diane, what a great post. I’ve been exploring the real estate market as a potential career change, interviewing agents. One agent I know is 84 and a millionaire from her real estate business, said she’ll die before she retires, and has the energy of hurricane winds, the other is 75, has no retirement funds, and refinanced her original-$250K-now-900K home to the point of potential foreclosure to pay for a 100K remodel and her salary during downturns in the economy. In these two examples, you’re right about the dream vs. the prison.
Another agent/investor N. Xavier Arnold of Real Smart Investor, has just written a really insightful book The Best Real Estate Investing Method…Ever! that has great tips for retiring successfully through real estate investing as Deb suggested.
Kate, thank you so much for the comment- it added a lot of valuable information. I would love to be 84 and going strong doing what I love. Retirement is a silly concept, maybe, to a healthy productive individual and it is a shame that it is forced on some people. I WOULD want to know, however, that were I to become ill I would have the money to care for myself without being a burden to my family.
Thanks for the feedback Diane. I so agree on the financial piece and not being a burden to anyone, including myself!