The rise of the real estate business operating system

Well-operated real estate teams have long achieved profit margins that surpass brokerages. A new breed of brokerage company is looking to scale this opportunity by partnering with talented agent entrepreneurs and support them with comprehensive services and guidance into profitable real estate businesses. This article explores this new model.
Authored by:
Paul Hagey
Published:
April 2022

A new breed of brokerage company is emerging that does not operate brokerage services directly itself, but instead provides an operating system of sorts to entrepreneurial real estate agents that powers their growth. These companies provide operations, systems, technology, marketing and support to power the agents and their teams who partner with them into large, often cross-country, multi-region real estate teams. In some cases, these teams are technically brokerages in other cases now.

Two of the most high-profile efforts are startups Place (launched in 2020) and Side (launched in 2014), which have raised $100 million and $313.5 million, respectively, to date. In October 2021, Keller Williams Realty partnered with the leader of a large Keller Williams team to launch Livian, a national expansion team that provides significant operational support to agents who join.

These developments further blur the line between brokerage and real estate team, one that has become increasingly less clear in recent years. The 2021 Swanepoel Trends Report, in the chapter “The Lead-Focused Lead-Generation Business Opportunity,” analyzed the growing opportunity of the extremely well-organized real estate team (run often as a literal brokerage). The companies mentioned represent extensions of this trend.

Access the 2021 STR chapter on T3 Intel.

Top-performing agents who run teams and who want to operate as true businesses, with careful profit-and-loss statements, clear organization, streamlined admin and processes and all the other elements of a well-run full-fledged business now have new options.

Inside the model

Place, the real estate team operations startup co-founded by Keller Williams Realty standouts Ben Kinney and Chris Suarez, raised $100 million at a valuation of $1 billion in November 2021. The company has approximately 400 employees and Kinney reports it made a profit of $20 million in 2021 on a total revenue of $150 million. Teams who partner with Place can have their license with any brokerage.

“We’re offering real estate in a box,” Kinney tells T3 Sixty. “Place is a platform for top real estate teams.”

A top-producing team leader and market center owner with Keller Williams Realty since launching his career in the mid-2000s, Kinney has since grown into a multidisciplinary real estate entrepreneur with Ben Kinney Companies, which owns his brokerages and teams centered in the Pacific Northwest, his tech companies which include CRM Brivity, mobile lead-gen tech Kwkly and real estate portal Blossor.

Place, which brought on Chris Stuart in May 2021 from his role president and CEO of Berkshire Hathaway HomeServices franchise to serve as president, is the culmination of these operations.

The company now powers 150 teams and approximately 1,000 agents in many areas of the country. Place designed a model to align interests completely. The company and the real estate teams it partners with, split team profits 50-50.

When the team wins, Place wins, and vice versa. In 2021, the average profit margin of a Place team was approximately 26 percent, according to Kinney. The company has a profit margin target for 30 percent of each team it partners with.

That aligned-incentives arrangement is the crux of the model. There are no other fees for teams to join, so it has an incentive in partnering with promising companies, and those who it feels can expand profits with significant infrastructure support that Place provides them.

Place, Kinney says, has streamlined and perfected the operations for real estate teams and provides those services to its members. These services include:

  • End-to-end technology stack and training for agents and their members
  • Transaction management -- Place writes and manages the transaction process
  • Accounting, including monthly profit-and-loss statements, payroll and benefits
  • Brand and digital advertising
  • Training that helps agents maximize their production.
  • In-house attorneys
  • Recruiting and hiring management

The company also serves as a coach and guide to team leaders it partners with including investments, retirement and tax strategy.

Agents who join a Place team get access to more support based on their production. When they hit 25 units in any year, they receive employee-level health care from Place for that year and the year following. At higher production tiers, they start to receive stock options from the company, the opportunity to be a coach, open up investment opportunities and the ability to operate a team within their team.

Side offers a similar model, but instead of powering teams with a real estate operating system, it helps real estate teams become independent brokerages themselves, and then provides them a similar level of comprehensive support including:

  • Marketing and advertising
  • Office space
  • Vendor management
  • Listing coordination
  • Transaction coordination
  • Legal support
  • Insurance

Side powers approximately 400 brokerage partners now in California, Texas, Florida, Washington, D.C., and Oregon.

Takeaway

Well-operated real estate teams have long achieved profit margins that surpass brokerages. A new breed of brokerage company is looking to scale this opportunity by partnering with talented agent entrepreneurs and support them with comprehensive services and guidance into profitable real estate businesses.

T3 Sixty – Trusted business advisors and management consultants.

Part of the T3 Sixty family of companies.

© T3 Sixty 2022. Enabling Intelligent Change.
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