All Forum Posts by: Llewelyn A.

@Joel Owens

@Russell Brazil

Thanks for the information.

I was already suspecting that Brokerages shift costs onto Agents.... or for that matter, Associate Brokers.

It's the one reason I decided to open my own Brokerage because I don't trust other Brokerages to add enough value to my training versus making money using my sphere of influence.

I happen to have a large Sphere of Influence in consideration that I have a large Friends and Family network, I have over 65 current tenants, 100s of former tenants, and lots of Students from a Real Estate Investor Education program I ran for 8 years prior to 2014.

One of my Partners just started as an Agent at one of the big firms. He hates it and he was given an open rental listing to market with his own money of which 50% of the commission was going to his Broker.

This Particular Partner is an expert at Rentals and manages 2 of my buildings. He's having a difficult time competing against experienced Rental Agents for that commission.

In NYC, the Tenant Pays for an Agent to find a Rental, not the Landlord. So when he runs ads for our properties, it's always a NO FEE listing. That NO FEE listing is the one that draws in the Leads.

Had the Rental been an Exclusive Rental Listing, he wouldn't be wasting time and money on trying to rent an apt that all other Agents can also rent.

I suspect my Partner will burn through his budget for the listing and not be able to sign a Lease.

I consider Brokerages treading new Agents this way setting them up for failure.

Because the Brokerages normally give the best leads to their best closers, the worst leads and worst jobs will go to new agents.

These are reasons why I wanted to just start a Brokerage. I'm completely avoiding wasting my time, money and the time for anyone within my Sphere of Influence.

Many of my Partners and their friends as well as my family members know that if something goes wrong and it's my fault, I have more than enough Capital to make a loss whole. I never had to test that because I've never lost money on a deal yet.

The reality is that I don't need to make Money from the Brokerage firm. I'm already set financially.

Those in my Sphere of Influence know that as well. They know I'm not desperate to sell anything just to put food on the table.

Any Agent that joins my firm will have to live up to my very high ethic standards. I intend on building my Brokerage based upon Ethics and Honesty first, Hard Working second, whether or not I make money.

I'll keep in mind that during a down turn, it may be to my advantage to be an Agent.

I suspected as much because I can see that Agents who do not have enough resources to cover themselves for the long term may need to come out of the field for a while.

That's definitely not me. I can devote my full time without financial consequences and I am certainly going to Sell as a Broker owner as well.

@Russell Brazil

@Cara Lonsdale

@Matt Shields

@Stephanie Medellin

Hi Stephanie. CORRECT... and one I never mentioned to the other posters.

Because these transactions are very large, neither Broker every represent the Buyer or Seller legally nor hold Escrow.

Once the meeting of the mind occurs, the Seller's Attorney then sends a Contract to the Buyer's Attorney.

The transaction is then out of the hands of either Brokers/Agents.

The Attorneys for either side typically collect $2k each.

Even after, the Closing Agent is normally another Attorney.

Also, Closing is normally done at the Bank's Attorney's Office.

Typically, there are 4 or so Attorney's, each representing all of the Party's interest, The Buyer, The Seller, The Bank and the Closing Agent and/or Title Company.

At the 9 Closings I have been a party to a Transaction, normally as the Buyer, there has only been ONE time that I have ever seen a Brokerage send over a representative to collect their check. Other than that, the check get's mailed to the Seller's Broker.

Cara: Just to flesh out the Analogy again.... My role in the pilot analogy would not even be to fly the plane. That would be the two Attorneys, both understanding the final destination, and a written Agreement on how to get there would be in place.

My role would only be to let the Passengers legally know that they can board the plane. BUT, after they board, they must speak to the one of the two Pilot representatives to determine if they should fly over the Empire State Building or maybe Rockerfeller Center so that they can get a good look. But ultimately, both Pilots will need to agree to the final destination.

Even the Earnest Money and Deposit money is not touched by the Broker. That's all handled by the Attorneys.

As a side note, the Contract here in NYC is approximately 10 pages long. It's boiler plate and contains every contingency you can imagine. Brokers/Agents here are not allowed to do anything to that Contract for fear of practicing Law without a license. Our E&O won't cover changes to legal documents.

From what I understand, we can fill out boiler plate legal documents, but we are not allowed to make any other changes.

Real Estate Licensee's main duty here is to have the Parties have a "Meeting of the Minds."

The Attorneys take over right after certain disclosures of Agency has been given.

Even the Attorneys will attach Riders to the Contract. Typically, you will see Lead Paint, Asbestos, Termite, etc. disclosures.

As an experienced Buyer, I already know all of the Contingencies in the boiler plate Contract of Sale, and probably ALL of the added Riders for typical disclosures.

The Property Condition Disclosure is also not even bothered with by the Brokers. That again, is handled by the two Attorneys. Typically, a $500 Credit is given to the Buyer to sign a Waiver of Disclosure and a Rider declaring that the property is being purchased "As Is."

I have NEVER seen a Property Disclosure filled out in any of my transactions. The $500 Credit is done automatically by the Seller's Attorney because it essentially protects the Seller. It's just too easy to forget to disclose something and will lessen the liability of the Seller and increase the responsibility of the Buyer to conduct his own Property Inspection due dilligence.

I suspect that outside of NYC, a lot of these kinds of things are done by the Broker's office.

However, the Role of the Broker, after the "Meeting of the Minds," is VERY minimal.

@Russell Brazil

@Cara Lonsdale

Ah, I see. It was extensive studying for both the Salesperson's Exam and the Broker's Exam at the same time. Both Classes and exams had to be passed.  Certificates of Completion had to be included in the Broker's License Application.

This year, I'm only planning on 1 transaction. I'm planning on buying another Investment Property, around $2 Million, and acting as my own Buyer Broker. I'll give the Listing Agent/Broker full disclosure when I submit an Offer.

I'll also clear it with the Real Estate Board of NY (REBNY) just to be extra cautious. I may even check with the NY State, Board of Real Estate, Department of Licensing. I've had the pleasure of talking with them to make sure that my past experiences qualifies. They are extremely helpful.

There might be One more similar transaction towards the end of the year. But that's not guaranteed.

With only a single transaction, purchasing my own property as the cooperating broker, clearing it with REBNY and NYS Board of Real Estate, plus involving a Transaction Coordinator, and lastly, run it by my Broker friend to see if I missed anything. I am guessing that nothing is overkill on this 1st transaction.

Russell, in this case of just a single or possible two transactions where you were buying your own Investment, would you still recommend buying a Franchise for that situation?

I am still not sure if the analogy of using a pilot in a 747 plane is correct. It's funny, but when I make an analogy about something I did with a financial transaction to my friend who is an Emergency Doctor, he always tells me that's not apple to apple... in the Emergency room, the patient can die.... the Stress level is vastly different.

In this case, Yes, my Brokerage can get sued, but no one is going to die.

I would say a better analogy would be going Pro Se (acting as your own lawyer) from reading books, hoping to win a case in Tenant/Landlord court in New York City.

I've done that twice.

The first case the tenant did not show up. The Summary Judge directed me to go to the Tenant/Landlord Part, where I had an Inquest trial against the no show Tenant. I won by default.

The second case the tenant showed up. However, I was seeking possession, not non-payment. The Judge was obviously pro-tenant. However, I stepped in and offer to stipulate a date for eviction a few months in advance providing the tenant deposited rents in the Court's Escrow. The tenant was eventually evicted by the Marshall. I went to Court and collected any of the rents that were in Escrow after.

The 747 Plane Example is not fair.

In fact, as long as I don't commingle personal funds with the Brokerage Funds, have O&E and General Liability, and as long as I am not GROSSLY negligent, any law suit should be defendable. Also, the Brokerage doesn't have much assets.

But it won't come down to that anyway. I'm the Buyer and I represent myself. So I won't sue myself! haha!

@Cara Lonsdale

@Matt Shields

Matt... the metaphor of getting a pilot's license and flying a 747 filled with passengers without ever having to fly does sound scary!

However, to make it more accurate.... I've been flying a plane for 20 years, progressing constantly, but without passengers in a specific route.

NOW that I have the ability to fly with people in the plane, in this case, just Buyers.... not going to List a Property just yet.... researching what the passengers need and other aspects of flying a plane with Passengers in it, is another type of license.

For the Brokerage Firm, I had to take 140 Hours of classroom study. If you exclude the 20 years of my experience, yes.... it sounds scary. Maybe it still sounds scary to both Cara and yourself with my 20 years of Buying Experience.

BUT, add to it that I have started 2 successful business.

Add to it that the Brokerage Firm is an LLC, will have General Liability and good E&O.

Add to it that the Buyers will be only Friends and Family, people I know well and who knows me very well.

In fact, those Friends and Family already have made millions from Partnering with me. And some of my friends and Family never invested to their regret.

Really.... I got what you both are saying. WHEN I AM IN A TRANSACTION, HIRE SOMEONE WHO IS EXPERIENCED!

I got that!

My first transaction will be my own.

My first transaction as a Buyer Broker where I am the Broker and not the Buyer, I will absolutely have it overlooked by another Broker or, as Jay Henrichs mentioned, a Transaction Coordinator.

I also want you both to consider that I'm not 20 years old. I've built several businesses and applied reasonable risk mitigation otherwise I would never have attained the level of net worth that I am at today.

@Jay Hinrichs

Wow! 10 to 15 million a year! Even if you averaged it with your contribution of Zero, that's still fantastic!

I appreciate the advice to not take on Agents at this time.

I totally agree.

I also appreciate the advice of using a Transaction Coordinator. I'll look into it.

One of my Partners who is in his 20s want to basically shadow my Real Estate Career. He's young and ambitious and I told him I would take him on as an Agent after he works for another Agency for at least a year or more AND I feel I can catch his mistakes OR at least have another Broker working for my Brokerage who can.

I have another friend that is an experienced Broker for 20 years. He has been pestering me to let him join my new firm. Part of his reason is that while he's probably a good Broker, he has not made substantial income.

I had the opportunity to give him some training for a side job in IT to help support himself. After a while, I can see why he didn't make much money all those years. He's very disorganized, unfocused, opinionated, does not think outside the box, etc.

To be honest, while he's a friend and he knows the ins and outs of a Brokerage, I can't see myself taking him on even as an Associate Broker because I'm afraid he can be reckless.

That had me wondering if there are a lot of other Brokers out there that are similar. If I am going to hire someone, I really need to see results over a certain time in their own careers. I don't see the point on hiring someone that might even be a risk. I would rather learn it all myself.

Unfortunately, in NYC, a Broker that has results probably wouldn't join a small firm like mine. A good Broker should be able to make $300k and upward, from what I have been told.

As I progress the Brokerage, I'll see if my anticipation of hiring a good Broker is as difficult as I think it will be.

Thanks again!

@Cara Lonsdale

Thanks for the vote of Confidence! And don't worry... I don't bite, I only look scary.

In NYC, I have dealt with many Brokers and Agents as Seller's Rep.

Most are reasonable good. That does not mean they will be able to find the "Highest and Best Value" before I find it.

Case in point, in 2008, I went to see a building which was being sold by a Broker who was also a VP at one of the biggest Residential Realty in NYC (I won't name them here due to the acerbity of the deal I got). I went specifically because I spotted a mistake in the advertisement of the building.

The building was being sold as a 3 Family, 4 Story building. HOWEVER, that was only the current usage and not the LEGAL usage of the building.

The Seller originally bought the building as a 3 Family, 4 Story building so she did not know there was actually a difference in the LEGAL usage. The building was actually converted from usage as a 4 Family, which is it's LEGAL usage via it's Certificate of Occupancy and it's current configuration as a 3 Family.

I went down to the basement to confirm that there were 4 Gas Meters and 5 Electric meters. Once I made that confirmation, I didn't need to see the rest of the building. That just confirmed that the building was a Legal 4 Family as you are not allowed to have any more Gas Meters in a NYC building than the amount of legal kitchens.

I immediately put in an Offer at full Ask, but stipulated that I needed a Seller's Concession of $60k.

I went into Contract and bought the building. The following business day I went to the Buildings Dept and got a certified copy of the Certificate of Occupancy for a 4 Family building as the legal usage.

I immediately put back the kitchen which was taken out prior to the Seller actually owning it and re-appraised the building for $350k more than my Purchase Price.

I then went to my Mortgage Broker and opened up a 2nd Lien for almost the same amount.

What's scary is not me....... it's the other Brokers that have to deal with me as they really should have known BOTH the Current Usage and the Legal Usage.

I don't blame the Broker in this case because the CofO was not available online. Although you could have confirmed it via the meters, not a lot of Brokers understand construction well enough.

Also, I taught Real Estate Investing for a while. My best student made about $2 Million in profits based upon my recommendations. Students that passed my highest classes also did great.

This is another reason why I started the Brokerage firm. I have too many people that want to Purchase upon my recommendations based upon 2 decades of success.

@Joel Owens

@Charlie MacPherson

The BIC hire would be one of the last resorts I would take.

I have two priorities right now.

1) Capture the Buyer Side Commission as I buy properties to add to my Portfolio

2) Figure out all the other business processes for a Brokerage firm for 2 reasons:

a) Broker for Friends and Family

b) Apply Business Analyst techniques so I can interface with my IT Software Firm to create a Broker Office Application which can be offered to other Start up Brokerages, competing at the lower entry level at first.

I will probably hire a BIC after I generate enough commissions from my own purchases. There should be 2 acquisitions I will do this year generating around $100k in Commissions. Hopefully that will keep the Brokerage afloat for a while as I learn other aspects of the business.

Charlie: I already looked into IDX... and you are right, no need to reinvent the wheel.

There are some growing pains that REBNY (NYC's Real Estate Board) is having right now as they just revamped their MLS database.

BTW, the programmer with time on their hands is me. I've been in IT for almost 30 years and stuff like IDX is routine for me.

@Charlie MacPherson

@Joel Owens

@Wayne Brooks

So, it's not a choice of whether or not I should open a Brokerage or not..... I already DID open a Brokerage.

The purpose is to get the Buyer side of the Commission which is substantial at the $Million plus side of things.

I have bought 8 multi-family building in NYC from 1997 to today.

There is no need for me to skip getting the full Buyer Side commission anymore. That's the whole purpose of the Brokerage.

HOWEVER, since I have a Brokerage, I can now Buy and Sell to others, which I couldn't do before getting the License.

Another plus is that the Property Management Firm that I started to Manage all the Properties can now manage properties for those that I help buy multi-family properties as I am very familiar with it.

BTW, it's very difficult to get a Broker's License in New York. Qualifying on Experience requires 5,250 points. I have much more than that from 2 decades of experience.

I currently have 3 firms.

1) An IT Software firm that develops Software for Enterprise Wide Corporations

2) A Property Management firm that takes care of all my existing properties

3) A new Brokerage Firm

I have a NY Broker friend of mine who can walk me through all the Process, but I want to first do my own research since he is a bit busy.

So going the route of working for another Brokerage Firm won't be an option I would be considering.

At worse, I will hire an Associate Broker or an Office Managing Broker to Manage and set up the appropriate Business Processes.

Then I'll have my Software company come in and develop all the necessary IT (Websites, MLS Access, etc.) projects that a full blown Brokerage need these days.

@Russell Brazil

@James Wise

@Joel Owens

@Darren Sager

@jay hinrichs

Well, I find myself in a bit of a dilemma.

I decided to get my Broker's License and start a Brokerage Firm. I now have my NY Real Estate BROKER's License (Note, Broker's License, not Salesperson's License) under my own Brokerage. I even have my Broker's Pocket Card! haha!

I qualified based on personal experience which means buying, selling, renting, mortgaging, etc. of my own Properties.

I opened my Firm and will probably purchase a property sometime this year in the $2 Million range which should give me a 3% Commission or around $60k.

HOWEVER, I am also thinking that I would like to offer friends and family my service as well and to give them a discount on my commission... at least in the beginning few years until I really understand all the things a Broker really needs to know.

I'll probably just concentrate on being a Buyer Broker rather than listing as I don't have experience YET at selling.

I won't take on an Agent just yet either until I fully learn all the normal operations of a Residential Brokerage Firm.

The dilemma I am having is that because I have not worked as an Agent, I am now tasked with understanding how to run a Brokerage firm from scratch.

So even simple things are unfamiliar to me including:

1) Associating/Disassociating Agents. File Agent's Licenses until they disassociate.

2) Insurances like General Liability and E&O

3) Forms such as co-Broke for Listed MLS Properties

4) Which Disclosures are needed for what circumstances... ie. Lead Paint Disclosure for Properties build before 1978

5) Keep all documents for 3 years.

6) How to conduct a proper CMA

7) How to conduct a proper BPO

etc.

I have both the Salesperson and Broker's License Study Guides which gives me a lot of information. However, to be honest, a lot of the material references are pre-2008. I don't trust that the Official Study Guides and Exam Questions and Answers are actually up to date.

I tried looking for Real Estate Office Management Books... there are several but I don't know which would be detailed enough for me to actually pick up the business processes and steps needed to run a Brokerage Office so that I conform to NYS/NYC laws.

I am planning on joining our local board, the Real Estate Board of NY (REBNY) and to have a NAR membership.

I will be asking them about education on how to run the Brokerage.

I want to keep it as a one man Brokerage until I understand exactly what I need to know.

Any suggestions would certainly be welcomed.

@Laura Allen

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