California Real Estate January/February 2010 : Page 18

4 BROKERS  We’re 1. 1. Narrow Your Focus Property management had always been a service of West Coast Property Specialists, Inc., though not a hugely lucrative one when sales were rocking. Nonetheless, the company provided cradle-to-grave brokerage and management services to investors and mom-and-pop owners alike. Though the income stream was small compared with a commission check, it was steady. When the Ontario company noticed the rapid market shift, it envisioned a way to transform property management into something more lucrative. Thus, the company assessed its strengths and the market and decided to stop representing buyers and sellers for home purchases to focus on property management. The former required too many hours and headaches for too meager commission dollars. The change also brought a rebranding of the corporation to Renttoday.us. Though property management brings in fewer dollars per unit than, say,a commission checkfora sale, “The money is consistent every month. But to make it work, you need volume,” says Mia Melle, broker and president of operations for Renttoday.us. To attain that volume, the company is chasing institutional investors, such as banks, the government, and hedge funds, to manage their large portfolios. It also will continue managing property for mom-and-pop investors. “If your business model is to hold real estate, you need people on the ground to manage it,” 18 CALIFORNIA REAL ESTATE • JANUARY/FEBRUARY 2010 Ready oo! Ready, Too! The roiling in the economy and in the real estate industry has motivated brokers to reinvent their businesses and, in some cases, get leaner, meaner, and revolutionary, in order to better position themselves—and their agents—for survival. Here are four brokers and their strategies. Let’s take a closer look: Melle comments. To create effi ciency and be positioned to compete for and manage large portfolios, it invested more than $200,000 to create a technology infrastructure that automates as much of the process as possible. Functions include real-time, online bidding for tenants, and an owner portal that lets clients view status updates in real time and generate customized reports. Besides management fees, the strategy will bring revenue from other streams, including late fees, new leases, and hundreds of monthly repairs that will be performed by a sister company. Renttoday.us also works with tenants who have lost homes to foreclosure, which Melle expects will be an expanding pool given the upcoming waves of mortgage resets. “We had to figure out what would work in a bad economy,”comments Melle. 2. 2. Kick ’em Out of the Nest The traditional brokerage model is broken. That was just one starting point forKris Berg, when she created San Diego Castles Realty, a six-agent company, in October 2008. It’s an approach she anticipates that others will need to take to thrive long term. She often likens the current brokerage model to a nest of baby birds. Agents are the baby birds, mouths agape, waiting for a feeding of knowledge, supplies, hand-holding, and so forth. Berg’s model: Kick ’em out of the nest.

We’re Ready, Too!

The roiling in the economy and in the real estate industry has motivated brokers to reinvent their businesses and, in some cases, get leaner, meaner, and revolutionary, in order to better position themselves—and their agents—for survival. Here are four brokers and their strategies. Let’s take a closer look:

1. Narrow Your Focus

Property management had always been a service of West Coast Property Specialists, Inc., though not a hugely lucrative one when sales were rocking. Nonetheless, the company provided cradle-to-grave brokerage and management services to investors and mom-and-pop owners alike. Though the income stream was small compared with a commission check, it was steady.

When the Ontario company noticed the rapid market shift, it envisioned a way to transform property management into something more lucrative.

Thus, the company assessed its strengths and the market and decided to stop representing buyers and sellers for home purchases to focus on property management. The former required too many hours and headaches for too meager commission dollars. The change also brought a rebranding of the corporation to Renttoday.us. Though property management brings in fewer dollars per unit than, say, a commission check for a sale, “The money is consistent every month. But to make it work, you need volume,” says Mia Melle, broker and president of operations for Renttoday.us. To attain that volume, the company is chasing institutional investors, such as banks, the government, and hedge funds, to manage their large portfolios. It also will continue managing property for mom-and-pop investors. “If your business model is to hold real estate, you need people on the ground to manage it,” Melle comments.

To create effi ciency and be positioned to compete for and manage large portfolios, it invested more than $200,000 to create a technology infrastructure that automates as much of the process as possible. Functions include real-time, online bidding for tenants, and an owner portal that lets clients view status updates in real time and generate customized reports.

Besides management fees, the strategy will bring revenue from other streams, including late fees, new leases, and hundreds of monthly repairs that will be performed by a sister company.

Renttoday.us also works with tenants who have lost homes to foreclosure, which Melle expects will be an expanding pool given the upcoming waves of mortgage resets. “We had to fi gure out what would work in a bad economy,” comments Melle.

2. Kick ’em Out of the Nest

The traditional brokerage model is broken. That was just one starting point for Kris Berg, when she created San Diego Castles Realty, a six-agent company, in October 2008. It’s an approach she anticipates that others will need to take to thrive long term.

She often likens the current brokerage model to a nest of baby birds. Agents are the baby birds, mouths agape, waiting for a feeding of knowledge, supplies, hand-holding, and so forth.

Berg’s model: Kick ’em out of the nest.

“We’re all independent contractors, but the mind-set isn’t there and the lines have been blurred for so long,” she says.

“Brokers don’t help new licensees think of themselves as being in business for themselves.” She see licensees saying, “Feed me, train me, and how are you going to make me a success?” That’s not a recipe for success.

Berg’s model includes principles, such as generous commission splits, an expectation of a high level of marketing savvy and experience, excellent customer service, and self-reliance.

San Diego Castles has no chic offi ce space, just an executive suite that agents share the cost of and visit rarely. Agents work when, how, and where they wish. “The idea is, we’ll give you high splits, but in return you’re in charge of your business. We’ll tell you the tools that are available and where you can learn, but we’re not going to pay for it,” comments Berg.

Among Berg’s duties as a broker and owner are keeping agents informed about legislative and contractual issues, reviewing fi les, meeting DRE requirements, and being available as a sounding board and mentor.

“There’s something inspiring and motivating about taking a higher level of personal risk and having the promise of higher rewards,” she comments. “Give someone 100 bucks to play craps and they don’t care about the game. When it’s your own $100, the game changes.” Berg expects that large brokerages also will be forced to change. “They’re going to have to be leaner, meaner, and revolutionary,” she says. “The model of a big broker will look and feel different, but their challenge is changing an entire cultural mind-set,” she believes.

3. Keeping People in Their Homes

Besides getting people into homes, Legacy Real Estate & Associates in Fremont is helping to keep them in their homes.

The company started an in-house loss-mitigation department that serves as a liaison between lenders and property owners facing challenges servicing their mortgages. The goal is to secure loan modifi cations, and Legacy owner Bill Aboumrad foresees such business being strong through 2011.

Legacy does a thorough fi nancial assessment of a client’s situation, looking at expenses even as small as the weekly grocery bill, to get a handle on the true debt-to-income ratio.

Based on that assessment, it determines precisely what clients can afford to pay for housing and whether they’re candidates for a loan modifi cation.

Legacy then manages the entire process, putting together an appropriate lender package, and taking care of the chronic followups in a process that, depending on the lender, can require up to four months. It works with clients’ lenders to develop a solution That can entail lower interest rates, extensions of amortization periods, or reductions of principal mortgage balances.

“We eliminate the stress and the paperwork, and we don’t charge up-front fees,” Aboumrad comments. If Legacy is successful in getting a modifi cation, clients pay $3,500 for the service.

One success story. One loan modifi cation reduced a client’s monthly payment from $2,200 to $800. “We haven’t lost one to a foreclosure yet,” comments Aboumrad. Legacy aims to do 150 to 200 such modifi cations in 2010.

The strategy provides all-around benefi ts. “We help someone save their home and turn a loan into one that is performing for the lender,” he says. It prevents consumers from being preyed upon by scam artists, aids the real estate recovery, and creates happy clients who potentially will generate future referrals.

4. Looking Inward

Morale. Motivation. Education.

Valerie Torelli of Torelli Realty, Costa Mesa, is zeroing in on this trio, fi guring that if the 14-person company can build effectiveness, efficiency, and knowledge within the office, everyone will be more successful in the fi eld, which translates into greater company success and personal satisfaction.

“We all sat down to discuss the need to realign our priorities to become better at client care,” she comments.

Among the issues she’ll be addressing: Effective Communications Torelli aimed for a common philosophy in the office, so everyone, she says, “was operating on the same frequency.” One strategy is having everyone read the same business and philosophy books and discuss ways they can use the theories to improve day-to-day business. One example is The Four Agreements by Don Miguel Ruiz, which formed four rules that everyone in the offi ce embraces. They are:

1) Be impeccable with words;

2) Don’t take anything personally;

3) Don’t make assumptions; and

4) Do the best job you can.

“When things aren’t good in the offi ce or there’s a problem, it’s a way of looking at things,” comments Torelli. As a result, she notices a new sense of openness, creativity, and honesty.

“There will be no downsides or bad ramifi cations from speaking honestly,” she adds.

Technology and Communications

A writer is managing blogging and social networking for the company, and a PR person is identifying media opportunities And places where Torelli can make a difference in the community through donations and volunteering.

Torelli also describes an emerging inhouse version of Facebook that will allow everyone to better communicate, share ideas, and stay in touch.

Efficiency

Coaches will hold seminars to guide agents and staff on best managing time and being effective in and out of the office, improving organization and communications, and developing steps to achieve goals.

“We want to create an environment that is thriving intellectually, emotionally, and fi nancially,” comments Torelli. “We planted the seeds of these initiatives in 2009 and expect them to come to fruition this year.” And one tangible manifestation of that initial client care discussion is evident in the approach the company takes with clients in distress and facing short sales.

If a homeowner has to move, Torelli Realty steps in to care for the lawn and house to be sure it looks lived in and doesn’t become a target for vandals. It also helps clients move to the next phase of their lives, whether it entails helping to fi nd a rental or locating homes for pets that homeowners can’t bring with them.

“We’ve been here for 25-plus years, and we take these extra steps to pay back to the community. It’s the right thing to do, and it’s what separates us from other companies,” comments Torelli.

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