Broker Hack - Create a Holding Brokerage for Inactive Agents for Additional Revenue

When a real estate licensee decides to stop actively selling, they’re often left wondering what to do next. The decision usually boils down to three main options: sending their license back to the state and stepping away entirely, staying active at their current brokerage despite no longer working with clients, or moving their license to a holding company.

Each choice has its own implications. Returning the license to the state means giving up the ability to earn income through referrals - a valuable stream for many inactive agents. Staying active at their current brokerage might feel unnecessary or come with higher fees and obligations that don’t align with their inactive status. 

That’s where a holding company becomes an attractive alternative - allowing them to maintain an active license, reduce fees, and continue earning referral income without the commitments of full brokerage involvement. But how does it work, and what does it take to set one up? Let’s explore.

‍

What is a Holding Brokerage?

A holding brokerage is a specialized entity designed to hold and manage the licenses of inactive real estate agents. Unlike a traditional brokerage, a holding brokerage doesn’t actively engage in buying, selling, or leasing properties.

Instead, its primary function is to provide a “home” for real estate licenses, allowing agents who aren’t actively practicing to remain compliant with licensing laws. This setup enables agents to retain their ability to earn referral income while avoiding the higher fees and obligations that come with being part of a fully operational real estate brokerage.

Holding brokerages often operate with reduced overhead and limited services, as they cater specifically to the needs of inactive agents. This streamlined approach provides a cost-effective and efficient way to keep a license active without unnecessary commitments.

How a Holding Brokerage Benefits the Broker

Creating a holding brokerage doesn’t just benefit inactive agents - it can be a lucrative and strategic move for the broker as well. Here’s how:

First, it creates a steady revenue stream. By holding the licenses of inactive agents, the broker positions themselves to earn a portion of the referral fees generated when these agents send business to active agents. Typically, the inactive agent retains a percentage of the referral fee, while the holding brokerage takes a negotiated share. This arrangement ensures the broker benefits financially from referrals without the need to oversee active transactions or provide extensive support services.

Second, it provides consistent income through monthly fees. Inactive agents pay a nominal fee to keep their licenses active under the holding brokerage. These fees, while smaller than those charged by traditional brokerages, can add up quickly as the roster of inactive agents grows.

Lastly, it strengthens the broker’s professional network. Even inactive agents can bring valuable connections to the table, helping the broker maintain relationships with other brokerages and active agents. This can lead to additional referral opportunities and bolster the broker’s influence within the real estate community.

By offering a low-maintenance solution for inactive agents, the broker creates a win-win scenario: agents retain their earning potential, and the broker enjoys an additional income stream with minimal effort.

‍

How a Holding Brokerage Benefits the Agent

A holding brokerage offers invaluable benefits to agents who need to step away from the daily demands of real estate but aren’t ready to give up their career entirely. Life happens - personal challenges like health issues, family responsibilities, or even a career shift can make it difficult to commit the time and energy needed to succeed as an active agent.

Rather than walking away from real estate altogether, agents can park their licenses with a holding brokerage. This keeps their license active and allows them to continue earning referral income, ensuring they don’t lose the effort and investment it took to become licensed in the first place.

It also provides a sense of flexibility and security. Agents can step back when they need to, knowing they’ll still have a foot in the industry. Whether they’re dealing with a temporary personal issue or exploring other opportunities, they don’t have to make the difficult decision to entirely abandon their real estate career.

Additionally, a holding brokerage reduces the financial and administrative burdens that come with staying active in a traditional brokerage. Agents can maintain their licenses with lower fees and fewer commitments, all while keeping the door open to return to real estate when they’re ready.

In essence, a holding brokerage serves as a lifeline for agents navigating personal challenges, allowing them to preserve their professional status and continue benefiting from the opportunities real estate provides.

‍

Managing Multiple Brokerages in the Same State

In most states, a broker can legally act as the managing broker for multiple brokerages, provided they meet the requirements set by their state’s real estate licensing board. However, there are critical rules and regulations to follow, and it’s essential to understand the nuances before proceeding.

‍

Licensing and Legal Requirements

Each state has its own regulations governing brokers who manage multiple brokerages. Generally, the broker must:

• Hold an active broker’s license in the state where they plan to manage multiple brokerages.
• Register each brokerage with the state’s real estate commission or licensing board, ensuring compliance with all administrative requirements.
• Maintain clear oversight of each brokerage’s operations, including supervising licensed agents and ensuring adherence to ethical standards and legal obligations.

‍

Potential Limitations

Some states may impose restrictions or additional requirements on brokers managing multiple brokerages, such as:

• Requiring brokers to disclose their role in each brokerage to the licensing board.
• Prohibiting conflicts of interest that may arise from managing competing brokerages.
• Ensuring proper supervision, which can become challenging if the broker is spread too thin across multiple entities.

‍

Benefits of Managing a Holding Brokerage

For brokers considering a holding brokerage, the role is often simpler than managing a traditional brokerage. With a holding brokerage, there’s no need for active property transactions or extensive agent support, making it easier for the broker to oversee multiple entities. As long as the broker remains compliant and maintains clear boundaries between their roles in different brokerages, this setup can be both legal and advantageous.

It’s crucial for brokers to consult with a real estate attorney or their state’s licensing board before taking on multiple brokerages. Doing so ensures full compliance and avoids potential penalties or license revocation.

‍

How to Create a Holding Brokerage for Inactive Agents

Setting up a holding brokerage may sound complex, but with the right approach, it’s a straightforward process. Here's a step-by-step guide to getting started:

‍

1. Understand State Requirements

Each state has specific regulations for establishing a brokerage. Begin by researching the requirements for licensing, registration, and operational guidelines for your state. Ensure you meet any criteria related to managing multiple brokerages, if applicable.

‍

2. Register Your Brokerage

File the necessary paperwork with your state’s real estate licensing board to establish the holding brokerage. You’ll typically need to provide details such as the brokerage’s name, structure (LLC, corporation, etc.), and your managing broker license information.

‍

3. Choose the Right Business Structure

Decide on the legal structure of your holding brokerage. Many brokers opt for an LLC due to its flexibility and liability protections, but a corporation may also be a good fit depending on your goals. Consult with a business attorney or accountant to determine the best option.

‍

4. Develop Policies and Procedures

Since holding brokerages operate differently from traditional brokerages, create clear policies outlining their purpose and limitations. These policies should address:

• Referral fee structures.
• Monthly fees for inactive agents.
• Expectations for maintaining compliance with licensing laws.

‍

5. Set Up Administrative Systems

Even though holding brokerages are low-maintenance, you’ll need systems in place to manage agent records, referral tracking, and fee collection. Consider using real estate transaction management software to streamline these tasks and keep operations efficient.

‍

6. Market Your Holding Brokerage

Once everything is in place, reach out to inactive agents or those considering stepping back from active selling. Highlight the benefits of staying licensed, earning referral income, and reducing costs through your holding brokerage.

‍

7. Maintain Compliance

Regularly review your brokerage’s operations to ensure compliance with state regulations. This includes submitting necessary paperwork to the licensing board and keeping agent records up to date.

By following these steps, you can create a holding brokerage that serves inactive agents while generating a new revenue stream for your business.

‍

In Summary

A holding brokerage is a win-win for both brokers and inactive agents. It allows agents to step back from the demands of active selling without giving up their license or the ability to earn referral income. At the same time, it creates a low-maintenance revenue stream for brokers, who can earn a portion of referral fees and charge a nominal monthly fee.

Setting up a holding brokerage requires careful attention to legal and regulatory requirements, but the benefits make it well worth the effort. From providing flexibility for agents navigating personal challenges to creating additional income for brokers, a holding brokerage can be a strategic addition to any real estate business.

To ensure everything runs smoothly, organization is key - especially when managing agent referrals and commission payments. That’s where Nekst comes in. With automated workflows, deadline tracking, and customizable tools, Nekst helps brokers streamline administrative tasks like tracking referral agreements and monitoring payments. By integrating Nekst into your holding brokerage operations, you can stay organized, compliant, and focused on growth.