- Investing up to $50,000 in each hire who typically comes from the corporate world, indie broker Michael Rossi does not recruit existing agents.
- Tech-forward firm Elegran likes to work independently on pain points in the real estate industry with its tech solutions.
- Elegran has been compared to another tech-forward Manhattan-based company, Compass.
You won’t see much of Michael Rossi at real estate industry events.
The entrepreneurial founder of Manhattan real estate brokerage Elegran is not big on mixing with other real estate people. He prefers to run his business at a slight arm’s length so he can see problems — and solutions — more clearly.
“I’ve never mingled, never plugged myself in, never worked in another real estate firm,” he said. “I don’t have the habits.”
Taking a page from WWII
There’s a method behind this approach for Rossi. The former hedge-fund manger ran client service operations for a Wall Street brokerage before setting up Elegran with a college buddy and his brother-in-law in 2008.
“We have a willingness to change our mindset as the market changes, separating our talent, isolating them,” he explained.
He likens it to an idea that came out of World War II, a movement called Skunk Works.
Characterized by “small empowered teams, streamlined processes and the culture that values the lessons learned when you are bold enough to attempt something that hasn’t been done before,” this approach was founded by Lockheed Martin, the U.S. aircraft company that isolated and liberated teams to help develop new aircrafts to defeat the Nazis.
“It put them in a great position to solve problems,” said Rossi, who studied at the London School of Economics.
This wartime concept has since been adopted by large organizations across industry and is working well at Elegran.
“When you are so busy, you become more on edge, so fear enters in,” he added. “It’s very hard to stay current and solve issues. It’s important to remove yourself from the day-to-day to see what is happening and not just be reactive.
“That’s been our biggest skill set — managing projects and finding pain points.”
Elegran’s attitude toward tech
With around 60 full-time agents in Manhattan (and a sales volume of $400 million last year), Elegran has developed its own proprietary tech, spending $2.5 million over the last three years on various tech systems.
The company is 80 percent residential sales, 20 percent rentals.
“We have built a proprietary internal enterprise-ready data management system that integrates with Salesforce,” said Rossi. “We have our own API that speaks with Salesforce and numerous other homegrown software programs.
“We’ve also been one of the first in the industry to totally customize Salesforce for real estate and invest in it for the entire team, as well as built out a suite of marketing automation software to align with our marketing and sales team.”
Rossi and his CTO are also looking at creating solutions for lead generation management and data standards follow-up.
At the same time, the company’s blog, which incorporates inbound advertising, various high-end branded guides, market newsletters and social media, is a pride point at the core of the company’s marketing.
The Elegran team has also developed some specific approaches toward social media marketing (SMM).
“We’ve been consistently refining our SMM strategy with social re-marketing, re-targeting and similarities campaigns, serving hyper-targeted ads to different demographics based on price point or lead source,” Rossi explained. “For example, we have custom messaging and creative that we serve to Facebook users for anyone who has contact with Elegran from Zillow.”
New direct mail company
Meanwhile, one agent industry pain point Rossi and Elegran’s chief marketing officer, Mihkel Noormagi, have recently addressed is managing direct mail and its return on investment, which is a “nightmare” for many agents, Rossi says.
With the creation of RealMailers.com, “we have simplified and automated the entire direct mail process for real estate professionals from design and printing to targeting and delivery,” Noormagi added.
“Unlike other services where you either need to upload your own address list or purchase a list of prospects, RealMailers provides targeting based on the various characteristics of the homes in the vicinity of your listing.”
The separate company will be 50/50 owned by Rossi and Noormagi (and headed by Noormagi).
Elegran has been compared to another tech-forward Manhattan-based company: Compass.
Rossi, who has transacted over $3 billion in real estate over his career, said Compass has not affected his business but thinks Elegran’s valuation may have gone up thanks to its larger, high-profile competitor.
“Tech-savvy brokerages like Elegran and Compass have realized the market is consolidating, driven by increased use of technology,” he said.
The CEO has some theories on how things will play out.
“In my opinion, in order to substantiate Compass’s valuation and the team they have hired, they are looking to ‘dis-intermediate’ the industry,” he said. “This dynamic makes me think of Uber and how they will eventually replace real drivers with self-driving cars, while today, those drivers are helping them build their business.”
By comparison, while he sees his company’s tech innovation as a key differentiator, Rossi’s focus remains on creating a culture and an environment in which his agents can excel.
“Elegran is solving the problem for our agents, providing them with customized technology in order to scale their business, transact and ultimately allow them to focus on their clients’ needs,” he said.
Unorthodox hiring policy
As part of Rossi’s independent approach, he doesn’t hire from within the real estate industry.
He likes to recruit high performers from finance, law or corporate sales, for instance.
“I’m a sucker for good quality kids out of college that might not get a break and might get trapped by the corporate ladder,” he added.
He explains his hiring policy.
“In Manhattan, it’s different — in other parts of the U.S., people are more normal; here, people don’t want you to be normal. A Goldman Sachs banker who makes $1 million a year, they expect that level of sophistication from the person in real estate, too.
“Those most successful in this industry have had some high-level career and can relate to the client’s high-impact needs.”
Rossi’s philosophy on building his team can be found in the company name, Elegran.
“We elevate our clients with a high level of service in granting title.”
The parable of the elephant also exemplifies the company culture, added Rossi.
“Elephants are known as one of the weakest animals when they are born, but through mentorship and familial structure, they grow to be one of the strongest animals.”
The CEO has seen the benefits from his recruiting technique, though it has taken some serious investment.
“We invest a lot in our people — between $35,000 and $50,000 per agent in order to offer them the hands-on support, the technology platform and in order to generate leads,” he said. “We have built a lot of products to facilitate the business, allowing our agents the ability to spend their time building relationships and studying the market.”
The Manhattan mindset
The company has two trainers, one in business development, the other in transactions.
Elegran has built a strong working relationship with most major residential real estate developers in Manhattan and links agents up with them.
Although they are new to the industry, Elegran agents are competitive types.
“Our average agent makes $200,000 a year. We really pride ourselves on having a very high average income per agent,” said Rossi.
The average house price they handle is $2.4 million.
Generally, Rossi said, those who come from a successful Manhattan standard career will make money in the first six to eight weeks: “We start them in luxury rentals; we believe it’s about their ability to get referrals and break into circles of influence.”
The company’s compound annual growth rate (CAGR) of 35 percent for the past five years, is still on track for 2016, said Rossi. And part of that success has to do with the buffer of ‘intentionality and expectations’ Rossi’s built against Manhattan’s softening market.
“I don’t look at the market from a transactional point of view,” he explained. “Everything we do is about building scalability into the platform. Listings equal liabilities in a downturn or a soft market. We consistently manage over $100 million in listings, it’s around $120 million at the moment.
“If you take on the wrong listing, then the sales team gets split. They have to make sellers happy but close the deal — it’s a very tough balancing act. Our team often turns down listings that are not right.”
Elegran’s growth strategy
Having built Elegran the way he wants it, Rossi is getting ready to change gears over the next year: “We‘ve rebuilt all the tech. We are tightening the screws and we are ready to scale the business.”
And he’s been approached by investors.
“Some people have noticed what we have done,” he said. “We have been speaking to a couple of investors, maybe we will speak to someone who can leverage what we have built.
“We have a lot of ideas of what industries are complementary to real estate. Real estate controls a lot of data, like the airline industry.
“We have built a mousetrap for that with multiple products — lead-gen, data management system, marketing automation, various software tools for our agents — it’s about how to do it nationally.”
Rossi, who is open to looking at new markets, had an investor who wanted to fund opening up Elegran in Miami, but he didn’t want to split his focus or be “unequally yoked,” he said, because it wouldn’t have been fair to his staff.
He also turned down a traditional national brokerage (not in New York City), adding “they loved our team, the tech, the data, the access to the market.”
Why most agents fail
The company’s tech gives its agents a true head start, argues Rossi.
Most agents fail, he adds; they spend 50 percent of their time networking, never have a chance to learn the market well enough and sink in the first 18 months.
Rossi explains: “Our tech allows us to focus on the client and the market, training and culture, the information base with robust data architecture. The back-end is very strong, everything they need is at their fingertips.
“We organize them at a very high level and have a genuine culture.
“Most real estate firms are packed with mercenaries. They come to a new firm because they want a bigger split, which is detrimental to the client.
“A happy agent is a happy client; it’s the culture and the tech that allows you to scale.”