Luke Monroe, the CEO and broker-owner of Kendrick Realty, shared with Inman his own recent experience opening his brokerage’s third office in California.
For indie brokerages still bound to brick and mortar offices, the task of opening a new space — not to mention the time and money associated with building it — can be daunting.
Luke Monroe, the CEO and broker-owner of Kendrick Realty, discovered early on that resources to help provide brokerages with a roadmap to expansion are scant, so he shared with Inman his own recent experiences opening the brokerage’s third office in Orange County California.
Where should you target?
Kendrick Realty already operates two offices, one in Northern California and another in Central Florida. Its strategy, ultimately, is to open two additional branches this year and eight next year year – an aggressive growth plan. Monroe chose Orange County, California, as the first new office for a number of reasons.
“One of the biggest things that we’ve learned is that a big part of our success comes from being opportunistic and going where it makes sense,” Monroe told Inman. “[Somewhere] where there’s availability of lead share, there’s not significant competition for our business model, there’s enough population density that we can get in and started at scale quickly — and there’s enough Realtors excited about what we’re doing that we can accomplish the first three things.”
Monroe was in Orange County for a realtor.com conference, with the other top 20 advertising spenders. Kendrick Realty’s business model is one of aggressive lead generation spending – which at one time was as high as $125,000 a month – a lot of in-house training and high accountability.
While at the conference, he observed that none of the other big realtor.com top spenders had a presence in Orange County.
Once Kendrick Realty decided Orange County was the spot, Monroe had to find the perfect location. His business model lends itself to a space that can be used for agent and team training, less as a walk-in storefront used to wow potential clients. So he chose an office that was near the geographical center of the county and close to all freeway arteries.
“We’re about the convenience of location, not looking for traditional aspects of a brokerage,” Monroe said.
How long does it take to get an office up and running?
In less than two months, Kendrick Realty’s office was operational in Southern California, but it required a lot of time and effort on the part of Monroe and his team.
“At that point, quite honestly, I was following the philosophy of ‘say it enough times and it will start to come true,’” Monroe recalled.
He made two more trips down to the office in early September and hired an office manager and his first team of Realtors. By the end of September, Kendrick Realty had a space and that first group of agents in for training.
How much does it cost?
One of the most important aspects to opening the new office for Kendrick Realty was to create a repeatable and scalable office space, as it plans to move forward with its major growth in the new year.
“As we were putting this office together we were almost scientific about the process because of what we’re planning to do next year,” Monroe said. “We wanted to have a super solid system down.”
“It may not be exactly an Apple store, where you walk into every one and it feels and looks exactly the same, but we’re going to get as close to that as we can,” Monroe added.
Orange County was unique because the brokerage signed a short four-month lease in hopes of finding a place to buy and pay up front, at a cost of $6,500. To get the office set up – including 16 desks from Ikea and 16 computers, 24 monitors, cables and a projector from Amazon – it cost Kendrick Realty just over $11,000.
To ensure early success, Kendrick Realty also invested $18,000 a month in advertising on realtor.com and about $5,000 from other lead generation sources. Including the appointment of a new office manager, Monroe estimates the overhead cost out of the gate hovered around $50,000 a month.
“For my team, looking forward at opening other offices and what else we’re planning on doing, that was a number that everybody was pretty comfortable with,” Monroe said. “We thought, as we go to open new offices, That’s what we should plan to allocate on a per monthly cost basis.”
How long until Kendrick Realty gets its ROI?
In its first month in business, all five of Kendrick Realty’s agents had offers out for clients and, in total, boasted $3 million in contracts accepted – but none officially closed yet.
At the current rate, if the brokerage stayed with just its initial group of Realtors and kept the advertising spend the same, Monroe projects it would start to break even at around six months and achieve profitability somewhere around 10 months.
But those timelines are being sped up now, as they’re about to begin training nine more Realtors, which means increased advertising costs – which they are front-loading – with the hope they’ll be able to achieve profitability before the 10-month mark.
“The response that we had from Orange and LA County was really pretty overwhelming,” Monroe said. “A lot of people are excited about what we’re doing.”