The following are articles that highlight the Realty Point Brokerage Franchise premise: The traditional

real estate brokerage model is no longer an effectively functioning business model for the realtors of
today in the Ontario real estate market.

Why the Traditional Brokerage Model is Obsolete ...................................................................................... 2

The Warren Buffett Model For Your Real Estate Business ........................................................................... 8
How Tax and Brokerage Rules Restrict Realtors ......................................................................................... 10

2015 Realty Point. Articles may be reproduced as long as they are not edited or modified and proper
attribution is provided and include a link to www.RealtyPoint.ca

Why the Traditional Brokerage Model is

Obsolete
The Broken Model
Traditionally, a real estate salesperson joined a brokerage for the power of their
marketing and name recognition, relying on the Higher Power to drive leads and
sales. Changes to the commission split structure put more and more marketing
responsibility on the individual. The shift to social media and enhanced online
networking systems has dramatically lessened the power of the brokerage over the
individual and now provides less and less value to the successful salesperson.
1. Changes That Broke The Brokerage Model
There has been significant shifts in the real estate brokerage industry and none of the changes
has been as significant as lower commission splits. Today the commission splits are ranging
from as low as 95/5 to a couple of hundred dollars per transaction going to the brokerage. As
you might imagine, with such low commission splits, a brokerage can only survive with a very
high volume of sales. The margins of gross income and profitability is constantly dropping for
the typical real estate brokerage.
On one hand there are not enough resources to properly manage and train the salespeople and
on the other hand the Broker of Record is constantly looking to generate more revenue to
cover their overhead and expenses. Basically, most brokerages are operating hand-to-mouth
and a shock to their business, such as a couple of their top producing salespeople leaving, can
jeopardize their business. With the intention of protecting their business, brokerages are
recruiting any licensed salesperson walking into their office.
One of the main tools used by brokerages to attract real estate salespeople was and still is the
promise to give them leads. The basis of that promise ranges from doing duty-time at the
office to online sources. In most brokerages, if not all, this promise is rarely kept. The
brokerages cannot keep their promise either due to lack of resources to generate the leads or
the number of leads generated is much lower than the number of salespeople. Further, even if
brokerages provide leads, they are usually of very low quality which salespeople consider a
waste of their time to pursue.
Moreover, the brokerages promise to provide full coaching and hands-on training for
salespeople joining their brokerage. Again, due to a lack of resources, most brokerages cannot

afford to provide the training required for their salespeople. As a result, most salespeople are
not fully equipped to practice properly and professionally in the field.
Additionally, most salespeople are not compensated for the cost of the technology they do use
on a daily basis. With the increase in functionality of smartphones and tablets, the costs
associated with the use of technology has shifted from the brokerage to the salesperson.
Nowadays, there is another promise used as a recruiting tool to attract salespeople and that is
online marketing and branding. It is very challenging to practically carry out this type of promise
as Online Branding is very personalized. In todays age of Content Marketing each
individual salesperson has to be engaged with the online world and create their own individual
brand and identity. This may involve writing blogs, posting videos, being active in social media,
etc Practically, it is almost impossible for a brokerage to brand salespeople individually as it
needs a wide range of resources to accomplish this time intensive task. So this most recent
promise, along with previous ones, cannot be practically delivered even if brokerages had good
intentions of carrying through.
The lack of supervision, training and coaching has led to another phenomenon in our industry
a significant increase in part-time real estate salespeople. On one hand, these salespeople
receive a big commission check, once in a while, which excites them to stay in the real estate
industry while on the other hand they are not confident enough to leave their full time job for a
long term real estate career. Basically they are not dedicated enough to be fully focused on
their real estate career or professional development.
As a result, most real estate brokerages have become more of a baby-sitting and license
stacking office. Real estate salespeople are not fully invested into their career and therefore the
rate of making errors or unprofessional conduct is high. The Broker of Record is constantly
putting out fires that are created by salespeople, mostly by part-timers. Instead of having a long
term vision to properly train and manage salespeople, brokerages are busy handling issues
created by their untrained salespeople. Unfortunately, the real estate brokerage industry has
brought this upon themselves by constantly and continuously discounting their services.
Conversely, despite receiving higher commission splits, the salespeople feel that they are not
getting the level of services they expect from their brokerage such as training, coaching, and
more importantly their Broker of Record being a sounding board and offering support for their
transactions. When salespeople do not perform well, they blame their brokerage for their lack
of performance. This situation could lead to an environment of lack of confidence in the
brokerage. As a result salespeople are moving from brokerage to brokerage looking for those
promises to be delivered.

2. Salespeople are the owners of their own Brand

Salespeople that push forward to establish their own online brand often do not seek out the
help of their brokerage other than to see what available tools they have access to. In fact, the
traditional real estate brokerage franchise is not in a position to help the salesperson to build
their own individual online marketing plan as each salesperson has their own unique
characteristics and they can better create their own unique online footprint. In the past,
brokerage and franchise branding might have provided some value to the image of individual
salesperson but in todays online marketing world each individual is better off to create their
own brand image independently. For this very reason most salespeople do not see the value
behind the concept of paying the so-called monthly franchise fee and this issue is reflected in
the most recent survey, of Independent Brokers, published on January 5th, 2015, by Inman, as
seen below1

We are living in the age of personalized marketing which means that the services delivered by
each salesperson is much more important than the brokerage brand name they represent.
Although personal branding has always been the biggest differentiator in the real estate sales
industry now it is the main primary motivator for the consumers of today. The expectation of
todays customers is customized services that align with their values, lifestyle and specific
needs. There is no longer a one size fits all strategy that built brokerages in decades past.
Each client expects to be treated as an individual. Traditional brokerages and franchises have

systemized their processes and provided a one-size-fits-all model for their clientele base that
is no longer relevant to the expectations of the client. The role of real estate professionals is
even more important today than ever before as clients expect the prompt delivery of
customized and personalized services. This trend is clearly demonstrated in a recent survey
conducted by Inman News. Brokers and real estate professionals by Inman say local control of
branding and technology gives indie brokers the ability to craft nimble, profitable businesses
that can adapt quickly to local market conditions without the burden of franchise fees. 1
3. Consumers pay the price
Our primary mandate as professional salespeople is to protect the interest of our clients. I am
not sure how we can serve our clients to the level of service that is expected when we have not
received professional training and ongoing coaching. As mentioned earlier, consumers expect
personalized and individualized services when they hire a real estate sales representative. I
would like to remind my colleagues that 80% to 90% of successful real estate sales
professionals business is based on repeat clientele and their referrals. You cannot expect to
build your business if you dont have a solid fully satisfied clientele base.

4. What is the solution?

Our industry is no longer seeing much of any value in the traditional real estate brokerage
franchise model and as a result the opening of independent brokerages are the route more

brokers are taking. Real estate professionals are rapidly moving towards establishing their own
brokerages under their own name and creating their own brand. They prefer not be attached to
the traditional brokerage image and, more importantly, want to take advantage of
incorporating their real estate practice for tax saving strategies and taking charge of their own
future. Interestingly enough nearly 9 out of 10 Inman readers surveyed (86%) think
independent brokerages are becoming more popular among real estate agents.1 This trend is
prevalent in US which is more or less reflecting our industry here in Ontario as well. Inman, in
its most recent survey The Shift Toward Independent Brokerages, published January 5th,
2015, points out that: while 71 percent of affiliated brokers surveyed by Inman report that they
have thought about going independent, 97 percent of indie brokers say they arent considering
joining a franchise brand.1

The real estate professionals who investigate the feasibility of opening their own brokerage
very soon realize the overwhelming overhead cost and significant amount of time required to
handle the administration of the brokerage office. Moreover, additional resources are
necessary to meet RECO requirements and be up-to-date with changes in rules and regulations.
Generally speaking, most of them are successful as salespeople and they prefer to be out there
selling properties and not stuck in an office to shuffle through papers and accounting
reconciliations. Further, we can appreciate that a good salesperson is not necessarily a good
administrator, a good bookkeeper or a good manager for that matter. For these very reasons,
there are a high number of successful real estate salespeople who do not dare to open their
own independent brokerage despite all its advantages.

Author Info:
James Hussaini, Realty Point Founder and President.
James believes in the power of education and philanthropy to affect positive
change in his business, personal life and in the lives of those he meets. Upon
realizing the need for a new way to conduct real estate business he sought
about to bring change in the way the brokerage business operated. He
founded Realty Point which is a revolutionary Franchise Model that helps
brokerages to run an effective and efficient business without the
administrative hassles or the hefty monthly expenses.

Article citation http://www.inman.com/2015/01/05/special-report-the-shift-toward-independent-brokerages/

The Warren Buffett Model For Your Real

Estate Business
Have you considered the Warren Buffett model for your real estate brokerage business?
Mr. Buffett is renowned for smart investments, he buys the business rather than just
considering his stock purchases as an investment.
Generally he finds value within a company and hires the right managers to continue allowing
the business to be run effectively and efficiently with an eye on growing the bottom line.
Realty Point also looks at their franchisees as business people with specific skills that have
brought them the success they have.
By providing a comprehensive suite of brokerage services and office space Realty Point takes
care of the usual complaints and objections about running a real estate brokerage.
By definition real estate brokers that are ready to open their own brokerage are very successful
at sales. As they move their career forward into brokerage ownership the required paperwork
skills and accounting knowledge becomes an anchor around their necks, draining them of time
and energy to keep their sales volume at previous levels.
If their knowledge of these aspects of the business arent easy for them to handle satisfactorily,
hiring additional staff to handle these issues becomes a cost factor that stops the idea of
opening a brokerage in its tracks.
Enter Realty Point with a brokerage franchise model that includes the staff, support and
services required to allow the Broker of Record owner the freedom to continue to grow their
sales without the drain of energy that continual paperwork, industry research, compliance
updates, trust account management and staff issues can have.
Realty Point franchisees have an experienced and dedicated administrative staff handling the
regular duties that brokers can rely on to handle the day-to-day operation of their brokerage.
Our executive team has many years experience running a successful brokerage and have in
place a system for keeping the franchisee up-to-date with regulatory compliance rules, proper
management of trust accounts and many other aspects that are required to run a successful
business. We have distilled many of the operating requirements for the Broker of Record to
simply sign and know that regulatory compliance is in order, trust accounts are managed and
salespeople are paid in a timely manner.

Realty Point also provides to franchisees furnished office space that is available in three Greater
Toronto Area locations, enhancing the no territory limit aspect for their businesss growth
potential. And with a flat-fee franchise structure the costs of running the brokerage franchise is
under control and easily affordable.
Realty Point is changing the way brokers look at opening their own brokerage. When youre
ready to talk about taking the step of ownership for your real estate career talk to us first.

Author Info:
Robert E Lee, Information Manager at Realty Point

How Tax and Brokerage Rules Restrict

Realtors
Ontario based realtors are under a significant tax disadvantage due to some confusing
combination of the rules related to their professional body (The Real Estate Council of Ontario
also known as RECO) and the provincial government. In contrast to other provinces, realtors in
Ontario are effectively prevented from operating their professional activities through a
corporation despite many years of discussions and lobbying. There is no reason to believe that
the powers that be will change their views anytime soon. Perhaps insignificant for the 80%
majority of the realtors (that old 80/20 rule), however, for the remainder and those who wish
to be part of the roughly top 20%, this is or will be an enormous tax issue restricting growth and
ultimately restricting the choices available to realtors to deploy after tax funds to their
businesses, families and charities for example. This frustration has resulted in some of the
larger brokerages allowing their top realtors to create a sub-brokerage and thus incorporate,
but this strategy to date has been met with a great deal of hesitation from our observations on
the part of both brokers and realtors. Consideration now to creating ones own brokerage
which would meet the professional and provincial requirements for incorporation may gain
momentum for those refusing to wait any longer.
Economically, what are we talking about? In Ontario, with the last provincial budget lowering
the threshold where maximum tax brackets are met, it takes relatively little to reach practically
maximum tax brackets. With a taxable income of only $220,000 and up, an Ontario realtor can
pay tax at just under 50% (to keep the numbers simple). At roughly $44,000 the tax rate is
approximately 31% while at approximately $88,000 one is in the 43% area for a tax rate in
2014. Contrast this with a rate of 15.5% in a corporation for the first $500,000 of taxable
income. You dont need to be much of an accountant to figure out that at relatively low
amounts of net income there is room for significant tax savings at even modest amounts of
income, let alone those who are or will be more robust performers. While we must appreciate
that a certain level of income is typically needed for the family to pay for household expenses,
we havent even talked about the advantages from income splitting and long-term planning.
Lets put this in a different way. For someone who is able to retain or split income with
$100,000, their tax savings in using a corporation as compared to conducting their realtor
activities as an individual could be approximately $35,000. This is $35,000 annually. Not once,
not twice, but every year where the profits allow. A risk free rate of return (ignoring changes to
tax rules and rates). Said another way, practically a risk free rate of return of 35%, yes 35%, less
the cost of compliance if you can set up a brokerage for your professional activities. Well, at
35%, you can afford a fair bit in compliance costs. And if someone else is taking care of most of

the compliance, from a tax perspective if you can maintain your revenues, this seems like a nobrainer.
OK, maybe youre not yet at the maximum tax bracket. So, does a corporation still make sense?
It depends!!!
Even at the relatively low tax bracket of a little over 31% we have savings at the corporate level
of basically half of these taxes given the corporate rate of 15.5%. Yes, someone could cut their
tax bill in half at a relatively low level of income. Considering the tax brackets, the savings
would be even more, but lets keep this simple. At the very least, someone can cut their tax bill
in half at modest amounts of profits.
Practically speaking, someone who has a net profit, and no other source of income, of say
$40,000 or less has no tax need of a corporation unless they expect profit increases over the
next few years. Further, lets be realistic, there are additional costs to run your corporation
which must be factored into the equation. Between low personal tax brackets at low to modest
amounts of taxable income, business costs and the small amount of additional complexity
involved in operating your own corporation, most realtors will find that once they are grossing
approximately $100,000 in earnings, serious attention should be given to setting up a
corporation, particularly where they are expecting to grow beyond this. This is not to say that a
realtor grossing $100,000 must incorporate, it is to say that a discussion with qualified advisors
to help you determine the specific pros and cons in your situation will be well worth while.
Even if this is to say implementation should not be quite yet, but to establish a realistic time
frame based on income projections, your specific situation and your future plans.
How do the tax and brokerage rules restrict realtors as per our opening comments? Consider
the funds available to a realtor on an after tax basis as compared to gross income or net
income. A high performing realtor, or one who will shortly be a top producer, will have roughly
speaking an 85 cent dollar to work with if they are incorporated as compared to a 50 cent dollar
if they operated as an unincorporated proprietor. Lets say that another way. If the realtor was
to invest in real estate, a business, their own business, paying for the post-secondary education
of their children or grand-children, or certain remuneration to family members, as examples,
they have a lot more money to make these investments and expenditures. Clearly using an 85
cent dollar to invest with is far easier than using a 50 cent dollar. Someone stuck using a 50
cent dollar to live life with is clearly at a disadvantage and restricted in what they are able to do
for themselves, their families and charities.

Author Info:
George E. Dube, CPA, CA
Partner, BDO Canada LLP
gdube@bdo.ca | @georgeEdube
Dube & Cuttini Chartered Accountants LLP