In my 27-year real estate career, I’ve built two million-dollar real estate teams and coached some of the most successful teams in the nation. I am a firm believer in the value of teams for building long-term success and wealth. If you want to build a successful real estate team of your own, the challenge lies in choosing the best real estate team structure for you.
Let’s take a look at the three most successful team models in real estate today so you can make an informed decision and build your own multi-million-dollar team. If you’re starting from scratch, I recommend ZipRecruiter, an all-in-one app for recruiting and hiring both agents and support staff. It’s the number one rated job-seeking app on both Apple and Android, so you’ll always cast the widest net and find hidden talent.
The Best Real Estate Team Models for 2022
Before deciding which real estate team model is best for you, you have to understand the financial risks, difficulties, and potential outcomes. Traditionally, the three most successful real estate team models include The Mentor/Mentee Model, The Team Leader Model, and The Lead Team Model. Here’s a quick comparison of each team model:
| Number of Team Members | |||
| Split to Team Member | |||
| Expected Transactions/Year per Team Member | |||
| Team Member Retention | |||
| Number of Employees | |||
| Inside Sales Required | |||
| Overall Cost to Operate | |||
| Difficulty | |||
| Scalable to Other Markets |
Now, let’s do a deeper dive into each model:
1. The Mentor/Mentee Real Estate Team Structure
If you are looking for a low-cost, low-risk real estate team structure, look no further. In this model, you mentor newer agents into the business in exchange for a percentage of their commissions for a specific period (typically 12 to 24 months). After that, the new agent will leave the team and pursue their real estate career.
You provide structure, set expectations for success, and answer questions. However, you are not providing leads, paying for their marketing, or managing team members. This is a common real estate team model for brokerage agents that offer residual income from their MLM (multilevel marketing) or downlines, like Keller Williams, Exit, and eXp.
Mentor/Mentee Real Estate Team Organizational Chart
The Mentor/Mentee real estate team structure doesn’t include Operations in its organization chart. Operational activities are handled by the brokerage or outsourced to a transaction coordinator.
The organizational model is simple. As the mentor, you recruit new team members, train them to be successful, and then you transition them into your downline. To maximize your downline further, teach your team members to do the same. This will grow your downline exponentially and provide you (and them) with long-term residual income.
Mentor/Mentee Real Estate Team Lead Generation Model
The objective of the Mentor/Mentee Model is to teach new agents to fish (when a cliche works, it works!) They pay you a portion of their commission for access to your lead generation knowledge and experience, not for actual leads or marketing.
As a mentor, you can teach outbound prospecting, sphere of influence (SOI) calls, strategic planning, and even how to host an effective open house.
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Mentor/Mentee Real Estate Team Model Services & Expectations
Mentors and mentees set their own individual goals. Ultimately, you want your mentees to be successful, so you’ll want them to keep all clients and leads they generate while on your team.
You may choose to provide administration or transaction coordination, but it’s not required. Team members are responsible for their marketing and advertising. Remember, the value of your team is your time and training, not what resources you are providing.
Why Retention Is Intentionally Low
Team member retention is intentionally low because it purposefully moves new agents into production. When your mentees transition into your downline, you receive a portion of the brokerage’s revenue or profit generated from that agent’s transactions, even after they leave your team.
Mentor/Mentee Real Estate Team Model Splits & Costs
This real estate team structure teaches team members to become independent real estate agents. Team members are responsible for all the expenses associated with being an agent, including marketing, their office bill, MLS fees, and split to the brokerage.
The splits in this model are lower for you than other real estate team models because you are not paying their expenses. Therefore, you can only expect to get between 10% and 30% of their commissions.
The mentee should receive at least 50% of the total commission after the brokerage takes its portion and the split is paid to you. This ensures that your team member makes enough money to stay in business.
How to Tell if the Mentor/Mentee Model Is Right for You
If you like to teach, are part of an MLM-style brokerage, and want to produce a continuous source of productive agents to fill your downline, this is a perfect model.
However, if you are not building a downline at your brokerage, think twice about this structure. Inherent turnover means you are constantly training new agents, taking time away from your production. You might find that the small portion of commission you earn for training a new agent doesn’t compensate you for the time you could’ve been making sales.
2. The Team Leader Model
The Team Leader Model is centered around actively promoting the team leader or the team leader’s brand. This traditional real estate team structure focuses its efforts around a neighborhood or community.
As the team leader, you provide structure and resources to team members, and team members promote the team leader’s brand, not themselves. Because you’re building a brand around a specific community, high standards and unmatched customer service are essential.
Team Leader Model Organizational Chart
The Team Leader Model is divided into operations and sales. The team leader is typically the lead listing agent, and team members are showing-agent roles. The sales side of the organization may also include a telemarketer and a second listing agent.
This structure requires at least one employee and one business manager, but is most effective with an additional marketing manager and transaction coordinator.
Team Leader Model: Primary Lead Generation Strategy
As the team leader, you set lead generation goals, team member expectations, and maintain standards. You are also responsible for leads for the team. Client referrals are the secret to success, so maintaining relationships and providing unmatched service is crucial. Keep lead generation costs low so you can spend those savings on making your client experience second to none.
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Lead Ownership
You may, at times, feel the need to allow the team members to retain clients after the closing. But don’t—this could be a huge mistake!
You took the time to create the team, assumed the risk of hiring employees, and covered the operational costs. Therefore, every client should remain a client of the team, not the individual agents.
This ensures that if/when a team member leaves, the lead will continue to be marketed to by the team and not by the former team member. This must be clear when inviting a new member onto your team.
Team Leader Real Estate Team Model Services & Expectations
Since this real estate team model is based on high-level customer service, you’ll want to provide full-time administrative support so the rest of the team can focus on sales activities.
You should also provide all marketing materials to ensure brand quality and uniformity.
How to Set Expectations & Reduce Turnover
Team members should have specific weekly or monthly productivity goals, like number of contacts, leads, contracts, and closings.
Generally, team members should produce four to six transactions their first year and eight to 12 transactions thereafter. Half of their business should come from their sphere of influence, while the other half will come from team lead generation activities.
This real estate team structure has higher retention rates because you’re carefully hiring for a team’s cultural fit. But if a team member fails in customer service or has a poor attitude, it reflects on you and your brand. Hire slow and fire fast should be your motto for this team model!
Team Leader Model Splits & Costs
Member splits are typically 50/50 or 60/40 (40% to the team), depending on the source of business. You might give a larger split if the team member provided the lead from their sphere.
Remember that your split must be enough for you to provide support and marketing for the rest of the team. If your split is too low, you may end up using your commission income.
As far as costs go, team members should be responsible for their phones, cars, and National Association of Realtors (NAR) dues. However, depending on the percentage of commission you take, you may choose to cover the common business expenses, like office bills, errors and omissions insurance, signs, cards, MLS, and lockboxes.
How to Tell if the Team Leader Model Is Right for You
This is an excellent real estate team structure for someone with an established brand (or someone who has a strong vision for building a brand). You’ll also need high standards, enjoy working with others, and have proven techniques that generate business. Setting expectations is essential, as is selecting the right team members.
However, there are some challenges with this team structure. For example, if you don’t take the time to appreciate your team members, it could lead to resentment and jealousy. To have long-lasting success, you will need to check your ego at the door. Don’t let emotions cloud the bigger picture … TOTAL COMMUNITY DOMINANCE!
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3. The Lead Team Model
The Lead Team Model is divided into sales and operations but further separates the sales side into inside and outside sales.
- Inside Sales: They deal with inbound leads, follow-up, and prequalification.
- Outside Sales: They handle showings, negotiations, and contracts.
This real estate team structure is high-cost and requires high transaction volume to keep the machine moving. It’s the most expensive and riskiest to operate, but when done correctly, there’s absolutely no limit to your success.
Lead Team Model Organizational Chart
This model is operations-driven, not sales-driven. The operations team oversees sales, instead of the other way around. It’s essential to have both a business manager for operations and a lead manager for the sales team.
The inside sales team follows up on leads from your advertising efforts and ensures lead qualification and assignment. The outside sales team is responsible for showings, negotiations, and contracts.
Remember, there are some great alternatives to hiring an inside sales team member. With an ISA (Inside Sales Agent) company like Real Qualified, you can essentially outsource the job of qualifying leads and nurturing existing leads.
Lead Team Model: Lead Generation Strategy
The Lead Team Model’s primary source of lead generation is advertising, which is expensive—it could easily cost $500 to over $20,000 per month.
Your advertising budget should include sites like Zillow and Google, or lead acquisition platforms like Zurple, BoomTown, and kvCORE (see my kvCORE review here). If you prefer prospecting, your team can prospect expired and FSBO (For Sale By Owner) leads using software like REDX and Landvoice. Just note that the cost and strategy of lead generation for the entire team is your responsibility.
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Lead Team Model Services & Expectations
Expensive lead generation and tight profit margins mean team members have higher expectations and rigid daily or weekly milestones that must be met. It’s reasonable for each team member to close a minimum of one transaction per month, with a stretch goal of three closings a month.
This model attracts newer agents because of the low split or flat fee. Turnover, therefore, can be higher than with the Team Leader Model. To protect your brokerage, be sure to write into your team agreements that clients remain with the team if an agent leaves.
Lead Team Model Splits & Costs
Because this real estate team structure is high volume and heavily reliant on systems (not skills), it’s pretty ideal for brand-new agents.
As you build your team, look for team members who are highly driven and hoping for the right opportunity. You may want to consider covering some of their administrative costs, like MLS and NAR dues, so they can focus on your leads instead of taking a part-time job.
Inside Versus Outside Sales Compensation
Be sure to comply with state employment requirements, including minimum wages, tax withholding, and whether certain team members should be classified as employees or independent contractors.
Outside salespeople should receive 25% to 30% of the commission or a flat fee of $800 to $1,500 per closing. This may seem low, but the outside salesperson doesn’t have any expenses. Nor do they handle the lead acquisition, manage the lead once it’s under contract, or assume the financial and legal risks that you do.
With this setup, they could easily build up to three to six transactions a month and make $40,000 to $60,000 their first year. You should compensate inside salespeople with an hourly rate plus a bonus for appointments set or successful closings.
How to Tell if the Lead Team Model Is Right for You
Do you want a large real estate team—but without being the brand or meeting with every client? Then this is perfect for you. It operates on systems that manage hundreds—if not thousands—of leads every month, which means you can build a scalable business that can generate millions in commissions.
However, you will need significant startup capital. This is the most expensive of all the models to set up and operate, so there is substantial financial risk if you don’t get it right. The most common mistake is overpaying team members. The advertising costs are too high, and the margins are just too thin to overpay your team.
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Bottom Line
There are thousands of successful real estate teams across the nation, and each has its own unique structure. The three I outlined here are the most common successful models, and if you follow my advice, they will give you the best chance of success in building your real estate team.
Over to You
Have a real estate team structure that we overlooked? Let us know in the comments or join the conversation in our Facebook Mastermind Group.
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