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How to Build a Recession-Proof Business Model

Feb 9, 2024

How to Build a Recession-Proof Business Model
Within the last few years, I was interviewed by the California Association of Realtors® for a book entitled Upward: 50 Leading Women in California Real Estate. The focus of that interview and subsequent teaching opportunities was on the business model at my brokerage, Broadpoint Properties. It’s a business model that actually kind of developed over time. As I’ve learned (and as we are seeing during the pandemic), it has allowed us to be successful no matter the market.

I realize that most of our blog readers are agents. Agents can apply the strategies and tactics I describe just as brokers can; each would apply them in a slightly different manner.

Here’s a little about our brokerage and our model (quoted directly from Upward). 

We’re a small brokerage in northern San Diego County. We currently have fifteen agents. We are a brick-and-mortar business. Many of our agents work from home and only come into the office a few times a week. We have multiple income streams from various sources including property management plus our short sale processing and transaction coordinating services.

Our third-party transaction and compliance services assist agents by putting together the entire package of documents that is required by the State of California so that their office files are fully compliant. We deliver that package at closing to the agent and/or his or her broker at closing.

During the Great Recession, I saw that there was also a need for short sales processing. Agents were running away from short sales, but they had no choice—doing short sales was the only way to have any business. The problem was that most agents weren’t comfortable negotiating with the banks.

I fell into this by chance while I was supporting providing administrative support to my husband in his own real estate business. I discovered that I was really good at handling all the paperwork. We began to offer the service of providing short sale processing and negotiation services to real estate professionals throughout California. During the recession, we closed between 1,000 and 1,500 short sales by assisting other agents.

a pie chart showing real estate statistics in a good economy vs recession

Aside from short sale processing, the other income streams that create a recession-proof business for us are transaction coordinating, property management, and the sale of my real estate planner (in addition to our sales division). They also allow us to remain small and selective about who works in our office.

While the description above, as well as the graphics, apply to a recession-proof strategy at the brokerage level, this can easily apply to the agent level and building that model for individual agents.

Here are 5 areas where you can “pivot” or “reinvent” your current book of business:

  • Sellers. Be willing to work with all types of sellers—those with equity and those without. Carve out a plan for working with sellers in financial distress, and build a team that can support you with the time-consuming aspects of that work, such as the team at Short Sale Expeditor®.
  • Owners/borrowers in financial distress. Reach out or take calls from borrowers and owners in financial distress. Help them to facilitate forbearance agreements with their mortgage lenders and touch base with them to provide resources and options.
  • Buyers. Work with buyers (particularly first time home buyers) who are essential employees or who work in fields not impacted by shelter-in-place guidelines.
  • Investors. Identify non-owner occupied homes where the owners have held the property for over 20 years. Because of the inability to depreciate on those properties after a specific number of years, now may be the time to do a 1031 exchange and purchase a new investment property.
  • Property Management. No matter the market, there will always be renters. Consider adding property management to your real estate business.
  Got any more “pivot” ideas? If so, feel free to share them in the comments. Best wishes to all for continued good health during this unique and challenging time.
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