RES 497 Week 5 Final Paper

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Ashford University *

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497

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Feb 20, 2024

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Strategic Business Plan Elena A. Cooper RES 497 Strategic Management of the Real Estate Enterprise Margaret Vivoda November 6 th , 2023

Introduction All companies need to have a plan in place before they can even decide to open the doors to the public. The following paper is an actionable strategic plan for the real estate brokerage, Cooper Realty, LLC. Mission Statement “A mission statement is a single sentence that describes a company's fundamental purpose by explaining why the business exists” (Indeed Editorial Team, 2022, p.3). The mission statement will let people in the community know what we strive to achieve while we are in business. The mission statement for Cooper Realty is 'Delivering excellent service across the real estate market. We believe in lifelong relationships and treating our clients like family. They come first and they have a voice and say in what happens or doesn’t happen throughout the transaction'. Vision Statement “A vision statement is a written document that describes where an organization is going and what it will look like when it gets there” (Hoy, 2023, p.4). Vision statements are like mission statements, but they tend to look at the long term and not short term. Cooper Realty has a vision statement that states ‘To make a difference through a combination of independence, support and competitive advantages for our realtors and working on behalf of our clients, while helping the community grow and develop’. Environmental Scan Analysis “ An environmental analysis, also called an environmental scan, is a strategic tool used to identify and assess all external and internal elements in a business environment ” (Estrellas, 2023, p.1) Every time that a new Realty or Brokerage is opened there is always going to be a threat to the

new company. There are many other brokerages that are larger than Cooper Realty and some people may not want to go with a new company, but instead go with a company that they know of and heard about in the community. When a company is starting out, they need to do market research, which may include reading articles, newspapers and academic journals in order to familiarize themselves with other companies in the area. Read these articles can help them understand what works and does not work in the community that they are looking to open in. Another thing that can help a new company like Cooper Realty is to know someone else in the field. This person can help the new company gain a better understanding and insight into the field and community. Guiding them along the way and being there to lean on in times of questions and need. SWOT Analysis This section of the paper contains a SWOT analysis breakdown of the owners personal and professional skills. “A SWOT analysis is designed to facilitate a realistic, fact-based, data- driven look at the strengths and weaknesses of an organization, initiatives, or within its industry” (Kenton, 2023, p.2). This section will explain the owners’ strengths and weaknesses in the real estate field. It will also explain opportunities and threats in the current field that could affect the company. Strengths According to Speth (2015), strengths are elements that positively influence an organization’s development and competitive position. One good strength to have in the real estate field is organization. Being able to make sure that everything has its place is a great way to make sure that you can find everything that you need. Making sure that all documents are in their correct file helps you to be able to find things quickly, can help you make deadlines and in doing

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so your self-confidence can get a boost. The author has always been one of those people that loves making lists of what needs to be done. The owner of Cooper Realty also makes lists and notes of phone calls just in case they need to look back at them. Being able to problem solve or switch gears. Companies never know when they may come across a problem that needs to be solved. Some problems need to be solved quickly and others you can take some time to find a solution. If you cannot find the solution and you need help, do not be afraid to ask questions. Asking questions can be good if there is something that you do not totally understand. In the owner’s past job as a settlement processor there were new programs, like Qualia, that had to be learned and it was helpful to ask questions about it, rather than finding out how to do something on their own. It saves time asking for help and shows that you are not afraid to ask for help when it comes to something you are unsure about. Another strength is being able to multitask. As a realtor or broker, you are handling multiple files and properties at one time. There are lots of documents and tests that are needed for each property, and they have due dates that must be met. In the process of getting documents and these things needed for closing on time can help you establish relationships with clients and other parties involved. Cooper Realty loves being able to form these relationships with clients. How our clients and realtors are treated can show others how we conduct business and make them want to come back and use us again. The last strength is that the owner has lived in this area for over 20 years, and they have a vast knowledge of this area. Having this knowledge could help Cooper Realty to be able to suggest places in the area that would help the client based on their needs. Weaknesses

According to Speth (2015), weaknesses tend to negatively impact on its development. The first weakness that could affect this company in the real estate world is that they do not have any certifications. Even though certifications are not a necessity in this field, they could help give the company a leg up. The main training certification that would help in this field is the Real Estate Settlement Procedures Act (RESPA) for Compliance Professionals. This course talks about disclosure requirements and escrow accounts. Opportunities According to Speth (2015), opportunities can be exploited to improve progression and if used wrong can turn into weaknesses. Opportunities are something that can truly help your business if it is used in the right way. One major opportunity is the use of new technology. Drones have been used more and more in the last few years in the real estate world. They have been used to fly over properties and take pictures and videos of homes. These pictures can help clients see the full property at one time. Virtual reality and walkthroughs became big during Covid, and realtors are still utilizing them. This is a great way for clients to view the property and make sure that it is something that could work for them before spending the time driving to a property that will not work for them. Another opportunity is having what is considered a one stop shop. The last company that the owner worked for was a settlement company. The company happened to be in the same office building as a mortgage company and a brokerage company with lots of realtors. Having companies that go hand in hand close together can make it easier for clients to find everything that they need to in one spot. They meet with a lender to get prequalified for a loan and then they meet with a realtor to find a home and then the settlement company takes it to closing. It saves a lot of time and energy going from place to place and having to track down everyone.

Threats According to Speth (2015), threats to your company can originate from external environments. These threats could harm your company and business if they are not taken seriously and corrected in a timely manner. The rise and fall of the interest rate can harm any business in the real estate field. Falling interest rates, even though a good thing, can bring more business to you and it could be too much for your company to handle, especially if you are a smaller company. When it comes to rising interest rates, no one is going to want to buy or sell homes, so you are not going to have as much business, and it could hurt your bottom line. If you are a smaller company, then larger companies can become a major threat to your company. This is something that could hurt your company if you let it. Just because you are a small company doesn’t mean that you cannot do anything that they are doing. Yes, they may have the capacity to take on more clients than you, but being smaller you are able to put a more personal touch on your closings. Significant Changes “Demographics are the data that reflects the composition of a population, such as age, race, gender, income, migration patterns, and population growth” (Nguyen, 2023, p.3). These types of things can affect the real estate industry in both good and bad ways. When it comes to age, only people over 18 are going to be buying a home and not all people over that age are going to qualify to be able to buy a home. “The U.S. is expected to add 50 million people to its population over the next 20 years” (Lynn, 2013, p.4). Adding more people to the population can cause a need for more homes and even have people having to look elsewhere because the demand is so great. “Increased population requires more housing, shopping, places to work (which includes factories and office buildings) and more hotels for travel and recreation (Lynn,

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2013, p.2). This also means that there will be a need for more parks, schools and sufficient spaces and healthy conditions, such as public transportation and healthcare. When you live in a place that accepts immigration, it can attract a lot of people. These people wish to move here and find a home that is located near their families or in areas that their families know. “Baby boomers are looking to downsize and find more manageable homes as they retire” (Ferrer, 2023, p.8). When they are younger, they buy homes that will fit their growing families, but when they get older, they want to find something that they can move around in easier. Millennials, who are born between 1981 and 1996, are now the largest generation in the workforce, and they are starting to buy homes” (Ferrer, 2023, p.7). “The affordable housing crisis is facing a perfect storm with the housing shortage and growing barriers to entry with higher credit scores, deposits, and income requirements for renters” (Forbes Biz Council, 2021, p.4). People have not always been able to afford rent or mortgage payments. As the years go by these get higher and higher as the cost of living and interest rates go up. “Access to affordable rents, or fair down payment requirements, and mortgage rates as well as reasonable operating expenses (e.g., tax, insurance, repairs) (Oostrom and Ulbrich, 2021, pg.10). This should be something that everyone has a chance to do in their lifetime. They should be able to live the American dream of homeownership. Until the time comes that they can do that then renting a place needs to be affordable. Interest rates are constantly changing and there can be positive and negative issues with these. “Changes in interest rates can greatly influence a person’s ability to purchase a residential property” (Nguyen, 2023, p.10). If the interest rate is high then my principal can take longer to pay off, in the long run you are paying more interest. The lower the interest rate, the lower the cost of a mortgage. Lower mortgages create greater demand for real estate, which pushes prices

up. This means that you would pay more for a home even if the interest rate is low because there is such a demand for the homes. “Real estate development is the process of purchasing raw land, rezoning, renovation and construction of buildings, as well as sale or lease of finished products to end-users” (Jackson, 2020, p.9). This can affect the real estate industry in a very negative way. If we keep building and logging raw land, soon we are going to run out of land to develop. This can affect land, animals, air, and all things that we depend on to survive. There could also be issues in the long run with zoning laws and restrictions. You may buy a building or piece of land and not be able to build what you want on it. You would have to try and get it rezoned and it is not an easy task. During COVID-19 there was a demand for homes, but there was a shortage of building materials, lack of workers and difficulty getting financed due to job loss. Because there was a shortage of building supplies, what was available was priced higher due to the demand. Future Industry Even though this company is in the real estate industry today, they need to be able to look ahead to the future and know what could happen. Issues that may happen could affect you in ways and you need to make sure on how to better yourself for that. “Agents must be conscious of the shifting market trends and modify their strategies” (Ferrer, 2023, p.12). You need to be able to shift based on who you are looking for, you aren’t going to show the same house to someone who is single and to a family of 6. You need to know what they are looking for and help them to find what is right for them. “The future vision of cities and buildings is based on four pillars: livability, sustainability, resilience, and affordability” (Oostrom and Ulbrich, 2021, pg.9). Livability can refer to the attractiveness of a neighborhood, city, or region encompassed into one that can enhance the

human experience. Sustainability can be great for investors by being able to improve on the return they would be getting by being able to lower the operational costs and increasing the property value. “At the heart of building resilience is future-proofing cities and buildings and the humans that occupy them, by mitigating the effects of unforeseen natural and man-mad events, such as climate, financial, and health crises, and preserving the cultural identity of communities” (Oostrom and Ulbrich, 2021, pg.10). In the future, I believe that a lot of people are going to decide on selling or buying their own home, without an agent. It throws around the question of is it better to list your property by yourself or enlist the help of an agent. If you are someone who has bought and sold multiple properties and you pretty much know how the process works and you could save some time and money by being your own agent. If you are just starting out or buying your first home, a realtor may be the way to go, but it is all about how comfortable you are. Start-up costs Licenses To start a real estate brokerage office in the state of Virginia, you first need to get your real estate salesperson license. To get your license, you must take a 60-hour pre-licensing course. This course takes about a month and can range from $200 to $500 to complete. After you complete the course, you will then need to take the real estate exam. The exam will take two and a half hours to complete and cost $60. You will also need to pass a background check, which will take four to six weeks to complete and cost $52 to take. After all of this you can file for your real estate salesperson license and pay $170 when you file. After you have completed all of these steps, then you can start on the brokerage license part. To be considered for a brokerage license you need to be an active, full-time realtor for at

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least the last three years prior to applying for your brokerage license. Another stipulation before you can apply, is that you have to complete 180 hours of real estate courses. These 180 hours do not include the 60 hours that you completed for the salesperson license. These hours can cost you about $1100 to complete. After these hours are completed, you can take the brokerage test and if you pass you can apply for your license. Taking the test and applying for your license will cost $270. The last license that you need to obtain is your business license. Some states do not have statewide license requirements, but if you work in certain industries you are required to have one. Virginia is one of those states. “Real estate brokers, engineers and home inspectors, for example, must obtain a state license” (Iwuozor & Main, 2022, p.3). The first step in getting your business license is to choose a name for your company. The author of this business plan has decided to name their brokerage. Cooper Realty. They have also decided to form a limited liability company (LLC) and will have to file the articles of organization with the Virginia State Corporation Commission. They will file for an EIN, or an employer identification number, this is used to file taxes and pay employees. After doing these things the owner can then get a business license. Real Estate Fees When it comes to starting a real estate brokerage there are different fees that you will have to pay before you can even open the doors. Multiple Listing Service (MLS) “is a database established by cooperating real estate brokers to provide data about properties for sale (Chen, 2022, p.1). This could cost a broker between $36 to $60 per month. Another fee would be the REALTOR association fee, which includes local, state, and national REALTOR association fees

plus one-time application fee. This fee would cost the brokerage between $500 and $850 per year. Insurance In the state of Virginia, there are different types of insurance that are required for you to have before you can open the doors for business. The first thing that you need to get squared away in the insurance category is getting a business owners policy. A business owners policy can cost between $700 and $3800 per year. This type of policy includes general liability insurance, commercial property insurance, and business interruption insurance. According to TRUiC (2023), generally liability insurance protects a business from the financial burden that could come from claims arising from bodily injury, personal injury, or property damage (p.2). Business interruption insurance will replace some of the income you may lose for a period after a covered loss. TRUiC (2023) states that commercial property insurance is put in place to repair in case you must repair your building, tools, furniture, or any other physical object in the event of a covered catastrophe (p.4). The next type of insurance is worker’s compensation insurance. Being a brokerage, the realtors will technically be self-employed and will file 1099’s so they would not be able to file a claim for workers compensation, but there will be some employees that would be w-2 and they would be able to claim. These employees could include the manager and receptionist. The average cost of a workers compensation insurance is $45 per month. Another insurance that you need to have before starting work is errors and omissions (E&O) insurance. Errors and Omissions (E&O) insurance is a type of professional liability insurance that protects companies, their workers, and other professionals against claims of

inadequate work or negligent actions (Frankenfield, 2023, p.1). E&O insurance can cost $500 to $1000 per employee per month. Office Space The next step to opening your own business is to find a place either to buy or rent. Cooper Realty LLC has decided to rent a space. Cooper Realty decided on 150 Riverside Parkway in Fredericksburg, Virginia. Suite 309 is 6933 square feet with 28 separate rooms and a reception area. According to LoopNet, it costs $18 per sq ft per year to rent the building. The rent for the suite would be about $10,500 per month. The owner would have an office, along with a file storage room, printer room, and three conference rooms. This would leave 22 rooms for realtors. The brokerage would rent out 17 rooms to realtors that would want office space. They would have three rooms that would be set up for realtors to drop in and work. Renting out these spaces would help pay for the rent. Computers, furniture, and fixtures There are many things that the brokerage would need to buy to start their company. They would need furniture, like desks, chairs, tables, couches, etc. They would need computers and filing cabinets and even pens and paper. They would also need to get a copier, printer, scanner, and anything else that they would need to run the day-to-day business. Cooper Realty is allotting $50,000 for the company to be able to buy the things they would need. Anything that is left over from the initial startup will be placed in an account for when they need to buy other supplies. Marketing and advertising expenses When a company is first starting out, they need to be able to advertise their company. Cooper Realty will need to start before they enter the building, they are renting to be able to get realtors to be a part of their company. They will then need to advertise their business. They

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would also need to pay for signage for the building, business cards and flyers to promote the opening of the business. Cooper Realty will be allotting $10,000 to the initial setup of marketing and advertising. All unspent funds will be placed into an account for further marketing and advertising needs. Initial staff training and development All staff need to be trained. When it comes to a brokerage most of the staff would be realtors and they have already been trained. The only people that the brokerage would need to train would be the receptionist and the office manager. Cooper Realty can hire people with prior experience, and this will cut down on the costs that they would have to spend to train new employees. Fixed Expenses Fixed expenses are expenses that need to be paid every month and are not expected to change. These expenses make it easier to budget because you know what the cost is going to be month to month. The following chart shows the fixed expenses for Cooper Realty by month, year, and two years. Expense Per Month Per Year Per Two Years Rent $10,500 $126,000 $252,000 License Renewal Fees n/a n/a $65 Post Licensing Education n/a n/a $200 E&O Insurance $60 $1,440 $2,880 MLS Fees $60 $1,440 $2,880 Business Owners Policy $317 $3,800 $7,600 REALTOR association fees $71 $850 $1,700

Workers Compensation $45 $540 $1,080 Variable Expenses A variable expense is an expense that can vary from month to month. These can vary from utilities and marketing to supplies. You can never plan for how much you will use throughout the month. Cooper Realty understands that these vary and has planned an allotment of money per month as a base for the expenses. See the table below for their expenses. Expense Per Month Per Year Per Two Years Utilities n/a n/a n/a Marketing/Advertising $200 $2,400 $4,800 Supplies $500 $6,000 $12,000 Plan to Cover Startup and Expenses The first thing that Cooper Realty plans on doing is getting a business loan. The brokerage would shop around and see which bank would work right for them. Cooper Realty would be looking for a loan of $500,000 to cover start-up expenses and have some money in the bank for the first year. The owner would cover the cost for her real estate license and brokerage license, along with all the post licensing classes. The company is hoping to have half of the offices rented on the day they move into the office space to cover the rent and utilities for the upcoming months. Anticipated Revenue Sources There are many types of anticipated revenue sources. The major one would be regarding the rental spaces that Cooper Realty is offering to the realtors. The brokerage would supply a desk and chair and file rack for each office and charge a fee to cover the rental of the furniture and the utilities. The next revenue source would be commissions from the realtors. When realtors

enter into an agreement to work for a brokerage, they agree that part of their commission would go to the realtor. A break-even point is something that is hard to figure out when you are not sure of how many people would be renting your space. I would assume that it would take a couple years before we are able to break even. Analyze Internal Controls Preventive controls are practices and policies designed to stop problems before they occur. Detective controls are procedures that are put in place and designed to identify already existing problems. Cooper Realty has set in place an employee handbook. This handbook allows all employees and realtors to understand what is expected and what would happen if there was a problem or a rule that was broken. This handbook also establishes authorization protocols. Understanding who can or cannot authorize certain transactions that happen can help everyone know who they need to go to if they need something specific. A handbook will go over everything that someone needs to know to work for Cooper Realty and if it is read and used as a resource a company should run smoothly. Competitive Advantage Analysis According to Oyinlola (2021), a competitive analysis is a process that involves identifying your companies’ competitors and evaluating their strategies to determine their strengths and weaknesses relative to your own business (p.5). The first thing to determine is who are the competitors in the same field as Cooper Realty. Other major realty companies would include Re/MAX, Century 21, and Coldwell Banker. These companies would be considered direct competitors since they offer the same type of service that Cooper Realty would provide. The next part of this analysis is to look at the different things that these companies offer to clients and even to their employees. This could include a newsletter, social media presence, how

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they treat their clients. Knowing who your competition is and what they are doing for their clients and employees can help Cooper Realty have an advantage as to what works and does not work before they open their doors. Cooper Realty needs to understand what works for someone else’s company may not work for them. Measurable Outcomes For the first couple of years Cooper Realty would like to make sure that they are keeping the realtors that they have already contracted, while adding at least two new realtors a year. The broker will work with any realtors that show remarkable effort and abilities as a realtor to train them as a broker and help them obtain their broker’s license. The last thing that Cooper Realty is looking to do is to continue to rent out their offices to realtors within their company. The owner has also thought about renting out the conference rooms to other companies that may need a place in the area. Conclusion This paper has shown a strategic plan for Cooper Realty opening a real estate brokerage. They have gone over strengths and weaknesses that could hurt their company. They have analyzed their competitors and listed what it would cost to start a brokerage. They have found an amazing property to rent and hope to find a brick and mortar of their own within the first few years. Cooper Realty understands what they need to do and know that it is important to continue learning to grow and thrive in the real estate world.

References Chen, J., (2022). Multiple Listing Service (MLS): Definition, Benefits, and Fees. Investopedia. Retrieved from https://www.investopedia.com/terms/m/multiple-listing-service-mls.asp Estrellas, L., (2023). What is Environmental Analysis?. Safety Culture. Retrieved from https://safetyculture.com/topics/environmental-analysis/ Ferrer, J., (2023). The Impact of Changing Demographics on the Real Estate Market: How This Affects Agents. Transactly. Retrieved from https://blog.transactly.com/the-impact-of- changing-demographics-on-the-real-estate-market-how-this-affects-agents Forbes Biz Council, (2021). 11 Predictions for The Future of The Real Estate Market. Forbes. Retrieved from https://www.forbes.com/sites/forbesrealestatecouncil/2021/09 /13/11-predictions-for-the-future-of-the-real-estat-market/sh?43b15797106e Frankenfield, J., (2023). Errors and Omissions (E&O) Insurance. Investopedia. Retrieved from https://www.investopedia.com/terms/e/errors-omissions-insurance.asp Hoy, T., (2023). What Is a Vision Statement? 25 Powerful Examples to Inspire Your Own. Board Effect. Retrieved from https://www.boardeffect.com/blog/what-vision-statement-why- important/ Indeed Editorial Team, (2022). What Is a Mission Statement Definition and Examples. Indeed. Retrieved from https://www.indeed.com/career-advice/career-development/what-is-a- mission-statements Iwuozor, J. & Main, K., (2022). How To Get A Virginia Business License (2023 Guide). Forbes Advisor. Retrieved from https://www.forbes.com/advisor/business/virginia-business- license/ Jackson, C., (2020). All About the Real Estate Industry. Construction 21. Retrieved from

https://www,construction21.org/articles/h/all-about-the-real-estate-industry.html Kenton, W., (2023). SWOT Analysis: How To With Table and Example. Investopedia. Retrieved from https://www.investopedia.com/terms/s/swot.asp#toc-what-is-swot-analysis Lynn, D.J., (2013). Demographics and Real Estate Demand. National Real Estate Investor. Retrieved from https://www.nreionline.com/institutional-investors/demographics-and- real-estate-demand Nguyen, J., (2023). 4 Key Factors That Drive The Real Estate Market. Investopedia. Retrieved from https://www.investopedia.com/articles/mortgages-real-estate/11/factors-affecting- real-estate-market.asp Oostrom, C.V. and Ulbrich, C., (2021). A Framework for the Future of Real Estate. World Economic Forum. Retrieved from https://www3.weforum.org/docs/WEF_A_framework _for_the_future_of_real_estate_2021.pdf Oyinlola, D., (2021). How to Do a Real Estate Competitive Analysis in 7 Easy Steps. Indeed. Retrieved from https://www.linkedin.com/pulse/how-do-real-estate-competitive-analysis- 7-easy-steps-free-oyinlola/ Speth, C., (2015). SWOT Analysis. Lemaitre Publishing. Retrieved from https://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=4006313 TRUiC Team, (2023). What is a Business Owners Policy? How to Start an LLC. Retrieved from https://howtostartanllc.com/business-insurance/business-owners-policy TRUiC Team. (2023). General Liability Insurance. How To Start an LLC. Retrieved from https://howtostartanllc.com/general-liability-insurance

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RES 497 Week 5 Final Paper

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