Young Gun Brokers

[MTR]

Just curious, here is an article sent to me a while ago
http://resources.keymedia.com.au/pdf/MPA/MPA13.03_YoungGuns.pdf

I am very curious, one of these young guns settled on $34M resi mortgages 12 month period, any idea what that equates to in terms of brokers pay packet for the financial year.

I am not planning to become a broker. Anyone else curious

Cheers
MTR

 

[Player]

No idea on the numbers, MTR.

In that article, it appears that Somersoft's very own Aaron C is featured on page 13 of 14 in the pdf you linked.

 

[Kinnon Bell]

Upfronts alone would be a very conservative $204k.

But depending on the commission structure with the aggregator they could have a 70/30 split or even a 90/10 split. Those with Aussie et al would be on the less generous side of things. Instead of having a split there are also aggregators with a model that is a set fee per month which is better for those settling high loan amounts.

 

[tobe]

Have you ever used a broker MTR? Part of the process is to disclose their commission, in both dollar and percentage terms.

The commission (paid by the lender) varies between lenders from about .4 to .7 (average .6 to .65) of the loan amount upfront and from 0 to .3 ongoing (usually .15 or so).


The commission received by the loan writer may be dramatically diferent. They may be employed and receive a base salary and commission structure, they may be part of a franchise that can take up to half the commission, especially in the first couple of years while they build their book. In either case an agregator will be involved that can take up to 20% of the commission for porcessing the payment and supporting the writer with a 'platform'.

They may pay for referrals, or marketing which can impact their income, and many will employ an assistant to process loans when they reach a certain threshhold.

For 34mil, the banks pay roughly $221,000 commission. Average loan amount about $350k, therefor 97 loans, or 8 a month, or just shy of 2 a week.

Those sort of figures wouldnt be considered out of the park fantastic, though they would probably be above average. I think the quote is an average broker take about $70k per annum.

 

[westminster]

My broker Ashleigh Wight from Diversifi is on the list.

My debt has helped her to get there

 

[D.T.]

My broker Ashleigh Wight from Diversifi is on the list.

My debt has helped her to get there

Do you feel like taking out more debt for my properties so that you can get her higher on the list?

 

[skeetskeet]

No idea on the numbers, MTR.

In that article, it appears that Somersoft's very own Aaron C is featured on page 13 of 14 in the pdf you linked.

"You really want to do the right thing by the client"

LOL. Really want to. Not you must.

QFT.

 

[westminster]

Do you feel like taking out more debt for my properties so that you can get her higher on the list?

Ummmmm nah!

 

[Rolf Latham]

I am very curious, one of these young guns settled on $34M resi mortgages 12 month period, any idea what that equates to in terms of brokers pay packet for the financial year.

could be 50 k a year.................

Big settlement volumes may have no direct bearing on profitability.

I know brokers that pay > half and in some cases 90 % of the upfront comm to aquire a client, either in marketing costs or direct client rebates.


ta


rolf

 

[MTR]

Thanks Rolf.
So brokers need much more than $34M turnover to make the huge $, be working day and night to do this, not fun

 

[Peter_Tersteeg]

Thanks Rolf.
So brokers need much more than $34M turnover to make the huge $, be working day and night to do this, not fun

I think what Rolf is saying is that you can't judge income by settlements volume. If your marketing costs are low, you have a good arrangement with your aggregator, you can keep your general costs down and you run your business efficiently, $34M can generate a substantial amount of net profit.

Then add the trail income into it and give that time to grow; you've got some serious cash-flow.

On the other hand, if you're operating under a franchise which might take up to 60% in fees and marketing, $34M won't go too far.

The last survey I read on this (about 2 years ago) suggested that the average income for brokers was about $60k - $70k.

 

[TMNT]

thats $50k residual income,

thats fantastic, most people are aiming for $100k passive income, these guys have already acheived it half way

plus on top of that they get the upfront comissions as well

I have been thinking of becoming a broker as well, I know its long hours, but I feel that if you are good at it, and your reputation is/becomes good, once it starts going well, it will snowball into sucesss

 

[Peter_Tersteeg]

It's not residual income at all. Most trail books run off within 2-3 years if unattended. Probably 60% of the work and 80% of my paid marketing goes into maintaining my trail income.

You might also want to consider what the drop out rate is. It is massive, most new brokers pour a significant amount of money into a new business and walk away after a year or two.

Very successful brokers can make a lot of money, most don't make much at all.

 

[TMNT]

It's not residual income at all. Most trail books run off within 2-3 years if unattended. Probably 60% of the work and 80% of my paid marketing goes into maintaining my trail income.

You might also want to consider what the drop out rate is. It is massive, most new brokers pour a significant amount of money into a new business and walk away after a year or two.

Very successful brokers can make a lot of money, most don't make much at all.

isnt it residual for the life of the loan??? ie for a $200k loan,

its like $1000 upfront and $500 per year for the life of the loan?

If they are good at their job and its not a sautrated, im not too sure why theyd walk away after two years,

its like any small business, a lot of fail, just because you do it, it doesnt mean you will go well

but good on ya for giving it a go

 

[Peter_Tersteeg]

You're over estimating the trail income, it's usually 0.15% (so it's more like $300 per year, not $500). It's also based on the amount owing, not the original loan amount.

The funny thing is, home owners have this habit of trying to pay off their loan, so the trail income reduces. Slowly at first, but it does accelerate over time.

Investors tend to want to do top ups and refinances all the time. If you're not there to service this need, someone else will. The loan will be refinanced and you'll loose that little bit of trail. People often tend to look around for better rates which can lead to the same result.

There's plenty of evidence to indicate the life of the average loan in its original state is about 3 years. For most brokers the runoff rate of their loan book is 20%-25% per year. Trail is not a passive income, you have to work to keep it.


I also agree, that if you're good at it, why would you walk away? It thus must stand to reason that most people aren't good at it. There's a lot more to it than filling out a bit of paperwork. I'm not just talking about the technical skills, running a business involves a very broad skill set and is far more tricky than most people ever appreciate.

The most common reason for quitting I've heard from ex-brokers is that they didn't earn enough money to make a living and thus went back to a regular job. The sad this is that most of them don't even know why they failed.

 

[TMNT]

You're over estimating the trail income, it's usually 0.15% (so it's more like $300 per year, not $500). It's also based on the amount owing, not the original loan amount.

The funny thing is, home owners have this habit of trying to pay off their loan, so the trail income reduces. Slowly at first, but it does accelerate over time.

Investors tend to want to do top ups and refinances all the time. If you're not there to service this need, someone else will. The loan will be refinanced and you'll loose that little bit of trail. People often tend to look around for better rates which can lead to the same result.

There's plenty of evidence to indicate the life of the average loan in its original state is about 3 years. For most brokers the runoff rate of their loan book is 20%-25% per year. Trail is not a passive income, you have to work to keep it.


I also agree, that if you're good at it, why would you walk away? It thus must stand to reason that most people aren't good at it. There's a lot more to it than filling out a bit of paperwork. I'm not just talking about the technical skills, running a business involves a very broad skill set and is far more tricky than most people ever appreciate.

The most common reason for quitting I've heard from ex-brokers is that they didn't earn enough money to make a living and thus went back to a regular job. The sad this is that most of them don't even know why they failed.

thats interesting, if your customer base is all O/O with only one property yes I would assume they would pay it off asap, as im an investor, I wont pay any of my loans back unless I sell, so I guess as an investor, it pays to look after me

as for average loan life being 2-3 years, that really really surpirsed me, I would have thought it was something like 25 years

 

[Peter_Tersteeg]

The loan might last 25 years or even longer, but not in its original state. How often do you do a top up or a refinance? If you do this via another broker or a branch, the first broker no longer receives the trail.

 

[TMNT]

The loan might last 25 years or even longer, but not in its original state. How often do you do a top up or a refinance? If you do this via another broker or a branch, the first broker no longer receives the trail.

well, a top up is a benefit to you because you get the ongoing comissions plus an upfront fee,

and I use the same broker ,

are you saying that if you buy Property A For $200k
loan for $200k with broker A, then do a top up to $300k via Broker B

then the trail comissions for Broker A totally disappear?

and does Broker B get allthe trails for the $300k or $100k?

 

[Jamie M]

then the trail comissions for Broker A totally disappear?

Yep, that's pretty much it.

Cheers

Jamie

 

[Peter_Tersteeg]

well, a top up is a benefit to you because you get the ongoing comissions plus an upfront fee,

and I use the same broker ,

are you saying that if you buy Property A For $200k
loan for $200k with broker A, then do a top up to $300k via Broker B

then the trail comissions for Broker A totally disappear?

and does Broker B get allthe trails for the $300k or $100k?

Broker B will likely set things up to get all the trail for all loans. Broker A will no longer receive any trail. Why should broker A continue to get paid if you're going elsewhere?

It's nice that you do all your stuff through the same broker. They get to provide an ongoing service and they get to maintain and even improve their trail position.

If your existing broker decides to retire and live of their trail book, what would you do the next time you need a top up or some other maintenance? Most likely you'd go to another broker or get it done directly with the bank. Your broker would find their income reduces.

Brokers do have to work to keep their trail income, thus it cannot be considered passive.

The reality is in many cases the upfront commissions is barely enough to keep the business afloat, sometimes it's still a negative equation. The trail income allows the broker to actually pay themselves something. If the broker has been working hard for 10 years they do very well. Years 1-3 are pretty tough though. This is a major contributor to the high dropout rate. How many people can afford to not pay themselves regularly for up to 3 years?

It is a good business to be in, but it's not quick or easy money. You have to work very, very hard to make anything out of it and you do have to be good at a large range of skills, many of which contradict each other. On minute you're looking at the big picture, the next you've got to be a details person. Then you have to work on marketing, later on compliance.

If you can survive about 4 years you'll probably do quite well but I estimate about 90% don't get that far.