Business Banking & Finance Mortgage broker - need advice for the right direction

Discussion in 'Starting & Running a Business' started by PropertyInsight, 9th Jul, 2018.

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  1. PropertyInsight

    PropertyInsight Well-Known Member

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    I think of becoming independent mortgage broker and I am seeking your advice if it is the right choice.

    My background is accounting/finance (5 years) and IT industry (20 years). I have been working n the IT industry for the last 20 years and step up to the management ladder. Now I am planning to become independent mortgage broker because of the following reasons:

    Reasons for change

    1. Have more flexible working hours to look after the family and more time to do the interstate IP renovations in the next 3 years.
    2. High rewards if the business is successful
    3. Quit the current IT job whose technologies change every 3 months. I am getting old and slow to catch up with the latest technologies.

    Challenges
    Drop the income. Mortgage broker does not make much money in the 1st years. I am a high earner, $150K/year, to cover the existing mortgage of 4 IPs.

    Questions

    1. As a mortgage broker, how much do I likely to earn in the next 3 years if I work hard and focus on the business? What the chance for me to earn the same as or above the current job.

    2. What are the most challenges for new mortgage brokers?
     
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  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    How will you get clients?

    I made $12,000 in my first 12 months.
     
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  3. PropertyInsight

    PropertyInsight Well-Known Member

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    In the 1st 12 month, mainly get referring from friends, real estate agents (friends),
    Long term, referring from past clients and digital marketing.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You will need something more than this!
    The referrals will be few and far between. Family - some will use you but others won't want you seeing their private financial situation.

    Why would a prospective client use you and not one of the other 1000 brokers out there?
     
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  5. Sackie

    Sackie Well-Known Member

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    If you also have an accounting/finance background I would be more interested in trying to become a financial/accounting consultant for companies. It may be slow to start but I know the potential is massive and I have friends doing similar, although they have 10 plus years experience before going solo. And flexible work hours as its your own business.
     
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  6. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    I don't know what average is, but I saw a post on a broker facebook page about someone 3 years in who was averaging $700-$1M/mth in settled loans. That's grossing approx $4500 - $6500/mth, before you take out any costs. I'd want a year of living expenses set aside for the first year to allow you to concentrate on the biz, otherwise you'll be so distracted with the financial side you'll never get enough traction to actually earn any money.
     
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  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It costs my company around $20k per year in base expenses, and that is without paying any rent.
    Starting off you will have a lot of upfront costs, plus the ongoing, plus the low client numbers.
     
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  8. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    A survey done a year or two ago suggested the average income for a broker was about $130k per annum, before business expenses.

    Within the first 3 years, I wouldn't anticipate earning much at all. 15 years ago my business was profitable in its second year, but the end of the 3rd year I was starting to think about paying myself a modest salary. In year 4 the GFC happened which was a bit of a setback.

    Honestly the primary drivers of financial success have little to do with being a great mortgage broker and a lot to do with being good at sales and marketing. For some that comes quite easily, but I'm an extreme introvert and I really struggled at first.

    The biggest challenge right now is the constant changes in the industry which are generally compliance related. It's been ongoing for 3 years now and I think it will be a few years before this is fully realised. There is a (very small) risk that this may kill of the mortgage broking industry completely within the next 2 years.

    Don't get me wrong, it's a great industry to be in, it can be very profitable if you're in it for the long term. The first few years is very tough, and it's a very tough time to be getting started.

    It's also a great example of the 80/20 rule. 80% don't last the first 2 years. 80% of those remaining will probably be okay. 80% of the real money is earned by 20% of the successful brokers.
     
  9. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    1. It's impossible to answer - it will vary a lot

    2. Getting clients. When you're starting off you have no track record/reputation/experience. I see new entrants talk about how many $xxx they plan on settling each month - then when they launch they experience how difficult it can be getting business.

    Cheers

    Jamie
     
  10. Harry30

    Harry30 Well-Known Member

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    For those new to the industry, it not better to start with an existing operator such AHL or similar where some of the marketing support and brand is already established.
     
  11. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    The right person, with the right head and heart space, not an issue.

    We have helped peops do 1 mill a mth in their 3rd year ........ because that was what their goal was, and for others a 100 k monthly comm cheque 28 mths in their new "career".

    It is what YOU want to make it.

    ta

    rolf
     
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  12. Morgs

    Morgs Well-Known Member Business Member

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    I'd be happy to share my experience @PropertyInsight , hopefully it helps.

    I made the transition from an industry that had nothing to do with financial services. Steep learning curve in particular for me given the lack of background around the technical aspects of lender process/policy and products. Having hands on experience with building a property portfolio over 15+ years was key to helping bridge this quickly. That said things continue to evolve weekly and you never stop learning, I enjoy that.

    The other part which I feel is a steep learning curve for many is being prepared to run a business. There is so much to the job beyond the "job" itself. If you don't have prior sales experience this can be confronting having to get yourself out there, develop business and build lead sources. I've been fortunate enough that I've experience in these areas so this was easier.

    There is no getting around the fact you'll need to work really hard for the first 12 months with little to show for it in terms of income. It can be frustrating especially if you've come from a high income and you may need to tighten the belt for a while to make ends meet. It is a huge industry and the rewards are there for those who consistently deliver good customer outcomes.

    Oh I also found it very difficult not having an onsite IT team to blame for my technology problems... but you'll more than have his covered :p
     
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  13. Rezzley

    Rezzley Member

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    I’m curious on how you guys actually made the transition from a previous job.
    Did you start the business and run it in parallel with the old job, then quit the old job when the business had enough traction?
    Or did you quit the old job and invest all your time with the business straight from the get go?
     
  14. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I did my first loan while working in the AFP. I made more in a few hours than I made in a month so I soon quit my job. It took me about 3 months to get my second loan.
     
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  15. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Many of our mentees have done both, the deep end approach can work better, but one needs 6 to 18 mths of fat to survive.

    The transitional method, can have issues unforeseen, since some employers consider ANY form of outside business a declarable conflict of interest, fortunately common sense prevails here.

    The transition method is the safer, but less likely method of transition for those without that cash buffer.

    Having spousal idealogical support and confidence is critical ...............

    ta
    rolf
     
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  16. PropertyInsight

    PropertyInsight Well-Known Member

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    Thanks all for reply.

    I have another question. Should I run my business under the company name or personal business. It costs about $500 to set up a company and a dozen hundreds per year for accounting costs but separating the personal and company liability and protecting my IP assets. However, as I read information on ASIC, it may take a lot of effort to de-register/liquidate the company later if I do not want continue the business. What do you think?
     
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    This is something you should seek legal advice on. The limited liability nature of a company would be attractive to a mortgage broker which potentially carries high risk these days.

    Companies are easily deregistered - if all shareholders agree and there are no debts, could just wind it up.
     
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  18. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    as someone that does some mentoring work in this space, that question immediately places STRONG doubt on your own capacity to achieve.

    Youd have to assume you were going to make a go of it , and do well....... why start if you are already preparing the back door ???

    just my 2 bobs worth

    ta

    rolf
     
  19. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    as someone that does some mentoring work in this space, that question immediately places STRONG doubt on your own capacity to achieve.

    Youd have to assume you were going to make a go of it , and do well....... why start if you are already preparing the back door ???

    just my 2 bobs worth

    ta

    rolf
     
  20. PropertyInsight

    PropertyInsight Well-Known Member

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    Hi Rolf

    I always admire you as you have very high reputation in mentoring.
    Thanks reply. I always expect the business go well. However, it is also good to plan all scenarios that may happen. What happen if we are in debt or some high risk factors may cause the business collapse?