The Real Deal New York

Starting a residential brokerage in New York is a world of pain

Here’s what you need to know, according to those who’ve done it

From left: Karla Saladino, Jordan Sachs, Zach Ehrlich and Andrew Barrocas

When Jordan Sachs and Todd Jacobs set up shop in 2010, they had a hot, airless 350-square-foot office on 12th Street and Broadway, with rented furniture. “We were so proud of it. I remember bringing my family in and I was like ‘look at this!’” said Sachs. “We’re super embarrassed about it now. It’s like, holy shit, that was our pitch?”

Sachs, who worked in e-commerce and ad sales, and Jacobs, a former broker at Marcus & Millichap TRData LogoTINY, decided to launch Bold New York while the city was still reeling from the recession. The condominium and co-op markets were dead, so they dove into the unglamorous world of walk-up rentals, which gave them immediate cash flow. Two years later, they expanded into resales, and in February, they scored their first new development: Largo’s 13-unit project at 533 Leonard Street in Greenpoint.

“If you’re hitting the three-year mark, and you’re actually growing… you’re probably within the 90th-plus percentile.”

–Zach Ehrlich

“We didn’t try to move quicker than we were able,” said Sachs who, along with Jacobs, coughed up $100,000 to get the business started. “We got whatever we had in our bank accounts and wrote checks.”

When it comes to new residential brokerages in New York, four-year-old Compass grabs all the headlines. But every month, there are plenty of other hopefuls that set up shop, hoping to capture a piece of the city’s cutthroat market. They promise a fresh approach to the business, greater dedication to clients, and a lot more. In many cases, their founders are bootstrapping from day one, writing checks and hoping their hard work will pay off. Often, it doesn’t.

“The failure rate is massive,” said Zach Ehrlich, who founded Mdrn. Residential primarily with his own funds in 2014. “If you look at the amount of money that’s being invested in large firms or in venture-backed firms, it’s an extremely competitive field. How do you ultimately compete against a Compass with $170-plus million in venture capital?”

The big brokerages have the brand recognition, the connections, and increasingly, the access to investors that developers crave. But the founders of several firms said that while striking out on your own without big backers is harder than ever, there are still ways to make it work.

“I’m a believer,” said Andrew Barrocas, who founded MNS in 2006 with around $50,000. “It’s definitely doable. But you have to have a real strategy.”

Barrocas admitted that were he starting out today, he’d face challenges that didn’t exist a decade ago. Information is no longer as big of a competitive advantage, he said, as consumers can get data on rentals, sales, inventory, construction history and much more directly online.

“New York City real estate operated as a black box in the sense that the brokerage community had the information and the consumer had very little,” said Sachs. “Now it takes real data. As a broker you can’t just kind of wave your wand and assume that’s going to direct somebody.”

The little firms that could

For some founders, transparency levels the playing field. “There’s nothing that a boutique firm can’t do or provide that a larger company can,” said Jason Bauer, who set up his firm Voda Bauer with Avi Voda in 2014.

Bauer, who chose to operate his now 47-person brokerage out of a WeWork space to keep initial setup costs down, said his firm focuses on recruiting agents with between three and five years of experience.

“Big firms pay attention to the rainmakers… and they pay attention to new agents but everything in the middle sort of gets lost,” he said.

Ehrlich said he puts an emphasis on hiring the right managers to train agents. “A lot of these companies that start, the principal, the founder, is the one transacting,” he said. “You can’t build a company effectively [like that], somebody needs to be thinking about strategy.”

Growth, rather than survival, is the real test, several entrepreneurs said. “You don’t see new companies starting from scratch and dominating the market, unless they go public and they raise money from Wall Street or investors,” said Aviv Zumin, who set up AZ Realty in 2011 and sold it to FirstService Residential in 2014. “I don’t know if I would’ve been been successful if I was not part of a large management company.”

Standing out from the pack of noobies is “very challenging,” Ehrlich said, “but once you hit a critical point where enough people know who you are, it is easy to identify what the issues are and actually hit a couple of singles and doubles. If you’re hitting the three-year mark, and you’re actually growing… you’re probably within the 90th-plus percentile. And I do think it will get harder and harder for firms to actually meaningfully scale up from scratch.”

But even national behemoths with the capital and brand name often meet their match in New York. The city’s residential graveyard is full of national powerhouses that flamed out here, such as Coldwell Banker, which teamed up with Neil Binder’s Bellmarc Realty but made a hasty exit when Bellmarc imploded. Others, such as William Raveis, are still operating in New York but haven’t made a dent.

One sign of progress is scoring exclusive listings, which require landlords, sellers and developers to believe that a new firm can actually make things happen and will be around for long enough to close a deal.

For Karla Saladino, who founded Mirador Real Estate in 2013, working directly with developers was the best way to establish the business. Her company partnered with Scott Solomon, CEO of Pan Am Equities, the development and property management firm backed by the Manocherian family. Pan Am Equities’ website states that the company works exclusively with Mirador on leasing assignments.

Mirador is not Saladino’s first go at this. She formed her first brokerage, SDB Residential Real Estate, in 2004 with an equal partner, a move she does not recommend. SDB was folded into Mark David & Co.

“Mom calls it expensive grad school,” she said of her first firm.

Fight or flight

Being a successful broker at a big firm does not automatically mean you’ll get the same traction on your own, Saladino warned. And there are costs, such as Real Estate Board of New York membership dues and licensing fees, that brokers often overlook.

“I’ve spoken to countless agents who work at Elliman … who say ‘well, I go and get my own exclusives.’ And I say, ‘well, yeah, but you’re let in the door because Elliman is investing XYZ in the marketing to get you that brand recognition,’” Saladino said.

As a small firm, you have to say, ‘well, if you have two bad quarters in a row you could be in trouble.’”

–Jason Haber

There are certainly examples of brokers who were thriving while at larger firms but didn’t get the same momentum on their own. Jarrod Guy Randolph, for example, was widely considered to be a star at CORE. In June 2014, he left the brokerage to form his own shop, JGR Property Group. Less than four months later, however, Randolph hopped to Town Residential. He later went back to running his own firm, now called JGR Consulting Group. Asked to comment, Randolph said that his firm now focuses on off-market commercial deals, and does some pre-development consulting for residential projects.

Smaller firms sometimes decide to agree to be bought up by the bigger players. In November, Bond New York acquired Harlem-based Absolute Properties. In 2015, Citi Habitats acquired Brooklyn specialist aptsandlofts, which was founded by David Maundrell in 2002. The following year, Citi Habitats picked up Miron Properties, a seven-year-old firm founded by Jeff Schleider. Representatives for Citi Habitats declined to comment.

For Jason Haber, who started Rubicon Property in 2010 and sold it to Warburg Realty in 2014, moving on from the business was about practicalities. “I was realistic about it,” said Haber, who started the business with his own funds and first ran it with his brother from his living room. “In 2014 I was concerned about the market contracting, in terms of the inventory count, which it did. As a small firm, you have to say, ‘well, if you have two bad quarters in a row you could be in trouble.’”

Mirador has absorbed brokerages in the past, one of which Saladino likened to an “injured giraffe on the Serengeti.” In most cases, Saladino said, the owners quickly realized they were running out of gas.

“We didn’t even purchase them, we just absorbed the talent,” she said. “There’s really nothing to buy.”

In November, Saladino said Mirador was in talks to acquire UpNext Real Estate, a Soho-based brokerage founded by Miron Properties alumnus Gary Posylkin. When asked about the status of the deal in January, however, sources close to Mirador said it was dead, though Posylkin will be joining the firm. Posylkin did not respond to requests for comment.

“We didn’t even purchase them, we just absorbed the talent, there’s really nothing to buy.”

–Karla Saladino

Sources were reluctant to single out outright failures, though it’s clear that things sometimes get very ugly. RLTY NYC, for example, was rocked by a feud between two of the founders, real estate scions Ben Benalloul and Emir Bahadir. The brokerage, which was founded in 2014, shut down late last year, sources confirmed. Another defunct firm appears to be Gild Real Estate, which no longer has a functioning website.

Still, the founders of brokerages that have stayed in the game say that while the challenges are enormous, the payoffs can be big, too.

“There’s a lot of buildings in the city that we live in,” said Barrocas. “There’s enough room for everybody to get what they deserve.”