Doing real estate is not as easy as some people would say. You have to serve your customers and clients full time. This is what Hector Castillo realized when he entered the real estate industry. Starting as a real estate professional, Hector quickly learned doing it part-time can be challenging, so he decided to open his own real estate company. On today’s show, he joins Michelle Seiler Tucker to share his journey to purchasing a franchise, becoming the CEO and a Regional Owner of EXIT Realty New York Metro, and growing it into a brand with 46 offices over 1,600 agents.
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Real Estate Franchising With Hector Castillo
Thank you for having me.
My career started back in 1988, a year after the stock market crashed. Remember that day?
What was interesting is that I came in June 1988, 1987 is when it crashed back then and I did not know what was happening. I was so naive in the real estate industry. There was nothing that was going to stop me from becoming an agent, regardless of what was going on in the news. I did not even pay attention to. I decided to join in as a real estate professional. I was working at the time. I had a job and I decided to do real estate part-time for three months. Later, I decided that have to dive into this business because as a real estate professional, doing it part-time can be challenging. Later on, in the years, I found out that as good as this, a lot of people that start part-time in real estate, many of them remain part-time in real estate. The problem is, how can you serve your customers and clients when you are working part-time? It dawned in me early and a few months later, I decided, “I got to do this full-time.” That’s the way that I started.
In my career, to summarize this, I worked with three major franchise companies before I joined EXIT. From 1988 to 1998, I worked with three other brands, had a great time working there, but I realized that there were some challenges that agents face and that I was facing. None of those brands addressed the issues. Fast forward, “I don’t want to do this anymore. Let me open up my own real estate company. Let me go into business for myself.” I was doing well as a real estate professional. I say, “Let me do this.” I went ahead and I opened up a real estate office in the County of Queens, New York. I bought a building. I gutted the building, I put a lot of money into it and that was going to be my company.
Years later, I realized that I was not growing enough the way that I wanted to. A few years into it, I went to a convention in Atlantic City, New Jersey. That is when I met and for the first time, I discovered EXIT Realty. I had no idea who they were. The next thing you know, I go in and I say, “Tell me a little bit about your system.” I told one of the fellows there. He says, “Let me tell you who we are,” and it dawned on me. I said, “One of the challenges that I had working with other brands was this.” I said to the fellow, “Before you tell me who you are, I want you to tell me and let me get to the bottom line, what are the fees that you collect in your franchise model from agents and brokers when they close deals?” He says, “We have no percentages and we have no desk fees.” Michelle, when he said that to me, you’ve been in the franchise business for quite a few years, you know that there’s got to be a percentage usually.
The young fellow goes and said to me, “We have no percentages and we have no desk fees monthly that we charge.” I said, “How do you do this?” He went ahead, Michelle, and explained that what they did was he says to me, “Hector, the founder of our company realized that as a company, instead of us collecting high profits from brokers and agents, we’re going to collect less of a profit. We want to make it up in value. What we do is that we charge a flat fee when an agent closest a sale.” I tell you, Michelle, that to me was music to my ears because I say, “This is great.” It appealed to me right away, this business model, but then they went ahead and explained how they do things way differently than any other brand. When they broke it down for me, Michelle, it makes so much sense. It was a genius.
There’s one flat fee across the board. If you close the transaction, you pay a minimum fee. If you do not close the transaction, you pay zero.
Right now, we have a little bit over 50 offices across New York State, but all over the country, there are hundreds out there.
This is much in the Downstate New York, which is five boroughs, Long Island and a little bit in the Hudson Valley. We have a few more up in Upstate New York.
Our plan is to take this company from the number of offices we have now to 125 offices minimum. I feel very strongly that this is doable andwhen you look at the real estate industry, the biggest challenges is that a lot of these broker-owners, whether they’re part of a franchise or not quite often, they don’t get much but they get charged a lot. I came up with a whole different concept, a different way of growing the company that allows the agents to make more, keep more. It allows the broker to grow faster and make more and build something that they can sell later on in the future.
That is what I discovered early in my career. Michelle, all of a sudden, I get introduced to this whole concept of EXIT Realty in December 2001, to be exact. Right away, I said, “I want to be part of this company. I want to buy a franchise.” The guy goes ahead and says to me, “I have good news and bad news. The good news is that, yes, we can sell you a franchise, the bad news is we cannot sell it to you as of yet because we do not have anyone to represent mostly in New York.” Michelle, when he said that to me, I went back in my mind back to 1990 when I started with a company. I realized that I gained enough experience and knowledge in these businesses. I said to myself, “With this business model, I can do something whereby more agents and brokers can benefit.” We went ahead and we bought the rights for the company here in our New York Metro neighborhood and it’s been fun since then.
I feel the Downstate New York, 125 is plenty. We may be able to squeeze maybe ten more, but 125 will give us a strong footprint, which we already have anyway.
I’ll tell you why. I have not personally done that, but I can tell you that I speak quite often about this. I tell the broker-owners, “My goal here is that if you’re interested in buying a franchise, our main objective is to help you grow at a rate that you’re able to,” number one. Number two, to be able to grow to a time whereby you decide when it’s time for you to either step out or pass this to your family members. That’s what it is. One of the things that made a big impact on me, when I was first introduced to EXIT is the fact that they introduced a whole different concept of compensation to real estate agents and brokers.
What EXIT International does is they reward agents and brokers. Anyone that works with EXIT Realty, they reward them when they help us grow the company. Let’s pretend that I am the owner of a company and you’re my agent, Michelle. You helped me and let’s say an agent, a friend of yours, joins the office. EXIT International will offer you as a thank you an amount equivalent to 10% of the gross commission of that agent that you introduced to the company. If the agent closes a commission of $10,000, that’s $1,000. If that agent stays with EXIT for the next 5, 10, 20, 30 years, you will get those residual bonuses.
Regardless of what’s happening, people will always buy and sell real estate.
One thing though here’s the beauty, if a broker-owner decides that after 10, 20, 30 years being in the business, they want to step out from being the owner. They’re making an exit. They want to retire. The benefit is this number one because of the retirement benefits that we have they continue to make money even when they sell.
Let’s pretend, Michelle, that you’re the franchisee. You’re the broker-owner of the office and you stay with us for ten years. In ten years, you have grown your office and you have introduced people into the company and that’s great. You’re happy and everything’s well. In ten years, you decide that you want to sell. You decide to sell. The new person comes in and pays the price that you’re asking for. You then go to the islands, Florida, Hawaii, wherever you want to go. Because you stayed with EXIT for ten years and you don’t have to stay for ten years, you can stay for six months. As long as you introduce people to the company, the moment that you retire, EXIT is going to offer you an amount equivalent to 7% of the gross commission of all the people that you left behind working.
It’s different. This is the reason why more brokers and agents want to join in. There’s something else. Remember we talked about me having five kids and I know you have a son as well?
Here’s what happens. Most agents have a family. Another thing that appealed to me about EXIT Realty, Michelle, at the time when I was introduced to is the fact that EXIT International says, “While you are actively working with us, we are going to offer you an amount equivalent to 10% of the gross commission of the person that you introduce.” “The moment you decide to retire at any time, as long as you help us grow with the however numbers of agents you introduced, it’s unlimited, you’re going to get an amount of equivalent to 7%.”
That also makes sense. They brought this to another area that companies have never done before. They said this, “God forbid, you are a real estate agent and you passed away but you helped us grow with X amount of people all over New York, all over the country because you could send people anywhere. Your pre-chosen beneficiary will receive an amount equivalent to 5% of the gross commission of all the people you also left behind.” That means that your family will be well taken care of God forbid something happens to you, imagine.
There are only many years I’m going to be around. The answer is, yes. The idea is to pre-plan an exit strategy whereby this can be passed to someone else. As the leader that I am here in New York, I speak quite often about my franchise owners to also be ready, to also prepare and have built that company where they’re going to have an exit strategy when the time comes. That’s what we’re working towards just so you know.
When I first saw your post on Facebook, I saw the title of the book and I saw this cover and it says,. I say, “Where is this coming from?” I looked up and I realized it was you. You and I met a few years ago. I’m saying, “This is amazing.” I said to myself, “I got to speak to Michelle.” This is what I’m speaking about all the time to my real estate people here, especially the owners. They got to have a strategy to exit this business. I cannot wait to read the book here, Michelle. In my honest opinion, number one, the book is ideal for any industry. In our case, it makes even more sense. Number one, you capture our name, Exit Rich, and that’s what we do for a living. It couldn’t be better than this.
What happened with the founder of EXIT, his name is Steve Morris? He’s up in Canada. Steve Morris has been in the real estate industry for many years. He worked with one of the major brands up in Canada. In September 1996, he decided to introduce the EXIT system to the real estate community. Even though he opened up on September 3rd, 1996, the idea of EXIT was born in 1983. At the time, Steve Morris began to develop the plan of EXIT, tried it in many different layouts or plans or business models that he calls it and realize that “This is going to work. This is not going to work.” He was always going back to the drawing board.
Towards the tail end, he realized that he did not have a name. He was trying to figure out what was going to be the name of this company? He tells the story of how he was traveling. He’s been all over the world. One of those times, he went to Japan. He’s traveling in Japan and he is on the train. Japan, I have never been there, but I can tell you from what I hear it’s crowded. He says, “I’m sitting inside the train. The place is packed. All of a sudden, the train stops and above the door, it had the named exit.” I believe it was also translated to Japanese. He immediately saw how everyone was looking for an exit sign to get out of the train. He started thinking about it, say, “This is a name that is subliminal. You see it everywhere.”
That was the beginning, Michelle, and then he started looking into a little further and realizes that there are over one trillion exit signs everywhere. We see them. We see it in every office building. When you travel to the airport, inside the plane, they do the exit dance. You see it everywhere. You go to the movie theater, there are two exit signs looking at you. Everywhere you’re going through the highway, you go to the expressway, and you see the exit. He tapped into a name that is subliminal. The best thing here is and you know about marketing. It is expensive to market your name in any area but because EXIT Realty, all we needed to do is for the real estate community to understand that EXIT Realty is the name of a real estate company.
The beauty is that it did not cost us any money to promote the name because they see it everywhere. The moment that someone sees exit anywhere, they connect it to EXIT Realty automatically. Now, that we’re adding, that’s another way. That’s another outlet. That’s how that name came about. I thought that it was interesting because it is subliminal. I worked for three brands. I worked for three other major real estate companies. I know that they will spend thousands, if not millions of dollars to be able to promote their name, the way we going to get our name marketed here not just in New York, but all over the country, all over the world when you think of it.
I cannot wait to read your book because it’s perfect for what we do here as a company.
I was listening to something and in the real estate industry, we are lucky to be in this industry because we are one of the three areas that no matter what’s happening, people will always buy and sell real estate. They need shelter. It’s like anyone in the food industry. They know that they will always be in business. It’s the same thing here with us. Regardless of what’s happening, people will always buy and sell real estate. It has affected us but in a positive way, because what we find here is this, when you look at what’s happening out there and let’s talk about the United States here. The average homeowner is a Baby Boomer. These are the individuals that bought a house 10, 20, 30 years ago. They’re sitting on a property with X amount of equity. Quite often, these are the individuals that are now thinking, “Where is this heading? I need to be able to number one either downsize or even go buy something bigger.” Whatever it is, they got to protect that equity. Quite often, what we see in this is that a lot of people deciding to sell and downsize, keep the expenses much lower, pull out the equity, and hold on to it.
A Millennial, unless they married, they will buy into a house. If they have a child or two kids, they will buy into a house because a condo becomes a little bit too tight for them. Ever since COVID, we expected the market to take a dive. Right before COVID, when we saw what was going on, we realized and I say, “This is going to hit the industry and it’s going to take a dip.” To our surprise, it went the other way. I’m speaking about New York. Keep in mind, it’s not across the country. I’m in New York City. I’m on Long Island.
What’s happening here is that one thing that has saved a lot of the buyers and it’s also helping homeowners to a degree is that the interest rate dropped. That is a big incentive because remember in New York City rentals are expensive. What someone is paying for a rental apartment, with a drop in the interest rate, they now can afford the house. If it’s almost the same or a little bit more, they will get a deduction at the end of the year. It is a no brainer for someone to come in and buy. They could buy with minimum down. There’s a lot of activity going on. At EXIT Realty, if we have an open house, I assure you, there will be 20, 30, 40 people looking at the house.
You can be the business owner, but you don’t have to be the one running the show.
I’m going to put a spin on this. We want to help our EXIT broker-owners to bill and have an exit strategy. We want them to read the book. We want every one of our franchise owners to read your book. Imagine this, there is another niche that we can tap into, which is business owners. No matter where you go, there are business owners everywhere. At par, I will say that 80%, 90% of them do not have an exit strategy.
This is another way for us to help the consumer as an added value. One of the things that I’m going to be speaking to my agents is this, “Mr. and Mrs. Agent, understand that this bookis ideal for every business owner. Here’s the deal, go and approach any business owner and give them added value. Support, help, guide and show them a path on how they can grow their business and build a strategy when the time comes.” There are many ways that we can do this. I believe that what’s needed, which is what you bring to the table, is the fact that you bring in the education that people don’t have.
That’s why I feel strong here that how is it that people open up a business? Here’s the idea, they have some cash, they get the idea, they will open up a business and they go. They don’t have a business plan that they put together. They do it because they have the ability to do so. They’re not prepared. Nobody’s guiding them. That’s why I’m encouraging all of our real estates to speak to us, many business owners out there and have them read this book and have the strategies is going to help everybody. I am excited about reading this book. I want to thank you for putting this together because the local businesses need it and people that are thinking of going into business need it as well.
Rarely people will ask me what I did before real estate because I’ve been doing real estate now. We don’t want to date this, but this is July 2020. People may be reading this blog later on. I had all the different types of jobs. I went to college for two years. I wanted to become an accountant. Imagine me as an accountant. I’ll be a mess. I worked on retail, believe it or not. I got to meet people. I’ll tell you a quick story. You probably remember this. I graduated from high school and I wanted to buy a brand new car. I said, “I want to make a little extra cash because I don’t want to work on an hourly rate job.” I went and got hired by a company called Kirby Vacuum Cleaners.
I was eager because they offer me a commission. They say, “If you sell this machine, Hector, you could make about $250 per machine.” I’m saying, “That is so much money. I got to do this.” The next thing you know, I said, “I want to learn everything that there is about the machine.” They trained me. They gave me two-week crash course training. If you know, Kirby, it has attachments galore, but it cleans up everything. They said to me, “Hector, here’s what we want to do.” Not just me, everybody. There were about 10, 15 people in the training class. The manager comes in and says, “Here’s an incentive for all of you. Now, that you learned how to use the machine, how to put it apart, what if you go and in one week, you sell five Kirby vacuum cleaners?” The price of a Kirby at the time was about $1,100.
He says, to all of us, “If you go sell five Kirby’s in one week, we’ll give you a free one. What you can do with a free one is that you could sell it, keep the money. That’s another $1,100 or you could keep it and use it for yourself.” I said, “This is a great incentive.” What did I do? I went to my house. I told my dad and mom. I was still living at the house. I said, “Mom, dad, this is the deal. Please give me the names of every single person that you know.” They gave me the list. I called. I went to see them. I did the five presentations and I sold five Kirby’s in one week. That’s when my sales career began and I’m going in the early ’80s.
I went ahead and I bought a brand new vehicle. I started working in retail. I always dealt with the public. When I came into real estate, it was natural for me, speaking to buyers and sellers. I engaged with them well that people feel comfortable. That’s why I decided to do this because I have a way to be able to communicate. I want to be able to serve. One of the things that we do is to serve people and help them and that’s what I learned to do working in many different jobs before real estate.
You and I have a lot of things in common. You have your reasons why you are doing this and I have my reasons why I’m doing this in real estate. I’ve been in the business for many years. I have met many real estate broker-owners that opened up a real estate company and they are not building a business. What they do and I hope that there are some people in real estate here. If you’re not in real estate, whoever is reading this, if you know someone, you got to help as many of these broker-owners. What I mean by that is in the real estate industry, when a broker-owner decides to open up an office, they open up a shop, they hire 5, 10, 20 agents.
The owner of the company continues to list and sell real estate. Besides listing and selling real estate, they got to teach, coach, and mentor the agents. Through advertising, pay the bills and answer the phone sometimes. I would say about 85% of broker-owners in the real estate industry, if not higher, that is where they are at. They do not have a business because when you have a business it’s when you have management teams running the operation for you. The broker-owners in real estate and this is not just in New York, this is everywhere.
They open up the real estate company, these broker-owners, and they continue to do all the work. I say to them, “If this is exactly what you doing and you came with the idea to open up a business, you do not have a business, you have a job.”
This is what I do daily here in New York. I sell real estate franchise locations. Over a few years, I’ve developed a system. I’ve developed a plan for broker-owners. I show them a path on how they can be the owners, but they do not have to be the ones running the show. I show them a plan on how they can hire a management team. In the end, it cost them no money with our system at EXIT Realty. It’s something that I put together. I’m going to soon release it to more people out there because I do know that a broker-owner that opens up a real estate company wants to succeed.
We want to put them on that path that they start succeeding from the beginning. Later on, they have no remorse.
You and I have heard the term, “Work your strength and hire your weaknesses.”
We have a saying here, “Do what you do the best, delegate the rest.”
Work on what you’re good at. Do what you do the best and delegate the rest.
Why not work on what you’re good at?
That’s a question that nobody asked me before.
Thank you, Michelle. I appreciate you asking that. I’m going to say these for the first time because people have not heard this before. I had two uncles. I remember clearly. One of them would dress casually. He was casual with a dress shirt and that’s it, no tie, just a dress shirt. I had another uncle. They both own a shoe store way back home. The other one was always wearing a three-piece suit. Every time I saw them, they look well-groomed, well professional and that stuck in my head for years. My father back home, went ahead and opened up a shoe factory. At the time, I was only about maybe 4 or 5 years old.
I was born back in El Salvador.
He opens up a shoe factory. It was a small one, but he had about 5 to 10 guys working for him. I mingled with all of them. As I grew and I went to school over there, I came here back in 1975. When I started getting my first jobs in sales, it reminded me of my uncles and I wanted to imitate them. I’m dressed casual now. I’m at the home office. You will always see me with a shirt and a jacket. I always need to look professional. I took that, not from my dad because my dad never dressed like that but from my uncle’s way back when I was 4 or 5 years old.
They have a big-time influence on me. I got to give them a lot of credit for what they did. I tried to imitate what they did and they were successful in their field. That’s what I did. I have two siblings. I have a sister. I have a brother. My mom and dad are still here. We have had our ups and downs like every family. I came here in 1975 and this is home now.
The oldest tree of them are.
We all have different personalities remember that. Me personally, I can tell you that one of the things that have helped me in my career is the following. Ever since I was in sales, I was always looking to learn. One of the things that I always did, I was always open-minded. I never say, and I still never say, “I know all of it.” I know everything about real estate. No. When I say open-minded, I believe the term open-minded relates to three other areas. Being open-minded, in my opinion, is one that is teachable, coachable and trainable. No matter what business you’re in, if you allow yourself to be teachable, coachable and trainable, you’re going to be fine.
The problem is that I see a lot of individuals out there. I meet a lot of people out there. I approach people that I want to sell a franchise. One of the questions that I ask and I always ask, “Tell me something here, Mr. and Mrs. Broker-Owner, are you an open-minded individual?” The answer always is, yes, but then I expand, “Are you telling me that you are teachable, coachable and trainable?” That’s when they start thinking and said, “Maybe not.” That was to give any advice I will say that. I live by that all the time.
If I was to add another advice, here will be the following, have a mentor and a coach. That’s key.
You see quite often why a coach and mentor has most likely built something or done something in the past. It doesn’t have to be your business that they built on. I’ll tell you a quick story. I’m going back to maybe in 2007. The founder of EXIT Realty, Steve Morris, was sitting at a convention at a conference in Atlantic City. We’re sitting over dinner and there must have been about 8, 10 of us. He looks at me and says, “Hector, I’m thinking about doing a contest.” This is December. We have a conference with EXIT International with all the regional owners. He says, “We have a conference coming up in, let’s say March or April,” whatever that is. “I’m looking for five regional owners like yourself who are willing to come up to Canada on one of the training sessions over there and do a pushup contest.” I’m thinking, “Where is he going? What’s the relation with real estate pushup?”
I said, “What are you saying?” He says, “Yes. I want to find five individuals who are willing to come to the conference, do a pushup contest. Here’s the way it’s going to work. The winner is going to get $5,000 in cash. There’s going to be someone next to each one of you and the person is going to put their fist on the floor and you have to make sure that you touch it with your chest to make sure that you go down enough.” I’m not a big dude. He looks at me and he says, “How many pushups can you do?” I said, “Please don’t look at me.” He says, “No, how many pushups can you do?”
I said, “If I do ten pushups, I got to have three breaks. Please don’t look at me.” He was talking about the whole thing again. He comes back again. He says, “Are you in?” I’m saying to myself, “You got to be kidding me. He’s challenging me now.” Here’s what I said, “Fine. I’m in.” Remember you got to do the most pushups in one minute. I have never done it. This relates to what we were saying about having a mentor. I have never done that before. When I do pushups, I don’t know in a minute, maybe I do three. What happens is I said to myself, “I like to win. I like to compete. I don’t want to lose.” I got back home and I said, “How am I going to do this? I have an idea. Let me go around the corner of the house. Let me go into the gym and I’m going to speak to the guy.”
I go into the gym around the corner and I speak to Jerry, the owner. I was not a member of the gym, I said, “Jerry, my name is Hector Castillo. I want you to know that I was challenged to do a pushup contest to see who can do the most in one minute. I like to know, Jerry, if you can help me.” He looks at me and he says, “Yeah, I can help you.” “Tell me how much you want me to pay you.” He tells me a fee. I was like, “No problem. Let’s do it.” We work out 3, 4 times a week and this is in December to the end of March. He had me doing every exercise that you could think of. I started doing pushups. I got to the point that I was doing 107 in one minute. I was a machine. I was going so fast.
He started it with all the other exercises. Whenever he felt that my upper body was strong enough, I started working on that. Ten years prior to that, I was injured. I was playing golf and I got injured with a rotating cuff. He had me doing all these weights. Fast forward, it’s a week before the event, I’m doing 105, 107. He’s happy. I’m happy. I’m excited. That day a week before he got me doing some bench press and he put a lot of weight on me that my shoulder, I couldn’t do it anymore. I said, “Jerry, I’m hurt. I cannot do this. About this contest, I don’t think I can do this.” Do you know what he says to me? He says, “Hector, we’re going to stop working out. We’re not going to do anymore. Rest it off for the week. Here’s what you do.”
He says, “Going there, you know that you did 107. Nobody else knows. You and I are the only ones who know that you can do 107, go into the contest and see the most you can do, do the best you can, Hector.” I say, “Jerry, let’s do it. Let me take a break for the week.” I get to the conference. He gives a shirt to every one of them, all the five guys. I’m the smallest guy out of the group. One of them is a bodybuilder. This dude is big. Another one was in the Marine or Navy or whatever it is. I had no chance. Imagine that. He calls everybody and everyone lines up.
There’s someone next to us that’s going to put their face on the floor and the contest begins. I start going fast. I got to 76 pushups. I said, “These guys kill me. They destroy me.” I’m thinking to myself. To my surprise, I beat everyone at 76. What’s the message here? The message here is this, I became part of this contest of something that I’ve never done before. It’s like owning a business that I never built before. How the heck am I going to try to win this contest if I don’t have a mentor, I don’t have a coach? Do you see the analogy here? That’s what the story is about. It’s about allowing yourself to be teachable, coachable and trainable.
I want to thank you again, Michelle. You and I know each other for about a few years and I am so glad. I’m happy and thrilled that you have put together this book that people can benefit from because being in the real estate industry, I know many people in real estate, whether they were agents or brokers, they left the industry with nothing to show. With this book that you have written, this guide, these steps that you’re going to give them in this book if they were to follow, they have an opportunity to build and have an exit strategy that they can sell for a little more than what they could do on their own.
No matter what business you’re in, if you allow yourself to be teachable, coachable and trainable, you’re going to be okay.
You could find me on the internet, on social media, Hector Castillo. The easiest way to reach me is through email. My direct email is HC@HectorCastillo.me. My cell number is area code (347) 624-2251.
Thank you, Michelle.
- EXIT Realty New York Metro
- Exit Rich
- Sell Your Business for More Than It’s Worth
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