Second office at $6,800 a month, or the same money into recruiting?

Sorry to slow the thread down, what does company dollar mean here? Is it just what's left after you pay the agents their split?

rigging, yes, it's the brokerage's share of the gross commission after the agent's cut, before the brokerage's own expenses.

sextant, the part of B that worries me is capacity for training. Adding 11 agents means onboarding 11 people, and if they're new licensees the ramp is long. Who's doing that? If it's you, then B has the same hidden time cost quarry just described for A, it's just spread across more people instead of concentrated in a drive.

$18 a foot on 2,100 feet is $37,800 of TI allowance and a broker office buildout will run past that easily if you're doing conference rooms and any real cabling. Get a contractor bid before you sign, not after.

Five years in on a service business with two locations and here's what I'd tell you about the second one. Overhead per seat is the wrong metric because it assumes seats fill on your schedule. What actually happened to me is that the second location filled at about 60% of my forecast for the first fourteen months and the rent didn't care.

Your model says nine productive agents at six sides by month 18. Run it at five agents and see what the hole looks like, because five is what you get if the market softens or if the two agents who'd move immediately turn out to be one.

The other thing: your primary office is already covering $372k of overhead on $231k of company dollar. Fixing that before you add a second set of fixed costs seems like the order of operations. You've got six agents who closed nothing last year and are presumably still costing you something in dues, insurance and attention.

thatch's last point is the one. Six of 24 produced nothing. What do they cost you per head, all in? If it's $2,500 each that's $15k, which is small. If it's $2,500 plus a meaningful share of your broker review time, it's not small at all.

I ran into the same thing with units. The bad ones don't just underperform, they eat the hours you needed for the good ones.

Is there a version where the two agents up north work remotely and you test the submarket for a year before signing anything?

plumb's question is the cheap one and I'd exhaust it first. A shared workspace day pass or a small month to month suite for a year costs you maybe $12k and tells you whether the submarket produces. Five year terms are for things you already know work.

The way I think about it with buildings: I don't buy the fourplex to find out if the neighborhood rents. I find out first, then buy.

Your B model assumes the recruiter produces 11 agents. What's the actual contracted deliverable and what happens if they bring you four? I'd want that in writing before I counted it as a plan.

On the lease: expect a personal guarantee on a five year term for a business with your P&L, and understand what the guarantee actually covers. Full term or burning off after year two makes an enormous difference to what you're risking. Ask for a burn-off in the negotiation, landlords sometimes give it and almost never offer it.

Also your three months free is likely to be free base rent only. CAM and taxes usually keep running during an abatement period. That's real money on 2,100 feet.

Three things in the lease and one outside it, and the outside one is the answer to your question.

Lease. First, tender's right that free rent is almost always base only, so read the abatement clause and confirm whether operating expenses are abated too. Second, find the escalation. A five year deal at $6,800 with 3% annual bumps ends at about $7,650 in year five, and if your model uses a flat $6,800 across 60 months you're understating total rent by roughly $25k. Third, look for a relocation clause and a landlord's right to recapture, because those turn a five year certainty into something less than that, and they're common in multi-tenant office.

Outside the lease, and this is the thing I don't see in either model: a second physical office may be a branch office under your state's real estate licensing rules, and in a lot of states a branch requires its own designated or branch manager who is separately licensed and physically supervising. That is not a nice-to-have staffing choice, it's a licensing condition in many states, and it changes Option A's cost from $6,800 of rent to $6,800 plus a manager's compensation. Requirements differ state to state, so verify with your commission and your brokerage's attorney rather than taking my word for the shape of it.

Once you add a manager at even $60k plus their production split, Option A stops being $82k a year and becomes $150k, and your nine agents at six sides doesn't carry it. That's why your models keep saying B by a comfortable margin. The margin isn't comfortable, it's just measuring the wrong version of A.

quarry already saw the same thing from the driving side. He was describing the cost of not hiring the manager.

fathom just turned a rent question into a payroll question and that seems right.

The six agents who closed nothing keep bothering me. Everyone talks about recruiting like it's a numbers game but you're describing a shop where a quarter of the roster doesn't transact. Adding 11 more people to that pipeline gets you what, three or four producers?

I'd want to know why the six didn't close before I paid a recruiter to find eleven more.