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Actual property franchise big RE/MAX’s Motto Mortgage subsidiary has been named to Entrepreneur journal’s 2023 Franchise 500 checklist for the fourth yr in a row, placing some wind within the sails of the corporate’s long-term objective of getting 1,000 workplaces up and operating nationwide.

For now, 1,000 Motto Mortgage workplaces stays a distant objective. Though Motto Mortgage’s open workplace depend grew 21 p.c from a yr in the past throughout the first quarter, to 232 as of March 31, quarter-over-quarter development was primarily flat.

However the 61 new workplaces opened in 2022 was an organization document, Motto Franchising LLC CEO Ward Morrison mentioned in a press release.

Ward Morrison

“I’m very proud to see how far the Motto Mortgage model has come since launching in 2016,” Morrison mentioned of being singled out by Entrepreneur as soon as once more. Final yr was “a document yr for the model with extra new workplaces opened throughout the U.S. than ever earlier than and our franchisees closing practically $2.8 billion in mortgage quantity to assist over 9,700 households fulfill their dream of dwelling possession.”

Entrepreneur ranked Motto Mortgage 403rd on its Franchise 500 checklist, down from 306th final yr. Final yr Franchise Enterprise Evaluate named Motto to an inventory of prime “recession-proof” franchise alternatives, and the info collected by that publication prompted Black Enterprise to spotlight the corporate as a prime franchise alternative for Black entrepreneurs.

Supply: RE/MAX investor presentation

Motto Mortgage doesn’t make loans however is a know-how, compliance, coaching and advertising resolution for mortgage brokers who work with a number of lenders. The corporate’s “mortgage brokerage-in-a-box” is out there to RE/MAX associates or any actual property dealer or entrepreneur. RE/MAX additionally gives third-party mortgage processing providers to mortgage brokers by one other subsidiary, wemlo.

It sometimes takes 12 to 14 months for brand spanking new Motto franchisees to rise up and operating. After attending coaching and getting licensed, franchisees sometimes pay $4,500 a month in royalties.

Motto Mortgage open workplaces

Supply: RE/MAX regulatory filings

Whereas Motto opened 61 workplaces final yr, internet development in open workplaces totaled 44 after subtracting workplaces that closed or left the franchise. Throughout the first quarter (Q1) of 2023, Motto offered a complete of 10 franchises, down from 17 throughout the identical interval a yr in the past.

However that tempo was in keeping with years previous when Motto ended with 60 to 70 franchise gross sales, Morrison mentioned on RE/MAX’s Could 5 earnings name. Rising rates of interest have been a drag on Motto franchise gross sales since Q2 2022, Morrison mentioned, however “we’re inspired by the strong begin to 2023 and the curiosity we see within the market.”

Motto’s development throughout a making an attempt time for the actual property business has been a shiny spot for RE/MAX, which posted a $700,000 first-quarter internet loss as income and actual property agent depend slipped.

On the corporate’s first-quarter earnings name, RE/MAX CEO Steve Joyce singled out momentum in Motto franchise gross sales and continued development in wemlo’s enterprise with mortgage brokers — as “operational highlights.”

Greater than 70 p.c of Motto franchise gross sales have been to actual property professionals, and their shut ties to homebuyers have been a key to their success, Morrison mentioned on the decision.

Throughout the first three months of 2023, 93 p.c of mortgages originated by the Motto community have been buy loans, in comparison with 80 p.c for the business as a complete.

“We consider the expansion, success and long-term potential of our mortgage enterprise is because of the distinctive and compelling worth proposition Motto and Wemlo every provide,” Morrison mentioned. “Ancillary providers like mortgage present actual property entrepreneurs with enticing alternatives to diversify their income and earnings, one thing that is essential throughout altering market circumstances.”

Within the final month, Motto has introduced the opening of 4 new workplaces:

Income and adjusted earnings, RE/MAX mortgage phase

Supply: RE/MAX investor presentation

After they’ve been open for a minimum of a yr, RE/MAX says every Motto workplace generates about the identical quantity of income as a 20-agent actual property brokerage workplace in a company-owned area.

Whereas RE/MAX’s mortgage phase — Motto and wemlo — are producing regular income development, adjusted earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) stay within the crimson.

Adjusted earnings had been trending towards constructive territory, however RE/MAX’s 2020 acquisition of wemlo and the cash it’s invested since within the enterprise have contributed to rising adjusted losses for the mortgage phase in 2021 and 2022.

RE/MAX’s long-term objective is to generate $100 million in annual income from mortgages, with half of that coming from wemlo.

Wemlo serves not solely mortgage brokers affiliated with the Motto Mortgage community however any mortgage dealer seeking to outsource mortgage processing, offering know-how and a pool of certified processors that lets lenders scale up or down to satisfy demand. This yr wemlo additionally plans to roll out a mortgage brokering system to assist shoppers originate loans.

Morrison mentioned that with mortgage brokers dealing with about 20 p.c of the 6 million mortgages originated every year, wemlo’s complete addressable market is the 1.2 million dealt with by mortgage brokers. If wemlo can seize simply 5 p.c of that enterprise, he mentioned — about 60,000 loans a yr — it should generate $50 million in annual income. That works out to about $830 per mortgage.

For Motto to hit $50 million a yr in income, it should want between 900 and 1,000 franchises to be open and paying the complete $4,500 monthly persevering with franchise price, he mentioned.

“We consider we’re nicely on our approach towards reaching that objective and the growth of our gross sales staff ought to assist us get there even sooner,” Morrison mentioned.

Though the Motto gross sales staff has skilled some attrition, “The excellent news is we’re trending in the correct route, and we anticipate to be absolutely staffed later this summer time,” Morrison mentioned. “It’s a good higher story on the Wemlo aspect. We have now efficiently doubled the scale of Wemlo’s gross sales drive and the outcomes have been measurable.”

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Electronic mail Matt Carter