The real estate business is quite different from traditional business models. It can be tricky, risky, and political. But the rewards are baffling and better than any traditional business. If you are organized, ambitious, goal-oriented, love challenges and up for taking risks, Real Estate business could be the jackpot you were looking for. You have to however be patient to get your first cheque and need to be persistent and people pleaser in this profession.
Read on if you are willing to commit and take this forward diligently. We have shared the steps required to start a real estate business in this article. Our information will definitely guide you in deciding if real estate is the right venture for you or not.
What the Real Estate Business Looks Like
Your company will employ real estate agents and associate brokers to buy and sell properties and carry relevant transactions. You will facilitate the process of buying and selling properties. For starting a real estate business, you will need to obtain a license as a real estate agent and fulfill other requirements laid by your respective state.
However, if you don’t own a broker license, you can hire a real estate agent to oversee the operations on your behalf.
You will have to put in a lot of time in being familiarised with different areas of town to look for what is offered on sale and where new buildings are being constructed. You will also have to spend a lot of time driving your customers or potential buyers around to have a look at the properties.
You need to be a real estate agent for a while, complete a certain number of transactions and work a certain number of hours per year, and pass real estate broker’s exam before you can apply for a license. The requirements of local ordinances change from country to country. We recommend that you research your state’s requirements before moving ahead.
The Market is Quite Ripe
Everyone is looking for some kind of property to buy, sell, lease, or rent. So, almost everyone is a potential customer. You need to learn how to motivate people to sell or buy quickly. The process to secure listing is long and requires constant interaction for months together.
You need an ideal buyer and an ideal seller. An ideal buyer is the one who is ready to purchase the property in cash or through a financial institution. On the other hand, ideal sellers are motivated to sell their property quickly.
The business sometimes can make the entire process stagnant. You may work for 6 months continuously without ever completing a transaction.
So, you have to aim for bigger clients and bigger properties to survive. However, once you become a prominent player, you will be loaded with buying and selling propositions.
Steps to Start the Real Estate Business
Step 1: Start with a Plan
A business plan makes a business more successful and strong. Your business plan will prompt you to think important stuff, which you may skip otherwise. Some of the important elements that you need to research and analyze thoroughly while making the business plan are:
- Current market status
- Start-up cash needed
- Potential buyers
- Marketing and promotional strategies
- Number of employees and staffs
- Office location
- 5-year plan
- Business goals, mission, vision, and ethics
If you have clear answers to all of these questions aforementioned, you can easily secure a bank loan or convince investors and lenders. A business plan also gives you direction and motivation.
If you do not want to get directly involved in real estate, then it is important that you hire an ace player who will drive the chariot successfully.
Read books, go through real estate-related journals, magazines and blogs, and (or) take formal courses on the subject to refine your skills and managerial abilities.
Step 2: Validate the Market
Before you get into this venture, you need to make sure there is a market for your business or the picked niche has a target audience. You have to know how to position yourself within a niche. And to do so, you have to research the market and validate it. Start by conducting primary and secondary market research. Start your research early to figure out loopholes and risks, come up with contingencies, and plan B.
Primary market research is finding information all by yourself by directly talking to potential customers. Published information is not counted here.
You have to hold group discussions, send surveys to potential customers, conduct one-on-one interviews, and assess your competition in terms of their target niche, marketing tools and technologies and solutions in your primary market research.
Information that others have acquired or published, such as government information, trade associations, reports, research sites etc. fall under secondary market research.
Researching ahead of planning saves cost and time, both precious for business. You may take probably 6 months to figure out the entire thing, collect data and facts, and get over fumbling steps. Give yourself one year break-even time for this business.
Analyze and Understand Your Skills
You have to also analyze your skills for this business. You have to figure out your strengths and weaknesses and find solutions accordingly. For instance, if finance is your strength and communication is your weakness, you could hire someone who can talk to your clients and convince them, while you concentrate on building strategies to triple your earnings.
Step 3: Choose Between Start from Scratch and Join a Franchise
You can do this business in two ways – either start your own brand company or take up a franchise. If you want to buy an existing system, becoming a franchiser is the right choice. Established companies carry brand recognition, which may help you in the marketing process.
Moreover, if you join a franchise, you will get a readymade market to take over. Also, the brand will help promote your business and train you on different real estate models and processes. If you have the kind of money, then you should definitely go for this option.
Have a support network in place to help you during tough times.
Step 4: Make Your Business Legal
You can get into this business only if you have the real estate agent license. It is just a single test you need to pass. You will be able to prepare yourself in three months’ time. However, as we mentioned earlier, the requirements change from state to state and country to country. For instance, you don’t need to be a real estate broker to start a real estate business in Florida. Instead, you need to have a broker-of-record.
Look up your state’s website or visit state corporation office directly for the rules and regulations.
Moving on, you must ensure that you cover up the following factors to make your business legally viable:
- Business Name: Most real estate businesses are named after the owners’ name, such as Long and Foster, Srivatsa, Engel & Volker’s, Keller William and so on. It is a great way to combine your personal brand and your business.
- Form a Legal Entity: Register your business name with your state corporation and obtain a license to run the business. If you do not have an idea about the type of business structure you need to establish, we suggest you consult with an attorney. Sole proprietorship, Limited Liability Company (LLC), Partnership, and Joint Corporation are common business structures. According to your financial status, your personal liabilities, and size of the business, your lawyer will recommend the most appropriate business structure for you. Each type has its own pros and cons. For example, a sole proprietorship cannot separate his personal liability from his business liability. Which means if his company runs into trouble, his personal assets will be affected.
- Permits and Licenses: Each business requires to acquire different licenses and permits to be able to run ethically. You will have to find out from your state authorities what the requirements to run a real estate business are that needs to be fulfilled. If you fail to obtain the necessary permits, you may have to pay hefty fines or you may be forced to shut the business down.
- Taxes: Register for the variety of taxes placed by the state and federal authorities. You have to apply for an employee identification number or EIN via your local IRS.
- Business Bank Account: Once you have obtained the EIN, the next step is opening a separate checking account dedicated to your business. A separate business account helps you organize your business funds effectively. A business account also makes your business appear professional and legal to your customers.
- Insurance: Whether you run a beauty parlor or a mill, insurance policy is a must, regardless of the size, shape, and gross income of the business. Limited liability insurance is the most common type of business insurance. However, based on your state’s legal requirement, you may have to purchase separate insurance for your real estate business.
- Insurance protects your business from legal claims and unforeseen accidents during business hours. It will safeguard your personal assets lest your company is sued.
- If you plan on hiring employees, worker compensation insurance might become mandatory.
- Business Accounting: Real estate businesses transact with lump sum money on a daily basis. Recording your sources of incomes and various expenses accurately is a critical obligation. It is important for you to understand your financial performances more clearly. Therefore, hire a professional accountant who will keep detailed and accurate accounts of your incomes and gains and profits and loss to simplify your tax filing and returns.
Step 5: Gathering Funds for Your Start-Up
Every business requires start-up capital to commence. You would require too. However, there is an advantage when it comes to the real estate industry. You don’t need to have a huge amount of cash in hand to get the business role. In fact, you can start a real estate business part-time, along with your regular business or job.
The startup cost to launch a real estate business is quite low, probably as low as $2000. The business works mostly on rotating cash. However, you need cash flow to fulfill your daily obligations. You need to calculate when the cash will start flowing and based on it you have to acquire your start-up capital.
If you are looking to start big, with offices and more, you may have to look for investors or bank loans as funding options. To collect funds from lenders and bank, you need to get a solid business plan readied.
Some of the notable sources for business funds include Credit Unions, Crowdfunding, Angel Funding, Commercial Banks, Private Banks, Personal Funding, and Line of Credit.
Step 6: Marketing Your Business
No matter what business you do, in 2018 and coming years, your marketing efforts will be the determinant for the success of your business. Marketing is the MOST crucial factor for any business today. However, thanks to the advent of digital technology, it has opened hundreds of mediums to market, promote, and launch a business successfully.
Topping the list is a Web Presence. You should see to build a successful website and make it SEO viable. Establish a strong online presence through your website. Most customers today look for properties for buying and selling on the web. A commendable website will do 40% of your marketing, promotion, customer interaction, and negotiation work.
Building a relationship with your customers and providing exclusive brand value are two important parts of marketing. You have to provide your customers what your competitors do not. You have to identify your key selling point.
It could be anything from lower commission rate to value-added services for new married couples and retired people. Think about it, find what your competitors are offering, and then figure out your own brand proposition.
Apart from, SEO and website, other trending marketing strategies include, PPC, Video Marketing, Social Media Marketing, and of course, traditional marketing, such as newspaper, flyers, pamphlets, and door to door marketing.
Hope our article proves valuable to you during your business set-up process. You can find more information about other start-up ventures on our website. Post your doubts in comments below. We shall get back to you with a suitable answer.