How To Start A Real Estate Business
How committed are you to breaking free from the chains of financial bonds, so that you’ll be able to make provisions to meet the needs of yourself and your family? Have ever you considered that you could start a real estate business and join the league of multimillionaires around the world? Check out some of the top proven ways to make money in real estate.
What Is A Real Estate Business?
A real estate business is one that deals with purchasing or acquiring real estate properties, selling, investing and/or managing the properties. The Balance extensively defines real estate as the land, property, buildings, underground rights of the land, and air space rights of the property.
Since wages began falling and inflation started rising, families in the middle class have been losing out on major wealth. One other sad reality is that below 5% of people that attain 65 are buoyant enough to retire or have financial security.
I know you are here because you do not want to have such a bleak future. So, you should consider starting a real estate business to turn your financial dreams into reality. And one other reason for this is because according to recent IRS reports, 71% of Americans who declared over one million dollars on their income tax returns within the last 50 years, are revealed to be into real estate business.
But then, just like every other business, starting a real estate business is definitely not going to be an easy ride. But when you are well prepared and informed on the necessary things you should be informed about, everything is much more easy and attainable for you.
So, before you jump in, commit yourself to countless hours of research with a carefully drafted business plan. Follow our guide on how to start a real estate business then open your business doors.
Here Is How You Should Start A Real Estate Business
1. Plan Your Business
Don’t we all say, “Whoever fails to plan, plans to fail?” Whether you are starting a coffee business, blogging, or a real estate business, planning should always be an essential part of your effort. Having a business plan positions your business to become more successful. Check out our article on creating a perfectly written business plan
A real estate investor, Eric Bowlin reveals a two-fold purpose of a business plan. He says that first is that a business plan gives a business owner a way to formally analyze business directions and goals. It is even more importantly a document that can reveal to potential investors and money lenders about your direction, where you are currently, and how you intend to achieve your goals.
Eric revealed how he got numerous business advice from the local Small Business Development Center. And the plain truth is that, receiving good advice from people who have gone ahead in the industry, is a great way to secure yourself in the business while starting out. Jamal Asskoumi, a real estate agent, says that people who aren’t directly involved in the business should connect with people who already have during the planning stage. The experienced guys know a lot about what should be done and what shouldn’t, and the basic factors that drive real estate business.
2. Do Proper Market Research And Validating Ideas
The market research industry is faced with its own challenges, but this aspect of business is very important to figure out the positioning of the startup.
Your initial market research will help you find out if the niche you have chosen is a workable one and has your prospective target audience. What about positioning yourself and your business rightly within the niche?
When you conduct a primary and secondary market research you will be able to have a broad view of how valuable your selected target market is.
However, no particular market research approach is a one-fits-all to figure out your best served area of focus. Here are some tips to focus on your research;
a. Do your market research ahead
It is important for you to figure out your market research early to save you money and time while your business runs. According to a Bluegrass Partners Trust Realty realtor, Michelle Stansbury, his first 12 months in the real estate business was full of figuring things out and fumbling around. But in the second year, he achieved three times more.
b. Conduct a market research to activate your skills
Another realtor, Brad Pauly disclosed how he dived in business using the same trial and error approach. But for Brad, the move helped him discover his innate weaknesses and strengths. In his own words, Brad says, “When I started in the industry, I wouldn’t turn away any business! Once I realized my strong suits, I focused on them. Four years after I was licensed, I obtained my broker’s license and created the company we have today.”
You can conduct a SWOT analysis to help you figure out what your strengths and weaknesses are.
c. Find a mentor or get real-life experience
You must have heard this a million times and more, but then it is still very important in the real estate industry. You need a mentor to position you to avoid some unnecessary moves, time wasting, and spendings. Lexington, a licensed estate agent says that he had already gained a lot of confidence about his idea. He adds, “I had already developed enough business to pay all of my startup expenses before I took my real estate exam.”
However, another real estate agent, Morgan, says that he committed to working with a real estate attorney to gather good experience before diving into the business. He advises new estate agents to find mentors they can work with for a year or two.
Aside from being mentored, Morgan also did a lot of research on the industry himself. He was asked how he came by his target market, and he responded saying that he took a close look at the volume of sales he has from his city, and then pointed out a ‘sweet spot.’ He says, “That is where the bulk of the volume of transactions was occurring. From there, I aimed for the upper end of that group.”
3. Create Your Brand
Every business should create a brand. It becomes easy to build a lasting credibility, attract potential customers, look much bigger than you really are, and then, stick to the minds of your audience. Sara Conte, an expert in branding says, “Although you can influence your brand through well-designed logos, hilarious ad campaigns, carefully crafted press releases, or super-friendly service, ultimately, your brand is what the outside world says it is.”
Here are essentially four things you should know about branding
a. Your relationships determine your reputation
Be the kind of person everyone else wants to connect with. Jamal Asskoumi, a real estate agent, advises that it is important to make your branding as personal as possible in real estate. Jamal added that since the business relies heavily on building relationships and interacting with others, it is therefore very important that they emit such welcoming smiles as you have.
b. Offer people the things they need
Being authentic and building your reputation are intertwined. A real estate agent for Brandywine Fine Properties Sotheby’s International, Michael Kelczewski, says that your clients can sense behaviour patterns and non-verbal cues. So, if you become more authentic in your behaviour, you will have more things going right.
Eric Bowlin holds the same view. He said that real estate is more about people than the properties. Eric says, “As a small business in real estate, I think it’s more about branding yourself than branding the business. Make people want to work with you.”
c. Create a creative space for yourself
Cheryl Julcher creates a distinction between her brand and that of her competitors through her unique brand of homes called Zoetic Homes™. Each of the homes under her brand is accompanied by a nutrition label, is guaranteed to have a matching design with the actual performance, and has a separate independent third party verification quality.
d. Set yourself as an expert
Position yourself and your brand as an expert in the industry. This lets you set yourself apart from others. Realtor Morgan Franklin revealed he harnesses an active presence on social media and videos. He says, “I host a weekly real estate show that is published to YouTube and Facebook. This has been huge as it has associated my brand with higher-end properties even though I haven’t had those listings.”
Realtor Michelle Stansbury advises selling your inexperience as an asset. He says,“You will be hungry to succeed and are more likely to work harder to get homes sold than the agents who have already ‘made it.’ Inexperience isn’t a total weakness and don’t let anyone convince you that it is.”
4. Go Legal
Getting into real estate has different rules guiding different states. You’ll have only one exam you should pass. If you study hard, you should be set to have it done in a few months. It however often differs a bit in-between states. Check the regulations and rules guiding your own state.
For instance, in Florida, you do not have to be a broker or agent to have your own real estate company.Tim Frie says, “You just need a broker-of-record who is an officer or manager of the company who is responsible for overseeing the actions and transactions of the sales associates.”
You can find test prep materials on The Real Estate Prep Guide website. And you will also be able to have a feel of what it is to have your state’s real estate exam.
Aside qualifications, other things you should do in preparation is to figure a name for your real estate business, register it, apply for a Federal Tax ID, and acquire all other required permits and licenses for the business.
Here is what Tim has to say about choosing a company name:
“My partners and I decided on something very close to home: a combination of two of our names. A lot of notable real estate companies are named like this: Coldwell Banker, Keller William, Engel & Volkers, Long, and Foster. Not only did we want to emulate what was already proven in the industry, but through the way that we provide service, we wanted something very deep to leave behind as a legacy that was a result of our hard work and dedication.”
Realtor Brad Pauly advises real estate entrepreneurs to get liability insurance, aside from registering their DBA, and ensuring a good standing with boards and commissions. You could also consult an attorney who is well informed in real estate laws, if you are still unclear about making your business legal.
5. Get Funding
You actually do not need huge funding to start a real estate business. Jarvis Team Realty owner, Joshua Jarvis says, “The startup cost to launch in real estate is very low. I used the savings I had and for less than $1,000 I was able to start. Now my monthly budget is 10 times this, but you don’t really need any money to start—or so most think.”
You should not only calculate the cost of your startup. Ensure to also consider your ‘carrying cost’, according to Joshua. He says. “As in, how many months it will take you to start cash flowing. In real estate, there are a good 60 days or more before you could get paid.”
Realtor Jamal Asskoumi had personal savings to help in financing his real estate business. He advises people may not be able to fund their real estate projects themselves to turn investors. It is very important to know where to find them. Jamal added that a flawless business plan would be needed to get this done.
6. Set Up Your Office
If you are just starting out, you should focus on building the required reputation in the industry first. Hence, it may be unnecessary having an office location from start. You could just work from home instead.
Eric Bowlin, a real estate agent says, “The vast majority of people I know who work in real estate have started in their own home. It’s more important to choose a target market than to worry about a location for your storefront. At startup, you need to be flexible and able to rapidly adjust your plan if it’s not working. A physical location will tie you down to that market and make you less flexible while simultaneously adding expenses.”
A time will definitely come when you’ll consider having hiring employees, set up required technology, and have an office location. But then, you should think through properly before hiring employees. Hiring employees isn’t for everybody. Here is what Eric says about it;
“I’ve had employees in the past and I will never hire an employee again. The government regulations for employees are far too burdensome and expensive. Instead, everyone I work with is treated like a contractor and given a 1099.”
Doing excellently in your real estate business is more of the personal connections and relationships you build. And this has little or nothing to do with your physical office location or employees. If you’ll consider bringing in employees, then ensure that they do fit for your brand and values. At least you wouldn’t want to damage your hard-earned reputation.
7. Market And Launch
Beyond physical networking, most real estate agents get their businesses marketed through a good web presence and Search Engine Optimization (SEO). Your online presence is a major ingredient in the success of your business. However, building relationships is central to all your marketing moves.
According to Tim Frie, Real estate marketing is focused on creating and building relationships. This can be efficiently done through blending a marketing and connection strategy online, with a traditional outreach. And even when you have no customer yet, start by reaching out to the people who are already in your existing network.
Tim says, “Ask if they know anyone who you can provide value to. If you’re new and starting out, you need to put yourself in situations that allow you to create new connections, meet new people, and provide value just by being yourself. Once people like you, they’ll correlate your name with ‘real estate’ when they themselves or someone they know want to buy or sell a house.”