How To Start The Real Estate Business
Starting a real estate business is one of the purest forms of entrepreneurship and it involves a series of risk-taking events. Your real estate business needs an initiative from you to start. But, it is better to plan first, because a well-planned business initiative has the potential for huge growth.
Before moving on to how to start a real estate business, read;
What Is A Real Estate Business?
The real estate business involves purchasing, selling, investing, leasing, managing, and operating lands and buildings. Real estate also involves natural resources that are above or below the ground, such as crops, minerals, water, and more.
If you want to start your own real estate business, instead of working for someone else, you got many things to consider.
How To Start The Real Estate Business
We have compiled top 20 steps for you to guide in how to start a real estate business.
1. Develop & Refine Your Idea
Real estate is very competitive field of business and very challenging to start as well. There are high chances that your vicinity already has one, two or more successful and popular real estate brokers. Real chances are that they might be highly competitive and active in market.
To be successful in any sort of business, you need to consider, your strengths, weaknesses, opportunities and potential threats. Similarly, you also need to consider your area of interest and experience.
First of all, you need to identify those areas and towns, where you are going to offer your services. Similarly, consider how you will present yourself to them. Identify your areas of strength first.
Ask yourself and others you trust for a second opinion, some questions before starting real estate business and refining the idea;
- What skills, knowledge and expertise do I have for this business?
- What sets me apart from other competitors?
- Who am I going to provide products and services?
- How much investment do I need to spend to start the real estate business?
- Do I need external funds? If yes, how much?
- What are my expectations from real estate business?
2. Choose A Niche
To start your real estate business, choose your real estate business niche which you are going to serve. In real estate business, there are number niches that are operating and numbers of businesses are active in it. Initially and practically, you cannot serve all the niches as it is not feasible.
Main real estate niches are;
- Residential real estate
- Rental property
- Vacation homes & resorts
- Commercially zoned properties
- Property management
- Income properties, real estate investor’s properties for income from leasing and rentals
As a startup business, you cannot deal in all the categories or niches. It is best and efficient to pick one or maximum two niches of your own interest. It is best to choose that niche in which you have any previous experience or interest.
Choose a narrow down approach. If you have interest and experience in residential real estate property buying and selling, then go for it. But, if you like short sales, pick rental property management. After all, it is up to you to choose.
The reason behind choosing one or two niches is that;
- You will be better be able to serve and understand your client’s needs,
- There is a better chance of success, if you choose to serve only a specific targeted audience
- You will be able to avoid overspending and satisfying your potential customers
3. Write A Business Plan
Before proceeding further into business, it is better to write a business plan. Real estate business has number of aspects that needs to be covered. Business plan will provide you a clear road map of your business and will give you confidence to move further.
A business plan is a clear document of your objectives, and how you are going to achieve those objectives. It’s a clear written road map of the business’s marketing, finance and operations. It will provide a road map of your next 3 to 5 years.
Business plan consists of three things;
- Who are you?
- What is your plan to do?
- How you are going to do it?
A business plan will help you in setting goals and objectives. It will also help you in gaining investments and funds from lenders and financers.
You can prepare a short and precise plan that is limited to few pages. But, it should contain all the necessary information about your business. More importantly it should contain all the financial estimates and projections if you are approaching an investor.
A business plan consists of following;
- Write Down An Executive Summary
- Describe your business
- Define Your Business Goals
- Describe Your Business Products and Services
- Conduct A Market Research
- Conduct Competitive Analysis
- Establish Marketing & Sales Strategies
- Establish Your Business Financial Analysis & Projections
- Introduce Your Management Team
- Appendix & Annexes
Read more: How To Write A Business Plan
4. Decide Your Legal Business Structure
Choosing the right legal business structure is important for every business. By deciding your legal business structure, you will be able to run your business legally.
There are many types of legal business structures that are available but not all fit your real estate business. Mainly there are four types of legal business structures available;
It means that you will be the sole owner of your business. You will be responsible for all the profits, losses and debts, while running a business.
If you want to run your business single-handedly, then sole proprietorship is best legal business structure for you. Most of the independent real estate agents run their businesses under this structure.
You can also open real estate brokerage under this legal business structure. It is the easiest way to set up your business legally.
It means that you will be having one or more partners in business. All the partners in the business will be responsible for holding liabilities.
Limited Liability Company
It means that owners of the business can limit their personal liabilities but still tax and other benefits will be included in it.
Corporation business allows corporations to take ownership of property, pay the taxes, and have contracts deal. It legally separates itself from its owners.
Corporation requires more effort to set up, but they come with different financial and business benefits.
To choose between these legal structures, consider your future business goals first. Choose a business structure that assists you in growing and expanding your business in future. After choosing legal business structure, register it with state and local government and IRS.
5. Conduct Market Research
Market research is the technique to gather information and to understand the target market of the company. It helps in identifying your target customers, their buying behavior and habits, their buying power, their buying patterns, what is the size of your target market.
Market research will tell you whether your business idea will work out or not and which niche will be better to deal in. Market research will also help in identifying your target audience and potential positioning strategy.
Through research you will be able to understand the following things better;
- Who are your target market customers and from where they are conducting the product or market research
- Their problems and the possible solutions you can provide
- Their behavior towards the price of the product or service
- Which competitor of your company is currently providing them solutions and to which competitor they look up to for the solutions
- What in the market is currently trending
- Converting an unaddressed customer to your buyer
- Is their demand of your business products or service
Read more: How To Do Market Research
6. Set Up Accounting & Book-Keeping System
To keep a track record of your finances, you need to set up accounting and bookkeeping system. It is important for tax filing and tracking your business cash flows. You need this system even in sole proprietorship too.
Accounting is about keeping and tracking financial records and information of your business. While on the other hand, bookkeeping keeps records and categorizes financial details. For that purpose you can hire a bookkeeper.
You can also hire a freelance or a virtual assistant to pay bills and manage invoices.
The bookkeeper will be responsible for;
- Keeping your financial and bank account records
- Reviewing your finances and accounts
- Filling Taxes
- Setting taxation strategies
For that purpose, hire a bookkeeper and accountant that know everything about real estate business and taxation.
7. Assess Your Finances
Assessing your finances before starting your real estate business is important. For that purpose, you need to track your sales and commissions. But, real estate business owner must take into account more that and tries to make their business profitable.
An estimate and projection of your business finances will help you in growing your business. If you got no projections, then your business might not sustain for long.
While starting, try not to overspend or underspend. Both of them will be harmful for your business. Rather try to maintain a balance and buy those things which are essential to run your real estate business.
Once you build your own loyal client base, you can buy other equipments and things.
8. Write Marketing Plan
A marketing plan is a document that shows the advertising strategy to sell company’s products and services. It also shows how the company is planning to utilize advertising and excel in the target market.
Marketing plan helps you to determine your target market, how to satisfy them, the price to offer them, and how to calculate your own efforts.
In marketing plan, all the strategies are written down in an organized manner. It helps you to keep you on track and calculate your efforts.
Here are some points to keep in mind while writing your marketing plan;
- Define your mission
- Identify your target market and your offerings
- Describe your content and marketing strategies
- Identify your competitors
- Set marketing goals
- Estimate your marketing budget
- Examine your results
Read more: How To Write A Marketing Plan
9. Write Sales Plan
Before initiating your business, make sure you know how you will sell your real estate business services to clients. In real estate business, success is mostly dependent on personal settings and commitments you have with your clients.
You need to identify clients to attract and avoid. Not all the clients you are required to deal with, save your time. This is the part of your business sales plan. Personally meeting and dealing with clients either physically or online, is not going to work.
You can provide consultation services to specific clients for specific properties. The purpose and expectations here can be to close a deal. Client can be ready to close the deal at any point during this discussion.
After closing a deal, and selling a property, you can use those deals to increase your business word-of-mouth. If you deal property owners properly and they are satisfied, then they will speak favorable words about your business.
This will help you and your business in winning referrals and gain positive word-of-mouth.
10. Get Real Estate Business License
You cannot start your real estate business without license to work as a realtor.
Whichever state of US you are living, you need an appropriate license to run your real estate business.
There are four steps you need to compete on to get your license and start operating;
Apply for a pre-license course for your state
You need to take a real estate course before license, and pass the exam as well. You need to know about your state and federal requirements and laws. In course, you will study about property ownership types and forms, how to sell an official property, fair housing laws, deeds, titles, legal contracts and much more.
Pass the exam
To pass the exam you need to study a bit deep. Exam duration will be of 1.5 – 3.5 hours and it depends on your state. Make sure you pass the pre-license exam with good marks, with 70 – 75% of the answers needed to be correct.
Submit an application for a license
After passing your pre-license exam, you are required to apply for license. State authorities will check your background before giving you license.
Find a real estate broker to work for
Now you are required to find a brokerage to work for. Your license should be associated with a brokerage in order to start working as a real estate agent. You can choose between financial brokerage or a boutique brokerage to work for.
11. Hire A Business Lawyer
Hire a business lawyer so that he can make sure that the deal between you and your client is legal. You need to hire a business lawyer that makes your business structure right and legal.
Business lawyers will help you in each and every aspect of your business, overcoming legal obstacles, and running the business smoothly. It is better to hire an experienced lawyer that will assist you in making right and legal deals.
On the other hand, don’t go for an inexperienced lawyer. That may cause damage and kill your business potential due to a lack of experience.
That is why you should go for an experienced real estate business lawyer. That will help you in making deals legal and negotiating with brokers and agents.
12. Get Business Insurance
Insurance of a business protects businesses against any potential damages that can cause in future. Businesses bear losses but they are protected through insurances. Businesses can face damages to property, but insurance help in compensating those damages.
It is better to make your business safe and secure by purchasing an insurance policy. Initiating your business with insurance can protect your business from damages, thefts, and intellectual property lawsuit.
Even small businesses face a lot of issues and damages, and small businesses involve a lot of amounts. They themselves are of a price of commercial or residential properties.
Get a liability insurance to get protection against any possible claim. Unhappy clients can sue you and your business if anything goes in wrong direction due to any possible factor.
Also, get workers’ compensation and unemployment insurance that will give protection to your employees.
There are seven types of real estate business insurance;
- Property Insurance
- Professional Liability Insurance
- Workers Compensation Insurance
- Home-based Business Insurance
- Product Liability Insurance
- Vehicle Insurance
- Business Interruption Insurance
13. Work on Brand Elements
Brand elements involve brand name, logo, graphics and images, color schemes, typography, tone and voice, slogan, and jingle.
Brand elements are unique features of your brand that makes your brand different from others. These brand elements create lasting memory in the minds of your clients. Brand elements help you in developing your brand identity.
14. Set Up A Click-and-Mortar Business
You can have a presence both online and at a physical space in the town. For a physical space, you can look for different locations in town where you want to open your office. You can buy out, or take on a rent an office space.
It depends upon your budget, if it doesn’t allow you to open an office, start your business without it. You can manage your client by using customer relationship management software. This software is helpful in interacting with your clients, from anywhere and anytime.
But if you have budget to open an office, it’s great. Find a location where your clients can reach you, and you can interact with them. You can also look for competitor’s place, where are they operating and how they are doing.
You can also enhance your business through a web presence. Many people around the world search for real estate services and products. Make sure you put all the right details of your business and rank it on Google so that you appear on top.
You can also choose to have a presence on social media platforms where your clients can interact with you. You can form a better customer relationships through these platforms.
Follow both online and physical store presence so that you don’t miss out on any single client.
15. Build An Online Presence
In this digital age, it is essential for almost every business to have an online presence. Similarly, you also need to build a strong online presence. You must think about your online presence when starting your real estate business.
A strong online presence will help you in covering a wide range of target audiences and build a brand. It will help your target clients to find you online and interact with you. For that, you can build an email list, active online, and use social media.
Most of the searches about a brand are done online. Clients choose service providers online, interact with professionals and evaluate brands against others. Make sure whatever you post is genuine and original and try to gain your customer’s trust.
Make sure you are also available on social media platforms like Facebook, Twitter, Instagram, YouTube, and more.
16. Take A Competitive Advantage
Another point to consider is to make sure you gain a competitive advantage over your competitors. Try to grab attention of your potential client right after starting your real estate business.
A new business usually takes time to build its client base and reputation in the market. So, it is better to study your competitors, their offerings, strengths, and weaknesses. Analyze that which of their weaknesses you can attack and take competitive advantage.
Additionally, know that what you can do to become better than them. What you can offer to your clients that no one else is offering them so that you get maximum clients.
17. Build A Network
The real estate industry is a challenging industry where competition is very high and intense. To start the real estate business, you need to start building a network. Networking is very essential and important part in this business.
Firstly after establishing your business, you need to survive. Secondly, you need to grow your business by competing with your current and potential competitors. In real estate business, only way to survive and grow is build a strong network.
Start by establishing new connections and take care of the old networks. As much as connections your business has, you will enjoy more credibility and positive word-of-mouth as well.
Try to establish quality connections that are worthwhile for your business.
18. Manage CRM
As your business starts growing, your list of clients also starts growing as well. Your inbox may receive a number of emails from clients and it may become hard for you to handle them. For that purpose, you can have a strong CRM team.
You should start managing customer relationships so that you can help out the maximum number of clients. Your motive should be to rescue them from each and every problem and issue regarding real estate.
There are many CRM tools available online which can help you in organizing leads, networks, connections and contacts. Some of them are;
- Hubspot CRM
- Zoho CRMFreshSales
- Less Annoying CRM
- Zendesk Sell
19. Ask For Referrals
Referrals are important in establishing new contacts for your real estate business. Your satisfied clients can suggest your business to other clients and you can contact them to do business.
The first thing in it is to satisfy and make happy your current clients through your products and services. Secondly, don’t be shy in asking for referrals. Once your clients are satisfied with you they will help you with referrals.
20. Grow Your Business Into A Brand
Turning your business into a brand helps you in building credibility in the market. Your business will appear bigger in customers’ minds. This is all what is branding, creating a perception in the minds of your customers.
To grow your business into a brand, you need to work on brand elements, advertisement campaigns, and other marketing strategies.