If you’ve always wanted to break-free from the chains of a 9 to 5 job, starting your own real estate business may be a good option to consider.
With so many ways to get started in the real estate industry- from being a real estate agent, to buying rental property, property management, wholesaling, and house flipping - the opportunities as a real estate professional are truly limitless.
Many people dream about having multiple streams of passive income, cash flow from real estate investments, and having full control over your time owning a small business.
Others simply wish they could be in the position of giving orders instead of receiving them.
Sounds nice, doesn’t it?
Starting a real estate enterprise provides all of this and so much more.
Learn how to get started in this ultimate guide.
Real estate means property, which comprises of buildings and land along with the natural resources in it such as water, minerals, and crops.
It includes the interest vested in the property and, more generally, refers to buildings and housing. It’s a legal term that is used in jurisdictions where the origin of the legal system is English common law.
A real estate business is a profession of purchasing, selling, and renting out buildings, housing, or land.
A real estate company may also engage in investment, development, and management of properties.
Starting a real estate business is not something that the faint-hearted can do with ease. That said, most businesses are not easy to start anyway.
One important thing to emphasize is that real estate is a tried-and-true business model.
You’re certainly not “reinventing the wheel” when starting a real estate business.
Regardless, you’ll need to spend many hours doing research on the real estate industry and coming up with a detailed business plan.
You may want to recall the main types of real estate.
Types of Real Estate Classifications Include:
Yes. Real estate is a lucrative industry.
Venturing into this sector is probably one of the best approaches when it comes to making money, as well as building wealth.
That’s because this sector provides many ways of making money as a business and as an investment vehicle.
The Four Ways of Making Money In Real Estate Investment:
A real estate enterprise can be quite profitable as long as you do your due diligence.
The most important thing is to analyze industry trends before deciding to go in any direction. This implies that you conduct an investment property analysis and target market analysis.
It’s also crucial to pay attention to the legal implications, including state laws and business regulation. If you decide to take mortgage or buy insurance, take time to do some shopping.
Yes. A common misconception is that most real estate investors are people who have a lot of capital when venturing into the real estate business.
However, this is not true.
There are many “rags to riches” stories of millionaires in the real estate industry that didn’t have any money when starting out.
The most important thing to have is the right mindset and education.
Money only follows a thorough education paired with effective action. It’s also important that you learn about creative methods of financing your real estate deals without using your money.
Such methods include:
Starting your own real estate venture can be a real challenge.
Fortunately, there are many benefits that make it worthwhile if you succeed to get your startup off the ground.
Here are the major benefits of starting a real estate enterprise:
There are clearly many benefits to starting your own real estate business.
In the contemporary world, accessing information on how to start a small business is easier than ever. Setting up your business in real estate is not as complex as it was some years ago.
Be sure to conduct detailed research before you get started to avoid costly mistakes.
Starting a real estate venture may seem like a daunting task. The truth is that anyone can become successful in the industry with some hard work and determination.
So, what’s the secret?
Here is a complete guide on how to start a business in real estate from scratch:
Set Personal Goals
Before you formulate ideas on how you want to start your business, analyze and prioritize personal goals.
What do you want to achieve as a person?
Make sure that the business you start is aligned with your personal goals.
A good way to set up a goal is start with the big picture, vision, or dream.
Then, break your vision down into small actionable steps you can do every day to get one step closer to reaching them.
Conduct Detailed Research
Real estate provides various opportunities to make money.
Whether you are buying and holding, renovating properties, or attempting to become a licensed real estate agent, there is something for everyone.
Start by analyzing your strengths and weaknesses. For example, if you are good with numbers, the investment side might be a great place to start.
If you love working with people and are drawn by helping new families find a home, you may look into a career as a real estate agent or property manager.
Take time to study the real estate industry.
What niche do you intend to venture into? What is your target market? Who are your competitors?
Get answers to these questions and get to know the business models around each niche.
Be careful not to be misled by what you see on social media.
Get out there and talk to local property owners and other real estate professionals. For instance if you're doing real estate business California, you could speak with members of the California Association of Realtors.
Understand your core competencies, competitive advantages and the resources you need to start and grow your business.
Check out free real estate business resources for entrepreneurs available on the U.S. Small Business Association (SBA) website.
Decide on Your Business Strategy
After conducting extensive research, you should arrive at a core business strategy that makes the most sense for you.
You might decide on being a real estate agent, real estate wholesaler, property manager, real estate investor, commercial property broker, or perhaps a combination of real estate business strategies.
Create a Business Plan
Write a business plan with keen attention on things that will differentiate you from the competition. Take time to think about your business and answer the following questions:
To help create a solid business model, check out this full PDF version of the book Business Model Generation by Alexander Osterwalder. The author introduces the "business model canvas" to map out business models - an excellent framework for any small business or entrepreneur.
Here’s a video from Strategyzer.com explaining it in just 2 minutes:
We’ll go into more detail on creating your business plan later in this article.
Establish an Online Presence
In the current digital world, you absolutely need an online presence to start and grow a business in real estate. Therefore, establish a website and social media pages that reflect you as a professional. Consult with experts in digital marketing to establish a strong web presence.
Come up with a Marketing Strategy
Know the unique value proposition of your business. This will enable you to set yourself apart from the competition. It’s this value proposition that should drive the marketing campaigns of your business.
Launch Marketing Campaigns
Be consistent in the marketing channels that you choose. These may include direct mail, email, social media, pay per click (PPC) campaigns, creating a Youtube channel, and traditional marketing. Develop a tracking and follow-up system for your campaigns.
Follow Up on Leads
It will be a mistake if you launch campaigns and fail to consistently follow up on leads. Even when a lead fails to create an immediate opportunity, cultivate a relationship. After some time real estate opportunities may result from older leads.
“The fortune is in the follow up.” - Jim Rohn, Author and Motivational Speaker
Join a Support Network
Networking is a must in the real estate industry, especially when you’re starting out. Therefore, join a community of other industry players.
These networks should include real estate agents, insurance brokers, private money lenders, potential mentors, property owners, wholesalers and others just starting out.
Real estate business salaries are different than with most other lines of work. Many real estate businesses are results based, meaning you earn when you close a deal, collect rents, or have other investment income.
As a business owner, you may pay yourself a salary, though the bulk of your earnings will not come from a W2 salary.
The type of real estate earnings to expect from your business will depend on your business model and how successful you are. Also, it’ll depend on if you’re doing it part time or full time.
Here’s a list of types of salary you can expect from real estate businesses:
Though not a salary, this is the cash flow you receive from investing in rental properties. When you own the right real estate and become a landlord, you should get regular rent payments from your tenants.
This residual cash flow income may come from residential property income, partnership income, commercial property income, and interest income.
You earn money as profit after selling a property at a price higher than the amount you bought it for.
The value of most real estate properties increases over time or after making improvements, increasing like adding square footage, increasing net operating income (NOI), and cosmetic rehabs.
However, the only way to get access that increased value is by selling it or borrowing against it.
If your real estate business provides special services or engages in business activities, it should earn money from its operations.
For instance, if your business has a hotel as part of its portfolio or if it engages in property management, you may earn a percentage of gross sales.
This is more common in commercial real estate, for example with parking garages, restaurants, and retail businesses.
Real estate commissions are how most real estate sales agents and brokers earn income.
In some instances, real estate brokerages pay a small salary to their agents in addition to commission bonuses when they close deals.
When a Realtor lists a home, the seller agrees to pay a percentage of the gross sales price to the listing agent upon closing. This percentage is usually around 5% and 6%.
From this sale commission, more often than not, half is split between the selling agent and the buyers agent.
For instance, if you sell a property for $300,000 and the agent commission is 6% you make $18,000. Typically half of that is offered to buyer’s brokers to find a buyer.
Further, the commission each side makes is often split with the brokerage. That means if you are representing the seller only, you get $9,000, which may be split even further with your broker.
This is why many real estate agents eventually get their broker’s license, so they can keep 100% of their commissions. Who doesn’t want to make more money?
According to the National Association of Realtors, the median annual income was around $42,500 in 2017. Experienced agents received an average pay of $78,850. 24% of most agents’ earnings were more than $100,000. Realtor households had a median gross income of $111,400 in 2016.
It’s no secret that you can make money by starting a real estate venture.
However, you may not be familiar with the best ideas to implement when starting out.
Here are some of the best ideas for starting a business in real estate:
Buying or selling a home can be an incredibly stressful process. Fortunately, there are many companies that have been helping people go through this process with ease.
Here are examples of successful companies that are highly regarded in the industry:
Real Estate Maximums (RE/MAX) is renowned real estate business that has been in the industry since 1973, primarily as a brokerage. Today, this company has over 100,000 sales agents that work in franchise-owned as well as operated offices in over 100 countries. This company is among the most productive sales forces in the U.S real estate market.
Century 21 is a powerhouse in the real estate industry, most recognizably as a brokerage. It’s a recognized brand with operations in Latin America, Europe, Asia, and Middle East. It has about 7,000 independently operated and owned broker offices. It also has 100,000 associates across the world.
Keller Williams is a recognizable global brand in the industry. It achieved 91% profitability in its U.S offices in 2012. Currently, Keller Williams has operations in over 700 markets across the world.
Coldwell Banker was founded in 1906 in San Francisco. It has a history of offering reliable services in the real estate industry. The company has 3,000 offices in almost 50 territories and countries. It provides top-rated services as well as training to its real estate sales agents.
ERA is an acronym for Electronic Realty Associates. Realogy, which is the mother company of Coldwell Banker and Century 21, operates ERA Real Estate.
ERA was established in 1971 with an aim of championing a novel technology, the facsimile. This business has grown significantly over the years.
Today, it has operations in many countries including Saudi Arabia, Germany, and Japan.
A business plan refers to a document with explanation of the origin of an agency, its goals and mission.
It provides a clear direction to business partners, as well as employees, on what will make the business profitable.
Here is a complete guide on how to create a business plan step-by-step:
Step 1: Assess the Target Market
Assessing the target market involves analyzing the demographic, cultural and financial factors that affect the real estate industry in the area where you intend to operate.
A market assessment enables you to identify potential challenges and opportunities. These factors will influence the success of your business.
To assess the market, draft a thorough market overview. Then, define the target audience in the market and research the competition.
Step 2: Come up with an Executive Summary
After assessing the target market, you'll now have a clear market picture, know the competition and your target audience. This makes it easier for you to describe your company.
The executive summary should summarize the services, purpose, audience, and location of your business concisely.
Use a maximum of five sentences to describe what your business will do, the services it will offer, the areas where it will operate and the people it will serve.
Step 3: Define the Mission Statement of Your Business
A mission statement should build on an executive summary. It should explain the purpose and motivation of your business. It’s a “why” statement in a business plan.
Therefore, consider why or the reason for starting the business as well as your passions in the industry.
Step 4: Perform a SWOT Analysis
SWOT analysis is an outline of the places where your business can lose or gain sales on the basis of external and internal factors.
Performing this analysis entails considering the strengths, weaknesses, opportunities, and threats that your business is likely to encounter.
Weaknesses and strengths are internal while threats and opportunities are external to a business.
Step 5: Determine Your Business Goals
Determining the goals of your business will enable you to decide on the path that will lead it to success.
To set business goals, identify the top objectives of your business on the basis of your ambitions, competitor achievements, as well as realistic growth.
Separate the goals into long-term and short-term categories.
Determine the key performance indicators to help you measure your goals’ achievement.
Step 6: Establish a Management Structure and a Daily Operations’ Outline
The purpose of a management structure is to determine the responsibilities of your team members. With a business management structure, outlining the daily operations of your company will be easier.
That’s because the structure makes determining the persons to oversee different operations easy. Match different staff members with the responsibilities they can handle better.
Come up with management metrics to make the reporting structure clear and forward-thinking.
Step 7: Layout Your Business Financial Plan
You now have goals and a management structure as well as an outline of your business’ daily operations. It’s now time to map out the financial plan of your business.
Write down the startup costs as well as ongoing expenses. Check the available funding options to choose the best.
Step 8: Lay Out a Marketing Plan
Marketing a business in real estate is about acquiring and moving leads via a sales funnel. Start by finding a good customer relationship management (CRM) software, such as Streak CRM for real estate.
This will enable you to track contacts, leads and manage your sales pipeline. It will also help you in examining the options you have when it comes to lead generation.
Engage in drip marketing emails as well as direct mail and campaigns to enhance brand awareness. This will make your business known to more people.
Step 9: Review and Revise Your Business Plan
After compiling these elements of a business plan, go through it with somebody that will play a role in the launch of your business. Get their feedback and input.
Make the necessary revisions until you feel satisfied with every section.
Keep your business plan in PDF and printed versions to ensure easy access.
The name you give your business is very important because it gives clients and prospects a flavor of the services it offers. The name of your business is also an important component of its brand image.
Here are tips to help you give your business a name:
To start acquiring customers and getting traction, you need to market it.
Here are tips to help you market and grow your business:
A business card will help you create a great first impression and grow your network.
Here are tips to help you make great business cards.
Yes. It’s possible to get a business loan to finance your real estate startup. Here are the options you have when it comes to getting a business loan for real estate.
Each of these options is different with its unique pros and cons. Therefore, conduct a thorough research to make an informed choice.
Yes. However, you will need help as your business grows.
It’s important to note that starting a business in the real estate industry requires training, a lot of work and time.
It's a seven-day a week business, and some clients will need real time responses to their questions. This may mean working on weekends.
Therefore, though you may start out alone, you will need help down the road.
Building a good team will help you scale and grow your business. Ultimately, the goal of most entrepreneurs is to remove themselves from the business completely while still receiving benefits.
Starting a real estate enterprise can feel intimidating. However, sticking to your 9 to 5 job won’t make you rich.
Starting a business in the real estate industry can allow you to make passive income, big profits, and take control of your own destiny.
Wholesaling real estate is definitely the best place to start because you can do it without money.
The good thing about investing in real estate is that you can start a small venture that may end up achieving big returns and keep your net worth growing.
Nevertheless, there are key fundamentals that you should know before venturing into this industry.
Click on this link to a free workshop to learn how to start building your own business in the real estate industry with no money.
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