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How to Start & Grow A Real Estate Business | The Ultimate Guide

real estate business Oct 29, 2019

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.

 

What is Real Estate Business All About? 

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

 

Types of Real Estate Classifications Include:

  • Residential Real Estate: Housing in the form of single family homes, duplexes, multi family properties (2-4 units), condos, apartments, townhouses, twin homes, and vacation uses.
  • Commercial Real Estate: Properties used to conduct business, including office buildings, hotels, shopping centers, strip malls, restaurants, medical buildings, educational facilities.
  • Industrial Real Estate: Distribution centers, self-storage facilities, factories, manufacturing and warehouses.
  • Land: Agricultural land, vacant land, ranches, timberland, and farms.

Is Real Estate Business Profitable? 

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: 

  1. Cash Flow: When you control and lease a property that generates more rental income than its expenses, you create a positive net cash flow
  2. Appreciation: The value of your property may increase over time due to increasing its net cash flow, improving the property, or as a result of changing market conditions
  3. Loan Amortization: Most real estate investors take out a loan to purchase a rental property. Each mortgage payment you make reduces the principal balance owed and increases your equity in the property. Over time, you may own the property free and clear. It’s really nice when someone else (your tenant) pays off your debt.
  4. Tax Shelter: An income property investment can shelter some of its own income from taxation and often shelter income received from other sources as well 

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. 

 

Can I Start My Own Real Estate Business with No Money? 

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: 

  • Real Estate Partnerships (Joint Ventures): You can partner with another investor, friend or family member that is willing and able to fund your first deals. Typically, you contribute your time, hustle, and knowledge, while your partner supplies the capital for a portion of the profits. 
  • Leveraging OPM: This acronym in real estate stands for “Other People's Money.” It entails using borrowed money, often from private money lenders, and ensuring that the venture yields a return on investment (ROI) that exceeds the interest charged for the amount borrowed. 
  • Owner-Occupant Properties: This entails taking out an FHA, VA, or 203k loan to invest in an income-generating investment property. This makes you a landlord and a homeowner simultaneously. VA loans require no money (0%) down, though they are reserved only for military veterans. Many people don’t realize that you can purchase a property with up to 4 units with these residential loan products. 
  • Real Estate Wholesaling: This strategy entails finding properties that are undervalued, putting them under contract and assigning the contract to another investor for a fee.
  • Seller financing: this refers to an agreement where you purchase an investment property and the seller is willing to “carry the note,” or take payments over time instead of using a bank to fund the transaction. 
  • Lease Options or Rent-to-Own Investments: This involves securing an option to purchase the property at a later date for a predetermined price, while renting the property in the meantime. If the property appreciates more than your option price, you can flip the property for a nice profit. 

real estate business

 

What Are the Benefits of Starting a Real Estate Business? 

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: 

  • Control: Though you work WITH many people, you work FOR yourself. You become your own boss without the fear of being fired. 
  • Tax benefits: Small business owners and property investors are rewarded by the government with many tax incentives. Rental income and business dividend income is generally taxed lower than income received as an employee. You’re able to write off many business expenses which lowers your taxable income. 
  • Multiple Streams of Income: Real estate businesses can create income from many sources. For example, cash flow from rents, wholesale fees, real estate sales commissions, fix and flip profits, management fees, and acquisition fees. 
  • Appreciation: Real estate property values and rents increase over time. Your holdings are likely to be worth more in the future, and you’ll reap the rewards when you decide to sell or refinance. 
  • Financial Freedom: Implementing the right real estate strategies creates an exceptional opportunity to create enough cash flow from business and investment to exceed your financial goals.
  • Security: Contrary to what is common belief, starting your own real estate business can give you more stability of income over time. Ever worry about getting laid off from your job? The real estate skills you’ll develop allow you to stay in business on your own terms. You’re in control of your destiny, not your employer. 
  • Personal satisfaction: Starting your venture from scratch and growing it allows you to enjoy greater satisfaction as you achieve more in life. Your self-esteem, abilities, and personal confidence improve. 
  • Creativity: Real estate professionals are creative problem solvers. Your creativity improves as you face and overcome challenges while starting and growing your enterprise in the real estate industry. 
  • Build a Team: Starting and growing a business in the real estate industry gives you a chance to establish a team that you can work with. You make the decision to hire, retain, and replace people who will eventually run the business without your day-to-day involvement. 

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

 

How to Start a Real Estate Business from Scratch 

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: 

  • What is your company's vision?
  • What is your mission statement?
  • What is your value proposition?
  • Which of your customer’s problems are you helping to solve?
  • How will you make a difference for you, your clients, and the world? 
  • What principles and values will drive your business? 
  • How do those principles and values differentiate it from other businesses? 
  • What will you be responsible for in your business? 
  • Who will be your key partners? 
  • What are your revenue streams?
  • What are the most important costs inherent in your business model?

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 Investors Associations are an excellent place to start networking. You can find local REIAs and other real estate business groups on Meetup.com.  

 

What Type of Real Estate Business Salary Can I Expect? 

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:

Residual Income

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. 

Profit

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. 

Business Operation Payments

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.

Commissions

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. 

 

What are Some Real Estate Business Ideas?  

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:

  • House Flipping: This involves purchasing distressed properties, fixing as well as modernizing them before you sell them for profit. Though you may not get continuous cash flow from house flipping, you can make large, one-time profits. You can also do it as a part time venture. 
  • Wholesaling Houses: You can wholesale properties by putting a property under contract at a discount, then assign the contract to another entity at a markup.  The profit made by the wholesaler is the difference between the price contracted with the original seller and the amount the buyer pays. 
  • Property Management: You don’t have to be a property owner to make money in the real estate industry. Starting a property management business can be lucrative and scalable. This entails handling maintenance and upkeep as well as rent collection and evictions on behalf of property owners. Typically, a property manager charges around 6-10% of gross rents collected, in addition to other fees for services provided.  
  • Real Estate Agent: This is the most common way people venture into the real estate industry. Formal education, state certification, and experience is required to start out as a real estate agent in some places. Real estate agents earn commissions from property sales, leases, and referral fees. 
  • Real Estate Syndicator: Syndicators pool together money from many investors to purchase large commercial properties and portfolios. While having a track record and team are usually a prerequisite for real estate syndicators, this is a great example of using Other People's Money (OPM) to fund your deals. 
  • Funding Broker: This is essentially a referral business that you can start by creating a list of funding sources, such as hard money lenders, private money lenders, and conventional mortgage lenders, and making a fee by sending them clients. You'll source and work with investors looking to fund their deals, then pair them with a lender for a fee of usually 1-3% of the loan amount
  • Bird Dogging: This entails finding good deals for real estate investors to earn a flat-rate fee or a percentage of the entire deal. 
  • Real Estate Photography: This entails taking professional photos for property sellers and landlords. Real estate photographers are paid by the job. The photos are mostly used for online property listings on the Multiple Listing Service (MLS) or sites like Zillow, Redfin, and Trulia

 

Examples of Successful Real Estate Businesses 

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: 

RE/MAX

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

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 Realty, Inc.

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

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 Real Estate

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. 

 

How to Create a Real Estate Business Plan 

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. 

 

How to Name a Real Estate Business 

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:

  • Consider your niche: Your business name may reflect the niche in which you operate. It should help you show your specialty or expertise. 
  • Determine what makes your business unique: Choose a name that makes your business stand out in your niche. 
  • Seek Help: Your team members can help you brainstorm to come up with a good business name. You can also seek help from a trustworthy real estate professional. 
  • Perform a Competitors’ Analysis: You want your business to stand out from its competitors. Therefore, know the names that your competitors use to come up with a name that will make your business stand out. 
  • Simplicity is Important: Settle for a unique and simple name that is easy for customers to remember. 
  • Use Online Tools: Use websites that help you generate a business name using specific keywords. 
  • Identify with your business name: People will consider your business more seriously when you make it your own identity. 
  • Convey brand personality: Choose a name that conveys the personality of our brand or the characteristics of your business that make customers relate with it. 
  • Consider first impression: Choose a name that enables your business to make a great first impression. Make it unique, catchy, memorable, and simple. 
  • Ensure that nobody owns it: Choose a name that is not owned or used by another business. Check your local Secretary of State's website to check your name's availability. For instance if you're in California, use the California Secretary of State name availability tools. 
  • Check if the domain is available: Check the availability of the name on the internet including the website URL and social media handles. 

 

How to Market & Grow My Real Estate Business 

To start acquiring customers and getting traction, you need to market it. 

Here are tips to help you market and grow your business:

  • Have your target market in mind all the time
  • Budget for all marketing expenses
  • Create a nice website or use a real estate website service like Carrot.com
  • Establish a presence on all major social media platforms 
  • Build an email list
  • Encourage word-of-mouth and referrals
  • Follow up quickly to any inquiries
  • Send newsletters to your audience
  • Create brand awareness by posting unique content
  • Let people know what you're doing in your business

 

How to Make Real Estate Business Cards 

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. 

  • Use quality materials 
  • Be creative with themes that feature land buildings and properties 
  • Use color to stand out
  • Keep your cards simple 
  • Include all contact information 
  • List your website and social media handles
  • Be specific about what your business does
  • Include a professional headshot

Aside from local print shops, there are also many online marketplaces to customize your own business cards such as www.moo.com.

 

Can You Get a Business Loan for Real Estate? 

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. 

  • Hard money lenders
  • Conventional lenders
  • Micro-loans 
  • Lines of credit
  • Crowdfunding for real estate 
  • SBA loans 
  • Rollover as Business Startup or ROBS 

Each of these options is different with its unique pros and cons. Therefore, conduct a thorough research to make an informed choice. 

 

Can I Startup a Real Estate Business by Myself? 

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. 

 

Real Estate Business for Beginners 

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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