So, you’re thinking about starting your own real estate business. Great idea!
There are many reasons why you should go full steam ahead with your plan. You can gain financial freedom while becoming your own boss.
By the end of this article, you’ll have all the knowledge you need to start your own real estate business.
But before we get to the nitty-gritty details, let’s first answer three common questions:
- What is a real estate business?
- Is real estate profitable?
- How much does it cost to start a real estate business?
What is a real estate business?
A real estate business handles more than just the buying and selling of land and properties. It can also deal with the management, operation, and investment side of things.
Real estate is not only limited to houses and offices either; it also covers underground rights (essential for any mining operations) and air rights.
Is real estate profitable?
This is probably one of the most asked questions by newcomers in the real estate industry. The market itself is gigantic. In 2020 over 5.5 million homes were successfully sold – an increase of more than 5% from 2019. And that’s just residential properties.
For many, their first thought about opening a real estate business is restricted to the buying and selling of homes. But there’s plenty of potential profit to be made in holding commercial properties or underdeveloped land, which can appreciate over time.
Holding and selling assets like land can help you further increase your income by renting or selling property down the line.
There are lots of opportunities out there and you have to be ready to go out there and find them.
How much does it cost to start a real estate business?
When starting your real estate business, you can expect to spend between $1,000 – $2,000. This covers material such as real estate licensing, association fees, and other practical requirements like business cards, setting up a website, and advertising.
Bear in mind these are your start-up costs. Don’t forget to take into account your carrying cost.
Carrying cost is how much money you will need to carry your business financially until you start to bring in enough money to cover your expenses and see a profit. It’s an approximation based on how much you expect to spend until you start to realize profits. This can take a little bit of time, so you’ll need a little bit of patience.
Now that we’re all on the same page, we can tackle the steps you’ll need to take to get your real estate business off the ground.
Here are 11 actionable steps you can follow to turn your real estate business from an idea into your job.
1) Refine Your Business Idea
The very first thing you need to do before performing any other step is to refine your business idea. To do so, ask yourself: what is your niche, and who are your ideal clients?
Identifying a particular niche is vital as the real estate industry is a super competitive one. Chances are, there is already an established real estate broker or company (probably many) with a foothold in the market in your area.
Preferably, you’ll want to choose a niche that you’re familiar with that enables you to start from a position of strength. That niche can be a specific area or type of property.
By deciding from the beginning that you’re going to focus on rental properties, and family homes, for example, instead of bachelor condos, you’ll save yourself a lot of hassle further down the line.
When brainstorming your ideal customer, keep in mind that success may hinge on your relationship with your clients. For the best chances of success, work with clients you can relate to.
To help you better refine your business idea, you’ll want to understand the market you’re entering.
2) Conduct Market Research
The most challenging part of starting your own business is understanding the tradecraft and your customers. By digging deep into the industry, you’ll also gain insight into your future success.
During your research, you need to establish whether your niche is viable, identify the market area you want to target and conduct an in-depth review of your competitors. Seeing how those competitors fare will give you a good idea of where you can land.
You can find information online, attend networking events, or even enlist the help of a mentor. All of the information you collect is essential for when you create your business plan later on.
Alongside understanding the market, it is also important to deep-dive into who your audience is.
3) Conduct Audience Research
There are multiple ways you can gather information about your audience. Suppose you’re relatively new to the industry. In that case, you can gain vital insights about your future customers by performing the research yourself.
By targeting a specific type of customer in the beginning, you can set up your business and brand to align with their values.
It will also benefit you to be the type of person who finds it easy to form relationships.
Here are some of the most useful market research methods you can perform:
You can set up a series of questions for your audience and send them out via social media, email, or even give forms for people to fill out.
Face to face interviews
Identify potential customers and chat with them about their problems. What solutions are they looking for? What’s currently missing from competitors?
For the best results, hold the interviews in a real-world setting like their workplace or a meeting room.
Focus groups are similar to interviews but aren’t limited to just one person. You can invite a small number of carefully selected participants to discuss specific topics. Unlike an interview, you won’t be leading the meeting. Instead, a facilitator will lead the session.
Once you have a better understanding of your new customer base, it’s time to figure out what you’re going to charge.
4) Determine Your Rates
Deciding on your rates as a new business can be tricky. You don’t want to sell your services so high that they’ll be unattractive, but you also don’t want to sell them too low as you’ll be losing out on valuable income.
During your market and customer research, don’t shy away from the subject. Find out what people are willing to pay for a service they need and compare it to your competitors in the market.
As a new business, you can enjoy more flexibility. You can openly declare your starting rates will be lower for your first few months and will slowly increase. You may find many customers eager to snap up a good deal.
Now that you’ve collected key information, it’s time to build your business plan.
5) Put It All Down On Paper (Business Plan)
Having a business plan isn’t a must, but it will 100% help you on your real estate business journey.
It doesn’t need to be hundreds of pages long, filled with stats and information. Instead, it should be a short document that clearly shows your business objectives and how you plan to reach them.
Traditionally, a business plan includes the following:
Executive summary – A summary of your business plan allows anyone reading it to understand your objectives and methods. If you’re struggling to write something, put down the current problem(s) in the industry, followed by your solution.
Think of this as your elevator pitch.
Overview of the industry – Include a brief explanation of your target industry, significant competitors, any critical or exciting trends, and an estimate of sales in the industry.
Market and audience analysis – Establish who your target market is and essential info, such as their location, pain points, and what they’re looking for.
Competitor breakdown – In every industry, you’ll face competitors currently serving the market. What’s critical is to understand how you’re going to offer a better product or service.
Marketing strategy – How will you promote your business? List here the methods you’ll use to market your business to your target audience.
Management and operations – It’s essential to note down the management and legal structure of your business – even if it’s just you.
Also include any operating details such as your business location, equipment, software, and employees where applicable.
Finances – This is where you’ll enter your income statement, balance sheet, and cash flow statement. It’s a good idea to include any start-up costs and the business model you’ll employ.
Appendix – Finally, in this section, you can include supporting information such as marketing statistics, images, legal agreements already in place, etc.
6) Get Your Real Estate License
It doesn’t matter in which state you want to set up shop (with certain exceptions such as Florida); you’re going to need a valid real estate license for your business. Keep in mind that business and residential licenses are considered separate in some states and require individual certificates.
Before taking the licensing exam, be sure to give yourself enough time to study so you fully understand each of the topics you’ll need to respond to.
Topics on the exam range from contracts and deeds to property ownership types and fair housing laws.
The next step is to establish your business structure.
7) Establish Your Business Structure
Setting up a recognized business structure such as a limited liability company (LLC) will ensure your personal finances and your business finances won’t conflate with each other. For example, you can invest in real estate without providing personal assets as liability, such as your car or house.
Establishing an LLC isn’t an overly complicated process, and you can hire outside help to speed things up.
Depending on which state you’re in, you may come across different fees and regulations required to establish your LLC.
A different business structure may be relevant based on the type of business you want to create.
If you’re unsure, consult with an industry professional for help and guidance so that you can save yourself time, money, and hassle.
Make sure that everything is ready to go because the organization is just beginning.
8) Get All Your Legal Ducks In A Row
Getting all your ducks in a row is an old saying which means to organize and schedule everything so that you’re ready for the next stage.
As we’re talking about setting up a real estate business, it’s vital that all of your legal ducks are nicely lined up. This means that you’ve paid for and received all of the legal requirements to operate a real estate business.
These requirements include insurance, licenses, permits, business structure, Federal Tax ID, and any other documents.
Check with your state’s Real Estate Commission to ensure you have all of the appropriate forms.
After you’re all set up legally, you’ll want to start marketing yourself which begins with setting up your brand identity.
9) Create Your Brand Identity
The world of real estate is a very personal one. Many interactions are either face-to-face or over the phone.
If you make a good impression, you’ll be remembered as an outstanding and trusted professional, which will ultimately lead to more work (and more profits).
But before meeting or talking with anyone, chances are they’re going to see – or want to see – your brand.
And what will be important is for your brand identity to be expressed clearly. It’s what your business is and stands for – it’s the sole, consistent message of your company that is communicated over and over again through a series of visual elements and consistent language.
Your brand identity must embody the best aspects of you and your company. In a competitive industry like real estate, branding is one of the things that can help your business stand apart from the crowd.
To create your brand identity, you need to ensure that:
- Your brand resonates with your target audience. Imagine a brand that targets soccer moms vs. one that targets CEOs and how that may attract and deter certain groups. Specify who you’re selling to and establish a brand identity that will be relatable to them.
- Your brand values are showcased and easily identifiable. They should be embodied by both visual and textual elements. Your logo, for example, should easily correspond to a core value.
- Your real estate logo, business name, and business cards look professional. Think about how your color and font choice can affect feelings. Many real estate logos use earthy colors like blues and greens because it gives off a safe and homey feeling, and the fonts are structured and sturdy – as opposed to whimsical and curvy – to radiate a feeling of safety.
With your brand identity in hand, you can start to build your marketing strategy.
10) Devise Your Marketing Strategy
By now, you should have a unique value proposition (UVP) and brand identity in place. The next step is to decide how best to promote your brand to your target audience.
Some marketing methods will work better than others, depending on who your audience is.
You can use:
Think about it. Millennials are now at the age they’re starting to buy houses. And what do we know best about millennials? They are addicted to social media.
Today, most millennials – and a growing number of the entire population – begin their search online. It’s a place they’re comfortable and can gather information in quick snippets.
It’s also a great idea to develop social pages for your business where you can later be referenced or recommended even more.
Open house, anyone?
Yep. You heard right. Open houses are networking events.
Promote your open house throughout the neighborhood through paper flyers and also social media. It’s a great way to meet potential customers who already know they want to buy a house. They’ll come right to you – the rest will be history.
Emails and newsletters
Once you have a couple of listings on your hands, this will be easier. It’s always important to inform your clients of new and changing listings.
Take every opportunity you have to inform them – it leads to more exposure for your business, listings, and brand.
Legal bandit signs, direct mail, postcards, and mailers
When in doubt, take the classic approach of sending out snail mail or walking around neighborhoods and sticking postcards in mailboxes.
This is great if you don’t have a big client base yet because you’re targeting an audience that could potentially convert with ease.
A lot of people may shy away from wanting to sell their house or begin the process of buying a new house because it feels like too much work. These mailers and legal bandit signs take the guesswork out and leave very little work for those potential new clients.
This will place you in a good position to meet and grow your initial customer base.
11) Land Your First Clients
Once everything is in place and your real estate company is officially open for business, it’s time to land your first client.
A great place to start is family and friends. Tell them about your new venture and offer your help. It’s also a great idea to ask them to spread the word – a lot of times a reference is all you need.
You can also invest in digital advertising. Remember that start-up cost we talked about? Part of what will be included in that cost is paid advertisements or sponsored posts.
You can promote your business on social media or even on Google as long as you have a website set up.
Don’t be discouraged if it takes a little while to generate interest and potential leads. And don’t hesitate to reach out to your current network or spend a little extra on your marketing expenses to get the ball rolling.
Investing in CRM software (customer relationship management software) will help you organize and contact leads while they’re still hot.
The longer a lead is left unanswered, the less chance you have of turning them into a customer.
Your work is going to be constant and at times it may be difficult. But if you’re already thinking about starting your own real estate business, chances are you’re a go-getter who enjoys the hustle.
Over To You
It may seem daunting to set up a real estate business, but with the above 11 steps, you’re ready to tackle it head-on.
Go on and create a company that’s perfectly set up for future success!