For those who enjoy working with others and helping them find the perfect home, becoming a real estate agent might be the perfect job for you. According to the United States Bureau of Labor Statistics (BLS), real estate agents make a median annual salary of $51,220.
Those who want to excel in this field should have a few key characteristics. For starters, they should be able to keep themselves organized to help their clients find the best homes or commercial properties based on their needs. Interpersonal and research skills are also paramount.
If you've decided to start your own real estate business, here's what you need to know about getting started.
Becoming a Licensed Agent
To become a real estate agent or a real estate broker, you need to pass your real estate licensing exam. This exam is administered in each state and requires you to know both your state laws and the federal laws regarding real estate. Potential clients will expect the agents they work with to have passed this test. You can expect to find topics like:
- Math related to real estate
- Guidelines about listing and describing properties
- Laws applicable to different types of lands and properties
- Relevant environmental laws
- Applicable tax laws and calculations
Understanding these subjects can help you get started in a variety of specialties within the real estate sector, including property management. If you're interested in real estate investing, this exam can also help you better prepare for the field by giving an in-depth understanding of the real estate market and processes.
Other licensing requirements generally include having a high school diploma or equivalent at a minimum.
Keep in mind that, in most locations, a real estate agent must become a real estate broker to run their own business. This requires continuing your education and passing a broker licensing exam, as well. Real estate agents who are not brokers can buy and sell houses, but they must work for a broker.
Preparations for Starting a Real Estate Business
After you earn your real estate license, the next step involves developing your business plan. As a small business owner, you may find it helps to secure a mentorship to help you navigate the first year and build a successful business, but it's not required.
Select an Emphasis
As a real estate professional, you can elect to focus on one of a few specialties available in the field. For example, some realtors may want to emphasize commercial real estate, working closely with business professionals to buy or find rental properties for their businesses. Others may want to work more with real estate investments. They use their understanding and insight into the local market and the best real estate available to buy and sell properties as a real estate investor.
Plan for Startup Costs
As you begin to plan your business, you'll want to consider your startup costs and market research. This will help you create a strong business plan that will help you make money. Use market research to learn more about what clients want to see in a realtor in your area. For example, if only a few real estate agents focus on serving particular towns or demographics, you can focus your business on serving those clients. Follow up your research with conversations with your target market to ensure you thoroughly understand their needs.
Once you know your target market, you can begin to calculate startup costs, such as those associated with:
- Office space
- Any employees or contractors you need, such as a photographer
- Insurance
- Marketing
Determine Pricing
You'll then want to figure out your pricing. Most real estate agents will make between 5% and 6% commission when helping people buy or sell their homes, but this can vary depending on the location. Set your prices according to what's standard in your area and what will help you cover your costs.
Getting Your Real Estate Business Off the Ground
Getting started in the real estate industry requires understanding what goes into building your business step by step. We'll go through each part of the process so that you can move forward confidently.
The Legal Steps in Forming Your Business
Although you might have an excellent business idea, turning your knowledge and insight into a successful real estate business requires taking some legal steps. The first is legally forming your business.
Each state has different rules regarding how to form your business entity. In many states, real estate brokers can form a limited liability company (LLC). However, other states may require those in real estate to have a different business structure.
To begin forming your legal business, you'll need a business name. This name will need to be unique and included in your registration with the local governing authorities. Most states offer searchable registries so that you can verify which names have already been taken. You can then file the paperwork to become a legal entity and apply for a federal tax ID number.
You'll need to submit some paperwork when becoming a business. Generally, these documents outline how your real estate business will be run and demonstrate that you have the know-how to manage your new organization. You'll also want to verify that you have any required licenses and insurance.
Once you have your legally registered business, you'll want to open a business bank account. This will keep your personal finances separate from those for your real estate business, which helps at tax time. To open a business bank account, make sure you have your legal documents from the creation of your business and your licensing information. If you will need to request money from lenders to build your business, having a business plan can help you present a strong case for your company.
Moving into the legal side of your business, make sure you fully understand the tax implications associated with your real estate business. Most of your income will come through commissions. Understand how this works for accounting purposes at tax time in your state so that you can document your income and expenses correctly.
Helping Customers Find Your Real Estate Business
Once your new business has been established, you want to help people find your services and show how you can help them in the local real estate market. This requires developing a marketing strategy.
Brand Your Real Estate Company
First, decide how you want to brand your organization. Create a logo that helps capture your brand's identity so customers recognize your business when they see your advertising. You can use free tools to examine different color combinations, such as those from Adobe. You can also get help from freelance logo designers on sites like Upwork.
Build a Website
Next, create a website that documents your services and the areas you serve. This empowers you to reach customers online. You can create your website using website builders like Wix or Weebly. You can also buy a domain and use website tools through popular vendors, like GoDaddy and Bluehost. If you'd prefer to let a professional create your website, though, there are plenty of freelance website designers online, including those on Upwork.
Get Started on Social Media
Marketing campaigns should also include social media. This means building profiles to engage with customers on popular platforms like LinkedIn and Facebook. You can take advantage of tools like Hootsuite to help you post to multiple platforms at once. New agents need to make sure they don't overlook opportunities to get their businesses in front of new prospects.
Set Up Local Search Profiles
Claim your Google My Business listing and create a profile on popular review platforms like Yelp. Encourage satisfied clients to review you.
Be Your Biggest Advocate
Finally, much of your new real estate business will come through referrals. Thus, a big part of your marketing plan should involve letting people know about your business, handing out business cards regularly, and telling clients how much you appreciate positive word of mouth.
The Day-to-Day Running of Your Real Estate Business
The first year of running a new business can be a struggle for many professionals: You have to learn quickly, maintain your cash flow, and stay on the good side of the Internal Revenue Service (IRS). However, building your real estate career is possible with the right planning.
You'll find that much of your day-to-day operations will benefit greatly from two types of software.
Customer Relationship Management (CRM) Software
Customer relationship management (CRM) software can help you track your current clients, follow important leads, and know when to follow up with people. These programs allow you to keep all the information about your clients in one place, helping you stay organized.
Accounting Software
You may have to track various sources of income and expenses. For example, you need to track:
- Billing and invoicing
- Receipts for everything related to the business - even driving to bring clients to property showings
- Purchase orders
- Materials you need for your business
- Marketing expenses
- Tracking commissions and income
Fortunately, Skynova offers numerous software products, including business templates and an accounting system designed for small businesses, to help you manage these different areas seamlessly and ensure you're ready for tax time.
Time to Get Started
Starting a new real estate business is an exciting but nerve-wracking time. You need to carefully consider a variety of factors as you begin to pursue your goal and turn it into a reality. Fortunately, by carefully reviewing the steps involved in creating a successful real estate business and reviewing your local guidelines, you can start to build your company.
As you build your business, make sure that accounting doesn't hamper your ability to grow. Working with small business accounting software from Skynova can help you easily track your expenses and manage your accounting books accurately. With free business templates to help you with invoices and estimates, Skynova brings together what you need to launch your real estate business. Check out our other software products.