Real estate is an exciting and fun industry to be in, and many people can earn a good income doing what they love by starting their own real estate business.
The great thing about working as a real estate agent is the variety of areas you can specialize in. You can focus on residential or commercial real estate properties, property management, investment properties, rental properties, and even become a real estate broker. You can do this by working as a licensed agent in your state and completing additional training requirements. Many states have their own licensing requirements and require a broker's license to work independently. If you want to branch out on your own, that's something to think about.
Whether you just got your real estate license or have been working with an agency, you might dream of opening your own real estate business. Here, we'll go over how the real estate industry works and how you can grow a successful business.
How Do Real Estate Businesses Work?
Real estate consists of residential properties, commercial properties, and land. Licensed real estate agents help people buy and sell real estate properties and earn a commission from the final selling price. Depending on the business model, this might be a percentage or flat fee. Realtors are uniquely qualified to specialize in their specified real estate industry and understand regulations and local laws pertaining to buying and selling real estate properties.
The value of real estate goes up and down. When it's on the rise, real estate agents stand to gain an increased income. However, as you can imagine, when the market is low, commissions are low. Because the real estate market works in unpredictable ways, it's important to consider times of the year when business might be slow.
How Much Does It Cost to Start a Real Estate Business?
Starting your real estate career with little to no money may prove to be difficult. Most business startups require initial capital to get going, and real estate is no different. If you don't have funds set aside, though, no need to worry. Some ways to cover the startup costs of your real estate company include:
- Applying for a personal or business loan
- Using a low-interest credit card
- Enrolling in affordable online classes
- Cutting out unnecessary monthly bills/costs
- Working a side gig
- Creating a budget
- Opening a savings account
If you're not currently licensed in your state, your costs will include course and materials, application, and exam fees. To maintain licensure, states have specified amounts of continuing education (CE) hours. The National Association of Realtors (NAR) offers a summarized listing of CE requirements for each state.
Once established as a licensed real estate agent in their state, many realtors have out-of-pocket expenses associated with their business. This includes marketing materials for home listings, self-employment state and federal income taxes, association fees, vehicle expenses, office supplies, and MLS fees.
Many first-time real estate agents don't anticipate the initial expense of running their own business. Spend time researching your state's requirements for forming your new business. This will help you plan and budget to get through your first year working as a real estate professional.
With some research and planning, you can start your real estate career. Let's go over how you can achieve this step by step.
How to Start Your Own Real Estate Business: Step by Step
The decision to start your own business is exciting. With so many ideas bouncing in your head, though, it can be hard to know where to begin.
Here, we'll go over how you can create a strategy and plan for your business, legally form your business, attract clients, and manage and grow your real estate business.
Step 1: Create a Business Strategy and Plan
Whether you're working with an agency or independently, real estate agents are small business owners. It's important to develop a strategy and real estate business plan to establish the goals of your business and help keep you on track.
You can create a business plan by considering the answers to the following questions:
- What is your market niche?
- Who is your ideal client?
- Who is your competition?
- What sets you apart?
- What are your strengths, weaknesses, opportunities, and threats?
- What are your financial needs?
Strategies are solutions designed to help you meet the goals of your business. What can you do to help you meet the long- and short-term goals of your business? Strategies are unique to your needs and may look different from someone else. Brainstorm your business ideas and put them into action.
Strategies to help you build your business may include attending industry-related conventions or networking events, developing a marketing strategy, spending an extra 15 minutes on social media sites like LinkedIn to build your name and brand, and following up with potential clients. Pencil these strategies into your daily routine so your hard work doesn't go to waste.
When revisiting your plan and strategy, be flexible. A plan is just that - a plan. When something isn't working, make adjustments to accommodate new opportunities and goals. Hiccups along the way aren't entirely detrimental to the success of your business. Awareness and flexibility can help your business grow.
Step 2: Legally Establish Your Real Estate Business
Legally establishing your real estate business offers valuable protection. Limited liability companies (LLCs) are a popular type of business entity chosen by real estate professionals. Other types of business structures can be found by visiting the U.S. Small Business Administration (SBA) website.
You'll also want to select a business name. This can be your actual name or something unique of your choosing. Visit your secretary of state's website to verify your business name is not already in use. You can also find the requirements for your state there. Once you're finished with the paperwork, file the required documents with your state to legally form your real estate business and get ready to take on clients.
Step 3: Acquire Real Estate Clients
It's said that the first year of working as a real estate agent can be the toughest. Finding potential clients and earning referrals all while managing cash flow can be overwhelming. With some determination and know-how, though, you can gain new business clients.
Lead generation is a critical aspect of building and maintaining your real estate career. A customer relationship management (CRM) platform is a helpful tool that can help you organize leads and interactions with current and potential clients.
Another way to build your client base is by developing a solid marketing plan you can stick with. You can do this by creating a professional real estate website that lists current property listings, pertinent strategies for buyers and homeowners, and how to contact you.
Your marketing campaign might also include an email marketing strategy. With this, you can keep in touch with past, current, and potential clients while keeping them informed about local real estate market trends, local entertainment and events, and other happenings in your area. Providing helpful information on a regular basis keeps your name at the forefront of people's minds and can help grow your business. When it comes to your marketing plan, never underestimate the value of networking with consistency.
Step 4: Manage and Grow Your Real Estate Business
Managing your company finances is an important part of growing your real estate business. This can help you with cash flow and forecasting and planning for the future. Consistent networking, follow-up, and hard work can help grow your real estate business.
Keeping Track of Your Real Estate Business Finances Is Easy With Skynova
Skynova's accounting software can help you track and manage your income, expenses, payments, and sales tax to keep your day-to-day operations organized and running smoothly. Try Skynova's all-in-one invoicing and accounting for small businesses and see how easy it is to make your real estate business dreams a reality.
Notice to the Reader
The content within this article is meant to be used as general guidelines and may not apply to your specific situation. Always consult with the governing authorities when starting your real estate business to ensure you're meeting business standards.