Do you want to take charge and moment to start your own real estate business instead of becoming ones laborer, working in their Real Estate companies? Here’s all you need to be your own boss, from essential insights to the steps you should take start a Real Estate business.
What Is A Real Estate Business?
Before we dive deeper into starting a real estate business, you need to first know the basics; what a real estate business actually is. A real estate business is a business entity that deals with the buying, selling, management, or investment of real estates. Real estate’s sometimes referred to as “real properties”. Don’t confuse them with personal properties with personal properties.
The two terms differ in such a way that real properties are immobile unlike the personal properties. Personal properties can be the things that an individual owns such as clothing, gadgets, furniture etc. Real property is the land and everything permanently attached to the land, and one can possess all the rights of ownership of that land where they can sell it, lease it or use it the way they want.
Technically, real property is land plus any other tangible development that can rest upon it or be installed in it. This kind of development could be a building that’s been set up there, a road or something that’s been slotted into the ground such as a septic system.
Looking at the types of real property, we can classify Real property according to its general use as; commercial, industrial, residential, raw (vacant) land and special purpose. Talking of business, you can invest in real estate either directly or indirectly.
For those who want to go for the direct option, you could do that by purchasing a home or any other property such as rental property and those who want to do it indirectly, then you will have to do that in a real estate investment trust (REIT).
How Does The Real Estate Industry Work?
Let’s say that you want to purchase a home in the US:
- Firstly, the homeowner and listing agent enter contract for the sale of the home.
- The home will then be published on the local Multiple Listings Service (MLS) by the Listing agent.
- Once the Buyer’s agent discovers the home, they inquire about it for potential buyers from the Listing agent. The Listing and buyer’s agent then negotiate on the price for which the home should be bought. When they reach the final agreement on the price, they ensure the legality of the sale.
- Finally, the Agents will get their commission after the sale is done successfully.
What Does It Take To Start A Real Estate Company?
Do you want to release yourself from the shackles of a nine-to-five job, do you crave financial freedom, do you dream of being your own boss, if yes, it’s time to consider starting a real estate business.
To be frank, it takes hard work, determination and dedication to own a successful real estate business. But if you’re up for the challenge, let’s get started.
We shall summarize how you can start a real estate business in these eight steps below;
- Identify your personal goals: Ask yourself questions like; do I want to invest part-time or full-time, am I financially ready to start investing, do I have a support system and what is my motivation. Your answers will help determine your initial strategy and business plan.
- Conduct research: Once you’ve identified your goals it’s time to dive head first into the research phase. This includes making an in-depth analysis of your local market and a review of your biggest competitors. After studying those external factors, begin to examine the internal factors, this means; pinpointing your strengths and weaknesses as well as deciding on how to differentiate you from the competition.
- Craft your business idea: After you’ve conducted sufficient research, you should be able to formulate several ideas on exactly what will help your business succeed. Whichever niche you choose should be highlighted in your business plan as well as with resources and tools you plan to leverage.
- Choose a business name and start an LLC (Limited Liability Company): When picking a name for your new venture, be sure that it’s memorable, creative, and catchy and accurately describes your business. Only after you’ve named your business should you start an LLC. An LLC will protect you and your business from future liabilities as well as reward you with additional tax benefits.
- Build a website: A web presence is a must for any business owner especially those in the real estate world because many potential leads will come from online. Don’t feel overwhelmed, there are plenty of free or low cost website builders online designed for beginners or you can hire a professional web developer.
- Design a marketing strategy: There’s social media marketing email, marketing direct mail, and a myriad of other tactics. Each strategy has its own pros and cons so choose your marketing strategy wisely. Start by identifying what it is that makes you and your business uniquely valuable. Answering this will help drive your marketing campaigns now that you’ve chosen a marketing strategy.
- Launch a campaign: Move forward by launching your first campaign whether this means sending your first email, buying your first Facebook ad or creating your first flyer. Be sure you’re consistent in representing your brand across all marketing channels.
- Keep up with the leads: The worst thing a real estate business owner can do is launch several marketing campaigns all at once and ignore the increased stream of incoming leads just because a lead may not result in a lucrative opportunity right away. It doesn’t mean that the lead won’t turn into something valuable in the future. When it comes to lead generation, make it your goal to build a genuine relationship with every potential client.
- Build a network: Building a solid network and support team is unparalleled if you want to succeed. You need to invest time and create relationships with anyone from colleagues to clients to mentors.
What Does It Cost To Start A Real Estate Business?
There’s a long lead time before you actually start earning. It’s easy to see why some aspiring real estate agents get discouraged and quit within their initial years in operation. This is why it is important for you to know the costs ahead so that you may not be blindsided.
Most expenses are incurred when you are getting licensed, after you get licensed to actually get yourself set up and start working and then lastly the monthly costs that you’ll have to pay in order to keep your business running. Let’s get into how much it actually costs to get your license. I do have to preface this by saying that it’s different for every single state.
Breaking these costs into parts, we shall pick Nebraska as our state of focus but we shall also highlight on some other states;
- Pre-licensing learning costs: The first thing that you will have to pay for is your pre-licensed classes. However, this depends on your state as well as the real estate school you choose plus the number of required hours. In Nebraska, you will have to take 66 hours of education, you will take two 30 hour classes and these cost around $275 each. Then, you will have a six-hour seminar about ethics and that is around $55. These costs could total up to just $605. I know in a lot of states it’s a lot more. For example, in Texas, it would cost you around a total of $1000.
- Real estate licensing exam costs: The next thing that you have to pay for is your real estate commission application and the test fee. In Nebraska, you actually pay for those both together. In some states, you may pay for them separately. However, their total cost will be around $285, “$150-test, and $135-application.” These costs are not so different from those in the other states.
- Fingerprint and background check costs: You will have your fingerprints taken and your background check run. This is the last step that you will do before actually getting approved for the state exam. They just put both of those costs together and the total would be $45 for the fingerprints and the background check. However, you will also pay for exam prep class but this is completely optional and it would cost around $165.
- License issuance fees: After passing your test, you will pay $80 for your license issuance fee. So the grand total for the licensing fees will be around $1064, this could be more or less for you depending on your state and how many hours of education you need to take.
- Post-license or first-year renewal education costs: A few states issue a temporary license for your first year but you will be required to complete additional post-license to earn your permanent license. Estimated Cost is around $100 to $1000+.
- The cost of maintaining your real estate license: After you get your license, you have an option to keep it active or inactive. Keeping your license active requires additional costs. Real estate agents typically estimate this around $1500 annually.
- Brokerage fees: You can’t have an active real estate license without working under a licensed broker. However, you may find it difficult hanging your license on a broker before you commit to a brokerage since it is costly. The most common brokerage fee is a desk fee, “an office fee”. Even if you don’t have a private office, they may still charge you this fee. Another one could be a franchise fee, this would be an extra percentage added on to every transaction that you have. You need to ask them exactly what kind of fees you’ll be paying when you interview them. Since we’re talking about predictable startup costs, we’ll focus on desk fees alone because you’ll owe those regardless of any sales. The estimated cost of the desk fees will be around $600+ annually.
- Error and Omission fees: For these, you will pay through your broker and they will cost around $600 or less annually.
- The cost of doing business: it was reported in 2019 by the National Association of Realtors (NAR) that an estimate of $4,600 a year was spent on the members’ total median business expenses.
How Do I Start My Own Real Estate Company From Scratch?
Do you wish to enter the real estate field and develop as a real estate professional from scratch? Here’s what you’ll need to do.
- Get a real estate license: Obtaining a real estate license is an important first step in your real estate career. Costs and qualifications for getting a license vary in different states.
- Find a brokerage: A real estate brokerage is an agency where real estate agents work. There are various brokerages popping up around the internet, so do a little digging and find out which option best aligns with your goals.
- Join the National Association of Realtors: this is important for one to be a realtor.
- Pay your dues: you will have to cover the initial costs such as license fees, brokerage fees before you can start selling million-dollar homes.
- Find a mentor: Learn from those around you especially those with experience in the field and see if they can help.
- Build your personal brand: You should always be building your personal brand and expanding your network in addition to finding ideal customers. You need to focus on people with property problems and then go help those people. You can also build a personal real estate website nd make your network stronger.
Finally, and perhaps the most important tip of them all, is to be patient. The beginning of a real estate business may not be the smoothest, but with experience and hard work you will earn great sums of money in no time. Never give up, strap your boots on, and keep your head high.
Can I Start My Own Real Estate Business With No Money?
We shall follow a step-by-step guide on how you can get started;
- Collaborate with an investor: This can open gates of new opportunities for your real estate business. There are times when you find a profitable property with a good scope but lack the funds to invest in it. In such cases, the best way you can ensure that you close the deal is to partner with a property investor. Many investors want to invest money in real estate, but either don’t have time or they don’t want to handle all the administrative or managerial works related to property. You can become a partner with such an investor and fulfil your dream of running a successful real estate business.
- Grab Rent-to-Own Investments: Another way of starting a property dealing business with no money is to grab a rent-to-own-investment. Many people use their lease agreements as an entry path for property estate industry. Here, the investor signs the buy option while renting the property. It’s time you grab a property that will earn you dividends in the future.
- Lead Generation: This is is an important part for all businesses and real estate business not being an exception. To be successful in this line, you can always start generating leads at a local level. First find clients or agents who are looking for a property and then search for the sellers. Finally, sell your leads at a price depending on the quality of the leads.
- Act on Behalf of Developers: You have to contact the developers and sign a contract to sell their properties. Using this strategy, you advertise and sell the developer’s properties and earn a commission on each closed deal.
- Middleman: Acting as a middleman between the buyer and the seller will earn you a tip once the deal is closed.
As you have seen above, it is not all about money but the decision making skills, the hard work and the determination if you want to succeed in the real estate business.
Review Of Real Estate Companies In The U.S.
Keller Williams Realty:
The headquarters are in Austin, Texas. The company earned an Annual Revenue of $351.2 Billion as per 2019. Keller Williams Realty focuses on developing their real estate company overseas and considered the largest and most profitable real estate company globally.
Brookfield Asset Management:
Headquarters are in Toronto, Canada. The company earned an Annual Revenue of $67.826 Billion in 2019. Currently, they are among the world’s top real estate companies with a net worth of $208 billion and about 22,000 employees working in the company.
Headquarters are in Los Angeles, California. The company earned an Annual Revenue of $23.894 Billion in 2019. When it comes to buying and selling commercial real estate property, CBRE is the top broker for the job.
Now that we’ve covered what it takes to start a real estate business and other factors that are essential in this regard, all you can do at the moment is to relax and watch your business grow.
But, provided you meet all it takes to achieve that success as we have looked above. If you have further inquiries and comments, write in the comments section below, we enjoy reading them.
Frequently Asked Questions
Yes. The real estate market is a trillion dollar market.
Commercial Real Estate
4-6 months on average.
Yes. With a real estate license, you will practice in this industry.