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Start a business in the dynamic world of real estate and unlock the potential for lucrative returns. With initial investments ranging from as low as $1,000 for individual agents to over $50,000 for starting a brokerage, the real estate business is accessible yet varied. Essential skills include a strong knowledge of the real estate market, top-notch sales and negotiation abilities, and adept business management.
In a market with typically steady demand that’s susceptible to fluctuations, you can expect average profit margins of 10% to 50%. Let’s explore the steps to carve out your own space in the competitive real estate business landscape.
|Initial Investment||Estimated startup costs can range from $1,000 (for individual agents) to $50,000+ (for starting a brokerage with office space and staff).|
|Skills Required||Real estate knowledge, sales skills, negotiation, marketing, and business management.|
|Demand||Steady, with fluctuations depending on the local real estate market conditions.|
|Location||Can be home-based for individual agents, but office space is ideal for brokerages.|
|Hours||Flexible, but often include evenings and weekends to accommodate clients’ schedules.|
|Permits and Licenses||Real estate license, business license (in some areas), and potentially other industry-specific certifications or memberships.|
|Profit Margin||Usually ranges from 10% to 50%, depending on the market, property types, and commission structures.|
|Challenges||Market competition, regulatory compliance, and economic fluctuations.|
Are you seeing home prices rise and wondering how you could get involved by starting your own real estate business? While many entities shuttered during the COVID-19 pandemic, the real estate industry has not only survived, but thrived.
A business plan is a must-have. By creating one, you’ll identify the requirements to start your business, how it will operate, and the likelihood of its success. You’ll refer back to it when you face challenges or opportunities. It’s the founding document — the road map — for your business journey.
To craft a solid business plan for a real estate business:
Also, identify core business offerings, such as:
There are four main types of real estate. Which is best for your business?
All U.S. businesses must be registered with the IRS, which offers several company structures. Choose a business structure with the best legal and tax setup for your situation. Real estate professionals generally run their businesses as small companies, so they’re registered as either:
Since you’ll target high-dollar transactions in a market where emotions can run deep, the liability protection of an LLC bears strong consideration. This structure shields your personal assets in the event of a lawsuit. It also avoids the double taxation of a corporation structure.
Real estate investing can be expensive, since inventory costs are high. By contrast, becoming a licensed agent costs less. As you calculate small business costs, consider the following:
Be sure to check for tax breaks and local grants to offset costs associated with starting your real estate business.
Concerned about having enough capital? Good news: there are a few ways to raise money for your real estate start-up. Consider:
Congratulations! It’s time to name your business! Pick something easily understandable, memorable and unique. Research names via local business registration services and online searches so you don’t use one that’s taken. Skip this step, and you could drum up marketplace confusion and a potential lawsuit.
When generating company names, also check to see if the URL (website address) and social media handles are available. You don’t want to confuse clients when they search for you online. Once you find a name with a web address and social media handles available, register all three.
Legal and licensing requirements for starting a real estate business include:
To market your business, first design a logo or have one professionally designed. Your logo image should appear in all your marketing materials, both online and in print.
Next, consider how to reach the target market you identified in the business plan. Which social media platforms do they prefer? Twitter, Facebook (groups, too!), Instagram, Pinterest, Snapchat, LinkedIn, and YouTube all offer inexpensive ways to flesh out your marketing strategy.
Go where your clients are. Create a website to provide a central place to refer all your followers and advertising. Be sure it’s search engine optimized so potential clients find it easily. Don’t have time to make a site? Prepackaged options like Wix and Weebly make creating your own real estate business site a snap.
If you have a brick-and-mortar location, sign up for Google My Business and local business directories. Search for other local businesses that may be good partners to share offerings, exchanges, or competitions.
One of the key benefits of starting a real estate business is the different paths to potential profit. There are two ways to form a real estate business. One requires an investment of time (a broker), and the other requires money (an investor), but both hold incredible profit potential.
With a big time investment, you can get a real estate license. Depending on where you live, that route takes 2–4 years and/or a set number of transactions, plus a broker license test. But the overall startup costs to become a licensed real estate agent are low.
Agents and brokers make money from commissions on sales. That means when purchase prices rise, commissions do too. The S&P CoreLogic Case-Shiller National Home Price Index rose 4.8% in 2020.
A faster but more expensive route is to start a real estate investment business. In this scenario, an outside broker does the buying and selling of residential, commercial, industrial, and even undeveloped land.
Whether you decide to be a licensed real estate agent or an investor, an added benefit of starting a real estate business is that you set your own hours. You decide when, where, and how the meetings and sales take place.
The real estate industry is massive and growing despite the challenges in today’s economic climate. Starting your real estate career carries low risk with potentially high reward, and it offers two paths of entry.
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