Key Takeaways
- A real estate business is an entity that deals with the buying, selling, management or investment of real estate properties.
- Consider these steps when learning about how to start a real estate business.
- The benefits to starting a real estate business are abundant — think about cash flow, asset appreciation, and tax benefits.
How long have you been wanting to unchain yourself from the desk of your nine to five job? How important is it to you to live a life of financial freedom so that you can provide for yourself and your family? If you said yes to any of the above questions, then I ask you this: have you ever considered starting your own real estate business?
What Is A Real Estate Business?
A real estate business is a business entity that deals with the buying, selling, management or investment of real estate properties. According to The Balance, real estate is “the property, land, buildings, air rights above the land and underground rights below the land.”
Over the last decade, middle class families have lost out on significant wealth because wages are falling and inflation is rising. Another unfortunate reality of today is the fact that less than five percent of people who reach age 65 have enough money to retire or are “financially secure enough” according the US census bureau. If you don’t want to be a part of those bleak statistics, it may be time to consider starting a real estate business to achieve your personal financial goals. The IRS recently reported that over the last 50 years, of all the Americans who declared more than one million dollars on their income tax returns, 71 percent were involved in real estate.
Starting a real estate business will not be easy, but with the right preparation it will be well worth the work. Best of all, there are a number of resources on small business systems that can make the learning process easier and more efficient. Read through our guide below, after all it is designed to help you succeed.
How To Start A Real Estate Business
Those wondering how to start a real estate business should be cautioned that owning a real estate company is no easy feat. Just like starting a business in any other industry, entrepreneurs should log countless hours conducting research and craft a meticulous business plan before actually jumping into business. Take guidance from the following tips as you open the door to starting a real estate business:
- Think Through Professional Goals
- Conduct In-Depth Research
- Organize Your Finances
- Craft Your Business Strategy
- Form An LLC
- Plan Your Marketing
- Build A Website
- Launch Campaigns
- Stay On Top Of Leads
- Build A Support Network
Set Your Business Goals
Before you hit the ground running, take time to evaluate and prioritize your plans for the future. This means thinking through your personal, professional and financial goals—as these will influence how you start and build your real estate investing business. Start by asking yourself where you plan to be in five, ten and fifteen years. Then, strategize more immediate steps to help you get here. The importance of this process cannot be overstated. Goals not only help investors stay focused, but they also help them take action.
One framework I find particularly helpful is SMART goals. This stands for specific, measurable, attainable, relevant and time-bound. Essentially, it helps investors balance ambition and action steps as they plan out the future. SMART goals operate in both short term and long term frameworks, making them perfect for any starting point. For more information on setting SMART goals, be sure to read our guide today.
Conduct In-Depth Research
A successful business plan is always preceded by in-depth industry research, which should identify a specific niche, market area, and potential competitors. There are a number of exit strategies your real estate business could focus on, though some are more geared towards beginners. Many first time investors will opt for wholesaling, which allows them to learn the ropes before actually purchasing properties. However, depending on your goals rehabbing or buy and hold strategies may be great options as well.
Your research should then focus on what market area is best suited to your investing niche. Look at median home values and rental prices, research neighborhood amenities, and most importantly don’t be afraid to look outside of your current location. Online research, networking events and even getting a mentor can help during this part of the process. Always remember, the more research you complete now the more prepared you will be to start developing your business plan.
Organize Your Finances
There are a number of methods to get involved in real estate with no money down; however that doesn’t mean you should avoid taking stock of your current financial standing. Chances are, when you approach a lender they will want information on your financial history. It is important to take a look before you are ever approached with questions. Request a copy of your credit report and review any existing accounts or investments you have. One thing I always tell investors at this stage is: no matter where you start financially there are ways to get started in real estate investing.
Depending on your investment strategy, there are a few financing options that may be right for you. Real estate investors can start somewhere traditional, like a mortgage from a financial institution or government loan. Or, they can opt for nontraditional financing options like private money lenders, business partnerships and even crowd funding. You don’t have to settle on one “method” right now, but you should be familiar with a few options. That way when it’s time to get your business up and running you know exactly where to go.
Craft Your Business Strategy
Once you have conducted sufficient research, you should already have started formulating ideas in your mind on exactly what will help your business succeed in your market. Write out a business plan that also includes the resources and tools you plan to leverage.
Form A Real Estate LLC
A limited liability company (LLC) refers to a business structure set up to protect business costs from interfering with an investor’s personal finances. The designation allows investors to purchase and own real estate, without involving personal liability. Each state has different fees and regulations associated with establishing an LLC, though the overall process is largely the same:
- Confirm the regulations in your state before getting started
- Choose a unique business name
- File an Article of Organization with your state
- Create an operating agreement for the business
- Publish an intent to file (if required in your state)
- Apply for a tax identification number through the IRS
After you form you LLC, there may be a few other permits required before you can officially open for business. Confirm with your state what these are, and you’ll be on your way to securing your first deal.
Plan Your Business Marketing
Having a successful real estate business is synonymous with having a successful marketing strategy. What is your unique value proposition? Answering this question will help you establish a brand for your business and any subsequent marketing campaigns. This is also a great time to settle on a logo, core values and a mission statement. These components will help inform how you reach out to potential customers, and serve as a jumping off point for your marketing materials.
After you create a foundation for your real estate business, it is time to get started on your first campaign. Read through the following list of common marketing materials for some inspiration:
- Direct Mail: Believe it or not, direct mail still has a place in this digital age. Real estate investors are constantly using postcards, handwritten letters, and other mailers to reach potential sellers. The most important thing to remember when using direct mail is to remain consistent: more often than not your response rates will increase on the second or third attempt.
- Email Campaigns: Email is a great way to reach potential leads, as long as you can gather enough contact information. Because email addresses are not as readily available as property information, it may take a while to put together a strong list. That being said, in time this is a highly cost effective method to reach both buyers and sellers.
- Social Media: Social media is great for beginners because it is an entirely free way to spread the word about your business. Create profiles across Facebook, Twitter, Instagram and Linked in, and post updates when you can. In time, you may find paid social media advertising to be helpful as well.
- Networking: Real estate thrives on networking,, in many cases it really is about who you know. Start by attending real estate events in your area, and branch out from there. Not sure where to find events? I recommend searching on Facebook or Meetup.com. Once you start building connections you can even start organizing networking opportunities yourself.
- Bandit Signs: When newcomers think of real estate, this is often the first thing that comes to mind. Bandit signs are those posters that sit at popular intersections with messages like, “We buy houses!” or “Call us for a cash offer!” Have you ever stopped to think why there are so many? It’s because they work. Bandit signs can be a great way to spread the word about your real estate business, just make sure they are legal in your area.
Build A Website
In today’s digital age, having a proper web presence is critical. Your marketing materials will without a doubt refer potential clients back to your website, so making sure your website is ready to go should be a top priority. Consider using websites like WordPress or Wix, which offer beginner friendly experiences at relatively affordable prices.
Launch Campaigns
Make sure to be consistent across all of your marketing channels, whether it be social media, e-mail, snail mail, or traditional marketing. Be sure to schedule out follow-ups to each of the campaigns that you deliver.
Stay On Top Of Leads
One of the worst things you can do to your business is to launch campaigns left and right, but not following up with leads consistently. Even if a lead does not lead to an opportunity at the time being, cultivating a relationship over time may lead to a deal down the line. Enlisting the help of real estate software is a great way to manage all of your marketing campaigns and lead management.
Build A Support Network
As cliche as it sounds, no person is an island when starting a real estate investment business. On the contrary, many leads and deals in real estate will come directly from your personal network. Whether your network consists of clients, colleagues, mentors, or even competitors, make sure to invest ample time in cultivating these key relationships.
[ Thinking about investing in real estate? Learn how to get started by registering to attend a FREE real estate class offered in your area. ]
Top 5 Benefits Of Starting A Real Estate Investment Business
The benefits that come with investing in real estate are nearly endless. Not only do you have to ability to make a sizable profit on every deal, but also, real estate is proving to be a solid hedge against the stock market and inflation. Some other benefits that are guaranteed to come with starting a real estate business include but are not limited to:
- Tax Benefits. If you gross $100,000 per year at your nine to five job and I earn $100,000 per year from my rental property, who gets to keep more after taxes? You guessed it, my rental property is taxed much lower because the government rewards rental property owners. The government also offers lower tax rates on long-term profits along with other benefits like depreciation and the exclusion of self-employment tax.
- Cash Flow. Not only do real estate investors have the ability to receive a substantial cash flow from steady wholesale or rehab deals, they can also ensure themselves a secure monthly cash flow with rental property deals. The best part about rental property cash flow is the fact that after all of your bills are paid, the extra money is considered a passive income meaning, you get to collect a monthly pay check all the while managing the rest of your investing business.
- Appreciation. While you are paying off the loan of whatever property you invested in, the value of that property is increasing, or appreciating. While things like recessions and market fluctuations are bound to occur, it is safe to say that over an extended period of time, the value of real estate will increase. That being said, any property you purchase today, will be worth far more 30 years from now; however, with a fixed-rate mortgage, you will always be paying the same dollar amount.
- Control. Arguably the greatest benefit of starting a real estate business is the control and pride you feel due to owning something you created. Your destiny is not tied to an office on Wall Street or your company’s CEO, it only belongs to you. Real estate investing puts you and you alone in the drivers seat of your financial future.
- Security. Of course, investing of any kind will always be associated with some type of risk. However, steadily building a real estate portfolio over time means that you are securing your own future. Unfortunately, too many individuals today have no specific plan for how they will secure their retirement. Real estate investing is not only what some say is the fastest way to get out of debt, but is an undeniable method of creating for yourself multiple streams of income that will continue well into your retirement years, and can even be passed on to future generations.
It is not advised to jump into the real estate investing world without first properly educating yourself. You must learn the best ways to find deals, how to market yourself, how to negotiate, and of course how to finance deals; however, once you’ve mastered those, you’ll be on your way to maintaining a successful business. So my partners at CT Homes and I put together a comprehensive list of the most common questions for you to study before embarking on your investing journey. Start from the top and work your way down and once you’ve thoroughly analyzed each question, you’re sure to already be ahead of your competition.
Starting A Real Estate Business FAQ
When you are finally ready to delve into the world of real estate investing, it is okay to feel anxious and overwhelmed. Starting your first real estate business will be no easy task, but if you do your due diligence and study the answers to these important questions, you are guaranteed to realize success.
- How Do I Make The Leap From Employee To Entrepreneur?
- What Do I have To Do To Be A Successful Entrepreneur?
- How Do I Know If It’s The Right Time To Start My Business?
- How Important Is My Real Estate Education?
- What Are The First Steps I Should Take To Get My Investing Career Started?
- How Do I Draft The Perfect Business Plan?
- Who Do I Need In My Real Estate Investing Network?
- How Can I Expand My Investing Network?
- How Do I Choose A Name For My Business?
- What Investing Strategy Will Best Suit Me And My Business?
- Do I Have To Care About Branding As A Small Business?
- How Do I Finance My Deals?
- Is There A Way To Fast Track My Real Estate Career?
- What Is The Best Way To Structure My New Business?
- How Do I Craft The Perfect Offer?
- How Much Does It Cost To Wholesale Or “Prehab” A Property?
- How Much Does It Cost To Rehab Or Rent A Property?
- What Are The Best Investing Strategies Of 2019?
Summary
Starting a real estate business can sound overwhelming, but by following the above steps as well as familiarizing yourself with the answers to commonly asked questions, becoming a real estate professional will be easier than you’d think. Be sure to define your goals, review your finances and prioritize networking to build your circle and watch your business flourish.
Do you have any additional resources you think folks learning how to start a real estate business might benefit from? Share them in the comments below:
