As home sale prices and market demands continue to grow, so do the opportunities for professionals looking to take their careers to the next level. Those with strong communication and collaboration abilities, a passion for homes and architecture, and plenty of self-motivation often find real estate to be a lucrative path.
If this sounds like you, read on to learn how to start your own real estate business.
5 steps to starting a real estate business
If you're thinking of starting your own real estate business, here are five key steps to help start your new entrepreneurial journey.
Identify profitable real estate niches in your area.
Like any business, the first step in starting a real estate business is to conduct market research to determine a profitable market area. Consider the following as you begin your research:
- Property types: Are there a lot of residential homes in your area for sale, or are you looking to work in commercial real estate?
- Emerging market trends: Local market trends could shape your business strategy and influence purchasing habits. For example, identifying up-and-coming neighborhoods with the potential for revitalization can help you guide clients toward properties likely to appreciate over time.
- Ideal customer demographics: Consider the clientele you hope to work with, such as first-time homebuyers, experienced buyers with specific interests, or businesses looking for their perfect space.
[Read more: 10 Small Businesses to Start in Real Estate]
Develop a business plan and set financial goals.
A business plan that includes your mission, vision, and values will serve as the cornerstones of your business and guide you as you work on getting your business off the ground. You should also define your financial goals, which should be specific and realistic.
Plan your goals in different time increments, like one, five, 10, and 15 years. Listing your goals will help motivate you and provide any possible investors with an idea of your direction.
Obtain the necessary education and licensure.
Here's how to obtain the proper education and licensure to become a real estate professional in most states. Be sure to look up your home state's requirements before investing in these steps, as they may vary.
- Take your state's course for prelicensing and pass the necessary exams. The course will inform you of regulations so you can conduct your business legally and professionally.
- Submit your application and pay any necessary fees.
- Work for at least two years with a real estate broker.
- Take a broker prelicensing course and pass the necessary exams.
- Submit the broker application with the necessary fees, which will range between $150 and $200.
Build a professional network and market yourself.
Promoting yourself and your business is one aspect of working in real estate that should happen continuously throughout your career. Consider ways you can creatively engage with your target audience; a good system is to offer something helpful (like a breakdown of selling trends in your area) as a way to connect with potential clients.
Many real estate professionals use a customer relationship management (CRM) system to organize their contact lists and keep track of where each client is in the home-buying process. You can also connect with other realtors through industry events to build a network for referrals.
[Read more: How Real Estate CRM Software Benefits Realtors, and What to Consider]
Develop a brand and create a website.
Using your mission statement and values as a guide, set up a website to best present yourself to any possible clients — remember that this will be their first impression of you. Your site should be professional, clean, and easy to navigate.
Include multiple ways for prospective clients to contact you. As you build a history of sales, you can feature them on your website with crisp images and testimonials from your clients. Once you have a site, you should optimize it for search engines so clients and hiring agents can easily find you.
The real estate industry is heavily dependent on market conditions, which makes it unpredictable. Inconsistent income can be detrimental to a business without the right management strategies and insights.
How to fund your real estate venture
Once you've nailed down the specifics for your new business, you'll need to secure funding. Here's how to get started.
Outline your business costs.
Understand your financial needs, including how much you need and what you need it for. Consider both immediate costs and longer-term costs that could impact your growth down the road.
These costs may include
- Initial costs: In the early stages, secure financing to cover startup expenses like legal costs for business formation, initial marketing campaigns, and essential purchases like equipment, CRM software, and office supplies. You may also need financing for expenditures like the cost of courses and the fees for the real estate license and broker applications.
- Continuing costs: Plan for recurring expenses, including employee salaries and benefits, rent and utilities, and subscription-based software expenses.
- Future costs: As your business grows, you'll need financing for expansion-related expenses, such as hiring additional staff or expanding into new markets.
Research your funding options.
New business owners have several funding options depending on their financial situation and business goals. Some options, like self-funding, crowdfunding, and bank loans, allow you to access funding while maintaining complete control over your business. However, these options come with added risks, such as personal financial liability.
If you're open to relinquishing some control, investments from venture capitalists or angel investors can provide capital and resources in exchange for a stake in the business. However, this often means sharing profits and decision-making control.
Alternative options are also available, including business grants, microloans, and business accelerators.
[Read more: How to Calculate and Compare Loan Costs]
Organize your financial documents.
Regardless of your funding option, you'll need to gather documentation to prove your business's viability and demonstrate your trustworthiness. While certain funding options may have specific requirements, most will require information, including bank statements, relevant credit reports, a business plan and projections, and tax documentation.
Create a compelling business pitch.
Craft a strong business pitch that highlights your target market's needs and your unique solution. Relevant data and projections should demonstrate your competitive advantage and prove your profitability.
To keep your audience engaged and interested in your business, ensure your pitch is visually appealing and easy to understand. Leave room for questions, and be ready to respond with fact-backed answers.
Seek expert advice.
The real estate industry is heavily dependent on market conditions, which makes it unpredictable. Inconsistent income can be detrimental to a business without the right management strategies and insights.
A financial expert can help your business succeed by establishing financial goals and performance benchmarks from the start. Their market expertise can guide you in preparing for market downturns and other potential risks, as well as setting up a solid business foundation.
Rachel Barton contributed to this article.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
