The Ultimate Guide to Starting a Real Estate Business
With an approximate growth of 3.4% in 2022 alone, the real estate market is undoubtedly one of the fastest growing and highly competitive sectors in the US today.
Buying and selling homes for money is the bread and butter of many thousands of people around the world.
And this doesn't just apply to those living in large cities like New York and Los Angeles, but to small towns across the United States as well.
However, starting an actual real estate business isn't easy, and it will take a lot more than just good intentions to make it work.
That's why we've written this ultimate guide to show you how to get started in the real estate business. Here are some essential steps to get you started:
Create a Plan
For any business to work, there first has to be a precise and well-detailed plan. To establish a flourishing real estate enterprise, you have to develop a strategic blueprint to guide you every step of the way.
When setting up a plan, ensure that it covers all aspects of your business, including concept, branding, targeted audience, marketing strategy, and most importantly, finance.
Having a proper financial plan is perhaps the best thing that you can do for yourself as you start your business. A financial plan will give you a clear idea of how you can procure the funding needed to start and sustain your business.
The first step to developing a financial plan is to assess your current financial status before drawing up a practical budget.
To help you identify what your business goals are and how to plan towards them, here are some helpful tips to guide you:
- Carry out thorough and extensive research on the market to find out if your current business idea is feasible
- Categorize your goals using the SMART(specific, measurable, attainable, relevant, and time-bound) framework
- Identify a suitable niche that caters to all your personal objectives and goals
- Find an experienced mentor -preferably in the real estate sector- to guide you and give you pointers
- Seek advice from Small Business Development Center experts.
Get Your Real Estate License and Become an Agent
Before embarking on your real estate business, you must first get a license, because, without one, you have no legal backing to work as a real estate agent.
Though the specific requirements for getting a license vary from state to state, here is a general rundown on how to get a real estate license:
- Complete the Pre-licensing Education
- Pass the Exam
- Get a License
- Sign with a Brokerage
Complete the Pre-licensing Education
This is the first step to becoming a licensed real estate agent and it requires that you take a pre-licensing course which usually costs about $350.
The requirements for this course vary depending on where you live. For example, in California, applicants must take three real estate classes, totaling 135 hours.
In New York and Georgia, the courses take 75 hours while in Florida, the course takes only 63 hours. Most states offer online classes as well as in-person coursework at real estate schools and classes at community colleges.
Pass the Exam
After taking the course above, the next step is to take and pass the licensing exam. Your course tutor is expected to guide you on how to schedule, register, and pay for the licensing exam which typically costs about $100-$300.
The exams are computer-based and consist of two sections: a national category on general real estate principles and practices and a state-specific category that covers your state’s real estate laws.
You must have a passing grade on both sections, which is usually from 70-75% to qualify for a license.
Get a License
After passing the exam, you are expected to submit an application and all the necessary documents to your state’s real estate regulatory body. You will also be required to pay a fee, usually between $200-400.
Once your application is approved, your license certificate will be mailed to you and you automatically become listed on the licensees' section of its website.
Sign with a Brokerage
Once you become licensed, you can now work under a brokerage that is licensed by the state to oversee real estate transactions and ensure you abide by the fundamental legal and ethical standards.
Typically, the brokerage pays you a percentage of the commissions collected from your real estate transactions.
Create Your Database
A client database is very essential to you as an agent because it helps you organize your current leads and clients.
It also stores information like client contacts and paperwork, email threads, prospect home search criteria, listing information, marketing content, etc.
Due to the fiercely competitive field in the real estate market, hardly any deals are closed on a one-call basis.
Thus, active marketing and multiple lead follow-ups are required to stay on top of your game and also to build your business long-term.
A database or customer relationship management helps you remain consistent and optimizes your interactions with your network of clients and potential leads.
This would not only make them see you as a reliable source of information when it comes to the real estate market but it also keeps you at the top of their minds.
Here are a few practical steps to build your client database:
Create a List of Existing and Potential Clients
Writing down the contacts of everyone you know is the first step to building your database. This list could include your friends, family, neighbors, existing customers, and everyone within your Sphere of Influence.
Categorize your Contact List
Depending on the type of relationships you have with a particular person, you can divide your contact list into different subcategories.
For example, one category would include people who are close to you, such as your family or already existing clients.
The next category could contain people you just met but are not very familiar with while another category could include new leads you have not met.
This helps you to keep your database organized and simplified to ensure all your clients receive the required attention to maintain a good relationship.
Fill in Information
The next step is to fill in the necessary information regarding each contact. This could include setting up dates to build relationships for those you have not met or setting reminders to call or email those with whom you are already familiar.
Build a Lead Generating Schedule
Time is of the essence to every business including real estate and the aim of every real estate agent is to turn potential leads into closed deals.
Therefore, when starting your business, it is important to maximize your time by creating a practical schedule.
Creating a lead-generating schedule helps you distribute your time across tasks effectively to ensure no aspect of your business is attention-starved.
Schedule important meetings and activities to occur consecutively instead of at random to avoid getting overwhelmed with the smaller tasks.
This in turn helps you to get more work done efficiently while still focusing on the important things that require more effort such as contacting people from your database and generating new leads via other means.
Scale Your Business
Now that your business is up and running, it is time to take it to the next level and establish a name for yourself.
Starting your real estate business is one aspect, but maximizing your business potential to a point where it is sustainable and you have financial freedom, is another.
To most people, this stage may seem difficult, but with focus, hard work and the right information at your fingertips, it is achievable. As an agent, in order to identify aspects of your business to scale up, it is important that you:
Evaluate your Business
Critically evaluating your business gives you an idea of the areas that need working on. Before scaling up, take into account your sales growth forecast, which is a product of the number of new customers available and the revenue you want to generate.
Employ More Hands
To identify areas of your business to scale up, you also need to create time to identify these areas and work on more pressing, important aspects of your business.
Automating and delegating less important responsibilities to contractors and vendors not only makes your work easier but also creates time for you to focus on things that actually bring in money.
Improve the Areas that are Working
It is said that hard work and consistency are the keys to a successful business venture. That being said, it is essential as an agent that you identify the areas of your business that are flourishing and stick to what you have been doing to achieve that.
For example, if sending out emails or calling your clients on special holidays keeps you at the top of their lists and gets you leads and referrals, then keep doing just that.
You could also further boost your relationship with your customers by adding special or thoughtful bonuses.
Final Thoughts on Starting a Real Estate Business
The real estate market is a nest of opportunities; however, starting a real estate business is not for the faint of heart. It requires focus, hard work, consistency, and strict planning.
As a startup, ensure to carry out due diligence before embarking on your business venture to help you fine-tune your goals and objectives.
Also, keep in mind that before you can be listed as a legitimate real estate business, you first have to obtain a real estate license.
TL;DR: To start your real estate business, get your license, sign with a brokerage, start contact people you know, set coffee dates with people, see if they're interesting in buying/selling, then, if they are, help them through the process. Rinse repeat. Easy, right?