Business: The Beginner’s
Are you contemplating a career in real estate but unsure what you need to do to take the plunge? If you’re ready to explore the possibilities of ditching your nine to five job and creating financial freedom, then this guide is a perfect place to start. Starting a real estate business isn’t easy, but it is well worth the effort.
What is a real estate business?
First, let’s define what real estate actually is. Real estate is a piece of land and the property—including the buildings, crops, minerals, and water—on it. Real estate is considered real property (as opposed to digital or personal property), including the ground and anything permanently attached to it, whether manufactured or natural.
A real estate business is a business that in some way, shape or form, deals with the buying, selling, operating, managing, and investing of real estate properties. Here at SERHANT., we focus on buying and selling.
Are real estate businesses profitable?
First things first, right? No one wants to launch a business that’s not profitable. The short answer to the question are real estate businesses profitable, is yes. Real estate is a great industry to join because, as Ryan says, “Until a house can sell another house, there will always be a need for more real estate agents.”
Real estate agents make money on commission, or a percentage of the price of the home sold. The commission is typically split 50/50 between the buyer and seller agents, although sometimes the percentages can be more or less depending on the responsibilities the agents take on. And if you’re the buyer’s and seller’s agent, well, then you get it all.
The amount a real estate agent makes depends on the market they’re in. If you sell in New York City, for example, the average price of a home is around $1 million. In the rest of the country, it’s more like $300,000—yes, that’s a lot lower, but so is the cost of living outside of NYC.
How to start a real estate business in nine steps
So, you want to start a real estate business. This will take research, a business plan, dedication, and, well, just plain guts! The following nine key steps can help you launch your real estate career confidently, no matter what market you’re in.
Get your real estate license
First up, you’re going to need your real estate license. Each state has its own specific rules and regulations, but everyone needs to complete the basic steps below to obtain a real estate license and work as a real estate agent.
First, you’ll need to take the real estate pre-licensing course for your state. This is required before you can take your state’s real estate exam. Every real estate pre-licensing course will cover the laws and regulations for your state in addition to the federal real estate laws in effect for all 50 states.
Next, you’ll have to take and pass your state’s real estate licensing exam. In most states, the requirement is that you answer 70% to 75% of the questions correctly to pass.
After passing your exam, you’ll need to submit your license application to your state’s real estate board. If there are application fees, you will need to include those. You may be required to submit fingerprints for a background check.
Finally, find a real estate broker to work for. Can you just work for yourself? Yes, but you’ll have to have a real estate brokerage license. If you’re not ready for that step, your best bet is to join a team in an existing brokerage.
Write a business plan
If you do decide you want to go into business for yourself as a real estate agent and obtain your real estate brokerage license, your next step is writing a business plan. A business plan should outline the financial and operational goals you have for your business and a plan of action to reach your goals.
Need help setting goals? Take into account your strengths and weaknesses and how you can use this knowledge to cultivate success in your business. Then ask yourself the following questions:
- What unique skills do I possess?
- What is the purpose of the business I want to start?
- Who do I want to provide service to?
- What can I spend to start my business?
- Do I need outside capital? If so, how much?
- What kind of life/work balance do I want to have?
- What are the expectations I have for starting a real estate business?
Keep your business plan concise and focused on the essential details. You won’t need a 217-page document. Simple is best. Once you have your plan in place, find a trusted mentor to review your plan and give you feedback.
Hire an attorney
The best time to hire an attorney is before you start your real estate business venture. Do not cut corners when choosing the right attorney. Price should not be the deciding factor. A lower retainer often means less experience.
When choosing an attorney, make sure they’re familiar with real estate laws and the real estate business in general. A good attorney is worth the extra cost when you need representation.
Assess and plan out your finances
Knowing where your finances, including your sales and commissions, are when you start a real estate business is crucial. You’re going to need to be able to crunch the numbers to figure out how you will fund your business to grow and thrive.
Be careful not to overspend. It’s tempting to fill your office with expensive equipment to get things off the ground, but new and flashy doesn’t mean it’s necessary! Some purchases are essential to building your business, and others are not. Overspending can mean the death of your business. Don’t put yourself in that position.
Most agents can run their businesses initially without the massive cost of all the bells and whistles. Once you build a book of clients, you can spend more on equipment and supplies. For example, most marketing and sales material is available to be sent in digital form, saving costs on printing.
Once you have your finances planned out, set up a bookkeeping and accounting system to help keep track of your cash flow, expenses, profit, loss, capital expenditures, and tax information.
Don’t forget business insurance
Business insurance can cover property damage, theft, intellectual property lawsuits, and other incidents.
As a real estate professional, you need to protect yourself from possible claims with liability insurance. There is always the possibility that an unhappy client may try to sue you if something goes wrong. Business insurance provides a level of security that allows you to do your job without the fear of losing everything to an unhappy client.
Develop your personal brand identity
Developing your personal brand is what sets you apart from everyone else. Think about your core values and your visual identity. How you incorporate those things into your marketing will set the tone and message you want to convey to your potential clients.
YOU are your brand, and your brand is your public identity. Make it unique. It should embody the best and most essential parts of your company. Your brand says “I know my business, and I am the best at it”. You want your brand to be strong and memorable enough that people are still talking about you, even when you’re not in the room.
Build a strong online and social presence
The internet is the information superhighway. To compete in real estate and build a successful business, you need to have a presence on the web. Social media is key, too.
When purchasing a home, your website is often the first thing a potential client will see. They start to form an opinion of you based on what they see. Make an excellent first impression with a well-designed website and social media presence. People are not just buying your services. They are investing in a relationship with you.
Create a web presence that builds your brand and communicates your style and approach. Don’t be afraid to add your personality and flair. Clients who are investing with you want to know that you are trustworthy.
Hire the right team members
When you expand your real estate business, you must hire the right people for the job. Trust is a critical element in a working relationship. You need to make sure that you can work together daily and resolve any disagreements professionally.
Hiring people who possess different strengths and specialize in other areas is key to building a well-rounded business that can handle whatever comes its way.
Once you’ve built the foundations of your business, it’s time to scale. Next stop, building a network! Making connections and establishing a name for yourself is critical. Ensure that you focus on quality connections, not quantity.
Word of mouth is a great way to generate leads. Make sure that you provide a first-class experience with every client to increase the likelihood of them referring you to others. Provide post-sale customer service that will knock their socks off. Don’t be afraid to ask for referrals from clients, friends, family, business associates, or people in your social networks.
The real estate business can offer you the life you long for. When you arm yourself with the knowledge it takes to leap into owning a small business, you can navigate the ups and downs of being a business owner without worrying you’ll lose it all. In fact, you can THRIVE.
If you are curious about how to get ahead of your competition as your start a real estate business, you can find the tools you need to generate leads, make deals, negotiate contracts, and more at Sell It Like Serhant.