How to start a real estate business in 15 steps
You’ve noticed that the housing and commercial real estate markets continue to see growth year over year. Now you’re wondering how to start a successful real estate business of your own. You know there are some essential questions you need to ask yourself before starting any new entrepreneurial venture, but what about real estate in specific? You may wonder things like:
- Should I start a real estate business?
- Can I be a real estate agent with no experience?
Whether you have experience in the real estate business may or may not matter, depending on the type of business you want to open. While some options require you to have at least some education and a license before starting your business, others have no such requirements. The real estate market is vast. If you want to start earning money in this industry, you just need to find the right real estate business for you.
Some real estate business ideas are:
- Real Estate Agent
This is the first thing most people think of when they think of a real estate business. Real estate agents help people buy and sell all types of property. They earn commission from sales and leases and may often receive referral fees as well.
To be a real estate agent, you need formal education and certification from the state. New agents then need to work for a brokerage firm (example: Keller Williams). After 2 to 4 years with them, you can apply for a brokerage license and head out to open your own brokerage.
- Real Estate Brokerage Firm
Want your own brokerage? You will be eligible to apply to be a real estate broker once you have all the necessary realtor licensing and 2-4 years of industry experience. If you already have the experience, you can sit for the brokerage exam. Once you pass it, you can apply for an official brokerage license with your state. After you pay the necessary fees, you’re able to open your own firm.
- Property Management
Property managers are then paid a fee of up to 10% of collected rent. Vast market knowledge and a strong professional network is required to be successful in this position.
- House Flipping
Have a flair for construction and design, or know someone with whom you can partner? Purchase dilapidated or neglected properties and improve them, then sell them for a profit. Expect to make large lump sums from this venture. Regular cash flow can be an issue.
- Wholesaling Houses
Purchase a property at a discount, then sell to another party at a markup. You make a profit from the difference. This is a great option for those not licensed as real estate agents but who want to get into the game.
- Funding Broker
This referral-based business allows you to make money by directing interested parties to funding sources. You’ll need a wide network of hard money lenders, private lenders, and mortgage lenders to make this path work. You’ll take a referral fee of 1-3% of the loan amount secured by the investors you work with.
- Real Estate Photography
Good with a camera? You can also enter the real estate business as an important accessory to the buying and selling process. Take professional photos of properties and get paid per job.
- Bird Dogging
If you know markets and you can research, you can bird dog. Find great deals for real estate investors and earn a percentage of the deal. This is another good option for those with little-to-no experience who want to bypass the traditional real estate education and licensing requirements.
There’s a place for everyone in real estate. Find your fit, and read on to learn more about how to start a real estate business.
1) Get your real estate license
If you do want to work as a realtor, you need a license. Bear in mind that residential and business properties usually require two separate licenses. For those who want to follow this path, you’ll need to know a few key steps to earning the proper credentials.
- Pass your state’s pre-licensing exam
- Go on to pass your state’s official real estate licensing exam
- Submit your application for a real estate license
- Pay any necessary fees
- Earn more experience with an existing real estate agency, or open your own real estate agency
If you already have your real estate agent’s license and requisite experience, you can apply to sit for the brokerage exam, which moves you closer to your broker's license.
2) Create a real estate business plan
Whatever your real estate business, a business plan will help you get clear on your goals and help you stay on track. It will also position you to gain investors or bank loans if your business requires them.
Your business plan should cover the following:
- Executive Summary: What sort of business entity is it? What is its purpose? What are the main goals, and how will you accomplish them? Provide a high-level overview of every part of your business plan, but don’t get too granular at this point. You’ll have the chance to go into greater detail later.
- Industry Analysis: Provide insight into your market research. What is the likelihood of success for your new real estate company? Who will your company serve? What makes you a necessary introduction to the market?
- Competitive Analysis: Who are you competing against in the marketplace? What do you know about their strengths and weaknesses? How will you stand apart from them? Include any relevant visual elements in this part of the business plan as well.
- Marketing: How will you attract new business, clients, or referrals? How will you build your network? What marketing channels do you intend to use to get the word out about your business? Do you know who your ideal client is, what they want, and how you intend to connect with them?
- Management: Are you a trusted business owner? How so? Any investors or banks you want to work with will need to know that you are reliable, capable, and ready to run this business. Outline your education, experience, and know-how.
- Operations Plan: What is your plan for the day-to-day operations of your business? Will you work solo or with a team? How will you develop your team to work well together? What systems do you intend to implement?
- Financials: How will your business profit? What are your estimated startup costs, operating costs, additional expenses, and projected revenues? Will there be one source of income or multiple? Include your first-year plan and a plan for the first five years of your business. Show your projected growth. Graphs and charts are a welcome addition here to add clarity and concrete visuals to go along with your data.
Your business plan will evolve, so don’t worry about getting it perfect right away. Continue to work on it as you pursue your business and learn more about what works and what doesn’t.
3) Choose your business structure
There are 4 main types of business ownership for small business owners:
- Sole proprietorship
- Limited liability company (LLC)
There are various options underneath those 4 main categories. You’ll need to research each one to determine the right type of ownership for your business.
4) Choose a niche
Now that you know the type of real estate business you want to start, you can narrow it down to target a specific market. Some niche classifications are:
- Residential (homes, apartments, condos, etc.)
- Commercial (office buildings, hotels, etc.)
- Land (farms, vacant land, etc.)
- Industrial (storage facilities, warehouses, etc.)
Within each of those larger niches, you can focus on one specific type of property. Maybe you’re the go-to person for first-time buyers or sellers. Maybe you want to be the first name that comes to mind for vacation rentals.
You can also find your niche through your industry research. Where is there a hole in the market that you can fill? Let your research, your business type, and your skillset help you determine how to position yourself in the industry.
5) Discover your unique value proposition (UVP)
Your UVP sets you apart in your industry. It’s why someone would want to work with you over anyone else. Your UVP can be about the type of service you provide, but it can also be about your company’s brand image. Who are you as a company? What can clients expect from you no matter what?
Once determined, use this UVP in all your marketing materials to solidify your brand persona in the minds of all who encounter you. Make it clear, simple, and focused on the client’s benefit, not your own.
6) Find your target market
Along with your business niche and your UVP, knowing your target client helps keep you focused and growth-oriented. You can’t serve everyone, but you can serve who you serve better than anyone.
To determine your target client, factor in where the holes are in the market based on your research. Who needs more or better service in your area? How can you provide this for them?
Along with who needs you, think about what you need. Go to your business plan for this. What are your goals? What sort of client can you work with to help you reach those goals?
Build out a persona for your client. Where do they spend their time? What is their income? What is their personality? A persona will never cover everything, but it gives you a good archetype to work from when developing marketing assets.
7) Choose your business name
You can use your name as your business name or choose another title for your company. If you select the ladder, consider the following business name best practices:
- Make it clear
- Make it easily identifiable
- Make it memorable
- Make it relevant to the service you offer
- Make sure matching domains and social media handles are available
Overly cute or clever names will likely confuse a client. Your business name should stick in your potential client’s mind. The more aligned your name is to your actual business, the likelier it is to be remembered.
8) Develop your service offerings
If you know what kind of real estate business you want to open, it likely comes with a list of services you’ll need to offer. However, additional services you can provide can make you a more enticing partner to potential clients.
Use your UVP to help determine what sort of additional featured services you can offer to your clients. Create compelling marketing assets that state the benefits of your services, not just the services themselves.
9) Get clear on your finances
Real estate business startup costs vary by type of business, location, infrastructure, and personal goals. However, you will likely need at least several thousand dollars to put toward startup costs. Some of the initial costs associated with starting a real estate business can include:
- An accounting system and/or a bookkeeper
- Marketing materials
- Transportation and fuel
- Office space
- A business phone line
- Website design, hosting, and maintenance
- Your real estate license (if needed)
- Software for content management, invoicing, customer relationship management (CRM), etc.
If you need starting capital for your business, you can potentially find financing through multiple sources. Some ideas are:
- Friends and family
- Bank loans
- Outside investors
- Line of credit
- Invest your savings
You may need one or all to open your real estate business. Refer to your business plan to see which options make the most sense for you.
10) Get insurance
Small business insurance is essential no matter what sort of real estate business you intend to open. There are many policy options to choose from, but nearly every real estate professional will require:
- General Liability Insurance: General liability insurance is designed to protect against legal claims for property damage or injury.
- Business Owner’s Policy: A Business Owner’s Policy is a package of policies most small business owners need to open their company. This can include general liability insurance, commercial auto insurance, and more.
- Workers’ Compensation Insurance: If you plan to have even 1 employee, you need workers’ comp. It will protect you in the case of an employee injury while on the job. Want an estimate of your premium? Use our calculator.
Looking to secure workers’ compensation insurance? You can get it fast and online through Huckleberry.
11) Complete necessary paperwork and build your business infrastructure
We’ve been through a lot already, and there are a few more steps to go. Real estate entrepreneurship can feel overwhelming, but fear not! There are plenty of ways to stay sane and keep moving forward. You’ve got this.
Let’s get your paperwork and other administrative and logistical pieces in place.
- Register your business name. The type of business you choose and your location determine how to register your business.
- Apply for an EIN. An EIN is an Employee Identification Number. It’s like a Social Security Number for your business. Your EIN gives you plenty of benefits and is a necessary component of your real estate business.
- Obtain needed permits and licenses. You’ll need to obtain your business license, but the process is different for each of the 50 states. Check your state’s specific licensing requirements and complete the necessary steps.
- Open a business bank account. Keep the IRS happy by separating your personal and professional finances. Open a business checking account. Many banks allow you to start the process online.
- Get a business credit card. Similar to a business bank account, a business credit card keeps your personal and professional spending separate. It also builds your business credit and provides additional financing if you need it.
12) Set up your office
Your type of business greatly determines your office needs. Seller agents will likely need a nice office setup for clients. Buying agents are more likely to meet their clients at or near the property they want to show. Other real estate businesses may never need to engage in person with clients at all.
If you find you need formal office space, you can either lease space or create a home office. Whatever option you choose, ensure that you have sufficient internet access and a clean, fashionable space to hold client meetings. You want your client to feel confident about their decision to work with you. A tidy, well-designed office space helps with that.
13) Think about employees
Employees come with additional expenses. Workmens’ compensation, payroll tax, and additional benefits like medical and paid time off will place a financial burden on your company that you wouldn’t have if you worked alone.
However, without employees, it is very difficult to scale your real estate business. Once you begin to grow, there will be administrative, financial, and operational tasks that you won’t have time to complete. You may choose to start your business venture on your own, but factor employees into your business plan to prepare for growth.
14) Create a marketing strategy
Once you know your ideal customer and your UVP, it's time to make a marketing plan. Your marketing strategy leads to targeted actions that drive lead generation for your business. At that point, it’s up to you to nurture them and eventually close a deal.
Let’s look at some powerful marketing channels you can use to promote your business.
- Your website: Your real estate website is an essential asset in your business. You need a web presence to be competitive in today’s world. Include a real estate blog and post regularly to improve your chances of ranking high on Google search. A Search Engine Optimization (SEO) content marketer or strategist can help you do this.
- Email marketing is one of the most effective ways you can reach potential clients. Grow your email list through your website and design templates you can repeatedly use in your automated email marketing campaigns.
- Direct marketing can be helpful depending on the type of real estate business you have. Direct marketing is physical mail marketing. Your brochure or flyer ends up in someone’s actual mailbox—something that can be beneficial to clients looking to sell their property.
- Social Media Marketing (SMM) can help you reach a large potential client network—if you choose the right platform. Look to your market research for insights about your target clients and where they spend time online. Build your marketing around just those channels. The main SMM channels are: Instagram, Facebook, Pinterest, TikTok, YouTube, Twitter, and LinkedIn. You can also hire a social media manager to help you grow your following.
- Google My Business: You can set up a free account on Google My Business to help you rank better on Google search. Simply register your business name and create a profile.
- Word-of-mouth and referrals: Referrals may be the whole foundation of your business model. If so, you need to find events, groups, and other places to develop your network. Make sure you follow up with leads promptly. Even if you don’t run a referral-based real estate business, you can still benefit from a large network. Don’t be shy asking for referrals from your current clients either. Happy clients are usually thrilled to pass along your name to someone they know can benefit from your services.
15) Keep learning
Now you know how to start your own real estate business, but the hard work doesn’t stop here. There will always be something more to learn in the real estate industry. Find good mentorship and invest more time into your new real estate career with the following resources.
- Inman News: Independent real estate news
- Realtor.org: Membership site for the National Association of Realtors (NAR)
- U.S. Small Business Association: Helpful information to help you start and grow your business
Get your workers’ compensation insurance with Huckleberry
A strong team needs even stronger insurance. Huckleberry provides real estate business owners with quality workers’ compensation insurance. Get an easy estimate of your workers’ comp premium entirely online through Huckleberry. Ready to secure your workers’ comp insurance? Start the process online now.